Sunday, 23 February, 2025
Eminent economist Dr Zahid Hussain has urged the authorities concerned to take steps to prevent foul plays in the capital market to restore the confidence of the general investors.
"If the issues of manipulated Initial Public Offering (IPO) issuance, scammed underwriting, opening of fictitious BO accounts and market rigging can't be stopped, then it is difficult to restore confidence in the market," he said.
Dr Zahid, a former lead economist of the World Bank, Dhaka Office shared such views while giving an interview to BSS recently at his residence in the capital.
The stock market regulator formulated a large number of policies, rules and regulations and passed orders over the last 15 years citing the best interests of investors.
However, most have backfired, leaving the stock market reeling from a crisis of confidence. According to the Dhaka Stock Exchange (DSE), the capital market was neglected, and even stakeholders failed to hold a single meeting for the past 15 years to resolve the problems and make policies for making it dependable as a source of investment.
In the last 10 years, an IPO market worth only Taka 650 crore was floated. Market insiders said good companies are coming in a small number while the number of investors in the market has declined by half in the last 10 years.
There are even fewer active investors. Currently, the amount of foreign investment has fallen to below 1.0 per cent. Although the amount of corporate bonds is reportedly one per cent, in reality, it is not more than 0.51 per cent.
Analysts pointed out faulty decisions in the last 15 years, including the imposition of floor prices, allowing mutual fund tenure extensions and stock dividends as their returns, and allowing companies with poor performance records to make initial public offerings.
As part of Bangladesh Securities and Exchange Commission's (BSEC's) move to bring back vibrancy in the market, the market regulator recently removed the floor price of most stocks.
The BSEC has also successfully implemented initiatives to restore confidence. These include strengthening market oversight and discipline, establishing a policy for independent directors, establishing market intelligence by following international standards, digital transformation of the market and expanding financial literacy nationwide. They are all in an early stage.
The authority has also taken initiatives to introduce new financial instruments to boost institutional investment, align tax and policy frameworks, and strengthen stakeholder engagement to create digital platforms for investor education.
BSEC has established a five-member task force dedicated to spearheading the capital market reforms. The task force's work is structured around 11 focus groups that have been formed to tackle key areas including regulatory improvements, governance, investors' protection, and market innovation.
Each focus group has its own Terms of Reference (ToR) which outline specific responsibilities for research, policy formulation, and recommendations in line with the overall reform agenda.
This collaborative approach ensures a holistic and thorough transformation of the capital market, addressing both macro and micro-level challenges.
About the capital market, Zahid Hussain pointed out that the main problem is the lack of governance. Also, outdated technology and systems hinder efficient trading and market operations "Internal reforms in the stock market were not carried out by the BSEC. This is the main reason for the lack of confidence and distrust in the share market. Past market manipulations and scams have left investors wary," he mentioned.
He said the investors tend to buy shares whimsically and without judging the fundamentals. Vested quarters take advantage of such behaviour to loot money from the market.
"The main problem is the lack of governance. Also, outdated technology and systems hinder efficient trading and market operations "Internal reforms in the stock market were not carried out by the BSEC. This is the main reason for the lack of confidence and distrust in the share market. Past market manipulations and scams have left investors wary."
When asked whether there is any light at the end of the tunnel, Dr Zahid Hussain said we have to keep hopes alive. "I can see rays of hope as now if anyone sees a problem in the economy and politics, then he or she can talk openly without thinking further ....if the openness remains and if the government keeps open its feedback loop, then you can certainly hope for a change. Hopes fade when the leaders deny everything," he added.
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Eminent economist Dr Zahid Hussain has urged the authorities concerned to take steps to prevent foul plays in the capital market to restore the confidence of the general investors.
"If the issues of manipulated Initial Public Offering (IPO) issuance, scammed underwriting, opening of fictitious BO accounts and market rigging can't be stopped, then it is difficult to restore confidence in the market," he said.
Dr Zahid, a former lead economist of the World Bank, Dhaka Office shared such views while giving an interview to BSS recently at his residence in the capital.
The stock market regulator formulated a large number of policies, rules and regulations and passed orders over the last 15 years citing the best interests of investors.
However, most have backfired, leaving the stock market reeling from a crisis of confidence. According to the Dhaka Stock Exchange (DSE), the capital market was neglected, and even stakeholders failed to hold a single meeting for the past 15 years to resolve the problems and make policies for making it dependable as a source of investment.
In the last 10 years, an IPO market worth only Taka 650 crore was floated. Market insiders said good companies are coming in a small number while the number of investors in the market has declined by half in the last 10 years.
There are even fewer active investors. Currently, the amount of foreign investment has fallen to below 1.0 per cent. Although the amount of corporate bonds is reportedly one per cent, in reality, it is not more than 0.51 per cent.
Analysts pointed out faulty decisions in the last 15 years, including the imposition of floor prices, allowing mutual fund tenure extensions and stock dividends as their returns, and allowing companies with poor performance records to make initial public offerings.
As part of Bangladesh Securities and Exchange Commission's (BSEC's) move to bring back vibrancy in the market, the market regulator recently removed the floor price of most stocks.
The BSEC has also successfully implemented initiatives to restore confidence. These include strengthening market oversight and discipline, establishing a policy for independent directors, establishing market intelligence by following international standards, digital transformation of the market and expanding financial literacy nationwide. They are all in an early stage.
The authority has also taken initiatives to introduce new financial instruments to boost institutional investment, align tax and policy frameworks, and strengthen stakeholder engagement to create digital platforms for investor education.
BSEC has established a five-member task force dedicated to spearheading the capital market reforms. The task force's work is structured around 11 focus groups that have been formed to tackle key areas including regulatory improvements, governance, investors' protection, and market innovation.
Each focus group has its own Terms of Reference (ToR) which outline specific responsibilities for research, policy formulation, and recommendations in line with the overall reform agenda.
This collaborative approach ensures a holistic and thorough transformation of the capital market, addressing both macro and micro-level challenges.
About the capital market, Zahid Hussain pointed out that the main problem is the lack of governance. Also, outdated technology and systems hinder efficient trading and market operations "Internal reforms in the stock market were not carried out by the BSEC. This is the main reason for the lack of confidence and distrust in the share market. Past market manipulations and scams have left investors wary," he mentioned.
He said the investors tend to buy shares whimsically and without judging the fundamentals. Vested quarters take advantage of such behaviour to loot money from the market.
"The main problem is the lack of governance. Also, outdated technology and systems hinder efficient trading and market operations "Internal reforms in the stock market were not carried out by the BSEC. This is the main reason for the lack of confidence and distrust in the share market. Past market manipulations and scams have left investors wary."
When asked whether there is any light at the end of the tunnel, Dr Zahid Hussain said we have to keep hopes alive. "I can see rays of hope as now if anyone sees a problem in the economy and politics, then he or she can talk openly without thinking further ....if the openness remains and if the government keeps open its feedback loop, then you can certainly hope for a change. Hopes fade when the leaders deny everything," he added.
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