The head of the Bangladesh Securities and Exchange Commission (BSEC) has expressed helplessness regarding the bearish run of the market, blaming the higher interest rate on savings certificates and bank deposits for the slump.
“What can the commission do if the bank deposit rate jumps to 11-12 percent and sales of savings tools reach Tk 64,000 crore in 10 months exceeding the annual target of Tk 40,000 crore?” said M Khairul Hossain.
The benchmark index of the Dhaka Stock Exchange (DSE) lost 74.55 points, or 13.07 percent, in the last three months.
Hossain made the comments at an Iftar party of the Capital Market Journalists Forum (CMJF) at a hotel in Dhaka on Friday.
“We have addressed many problems related to the stock market. You (journalists) can find out what can be done additionally in order to make the market vibrant,” he noted.
According to Hossain, the correlation between the money market and the stock market is not like a “straight line”, rather it is a very complex relation that investors need to understand.
Abu Ahmed, a stock market analyst, raised a question: if money goes out of the market through placement shareholders and sponsor shareholders, how would the market remain positive?
“The commission can redirect some money from the banking sector through policy support and you’ll see the index will rise. But a vested quarter will become active in the market and take the money away and thus the index will collapse again,” he said.
Ahmed, also a former chairman of the economics department at Dhaka University, recommended keeping an eye on the share sales by sponsors and placement shareholders.
It is even more unfortunate as sponsors act like decision-makers of a company even after selling their stake, he said.
Ahmed also talked about the mutual fund sector, saying the sector was seriously affected by a regulatory decision on dividend.
The regulator allowed asset managers to declare return on unit (similar to stock dividend) instead of cash dividend.
“It was a great mistake. The decision has seriously dented investors’ confidence,” he added.
Faruq Ahmed Siddiqi, former chairman of the BSEC, KAM Majedur Rahman, managing director of the DSE, and Hasan Imam Rubel, president of the CMJF, also spoke.