ABG Ltd, a concern of Bashundhara Group, signed an agreement with the Chittagong Stock Exchange (CSE) yesterday to buy a 25 per cent stake in the bourse in line with a demutualisation process. 

A demutualisation act was approved by the government in 2013 in a bid to break the monopoly of stockbrokers in the stock exchanges and ensure knowledge sharing with research-based strategic partners.

ABG will buy 15.86 crore shares at around Tk 240 crore, with each share at Tk 15, according to the agreement, which was inked at the Radisson Blu Chattogram Bay View in the port city.

Sayem Sobhan Anvir, managing director of ABG, and Ghulam Faruque, acting managing director of the CSE, signed the contract on behalf of the respective organisation. 

On September 28, the Bangladesh Securities and Exchange Commission (BSEC) passed a conditional approval on a CSE proposal to take ABG as a strategic partner by selling a 25 per cent stake.

ABG was registered with the Registrar of Joint Stock Companies and Firms (RJSC) in February 2022.

Thanks to the deal, the CSE found a partner four years after the premier bourse, Dhaka Stock Exchange, sold its shares in 2018 to take on Shenzhen Stock Exchange and Shanghai Stock Exchange as strategic partners.

"The signing will link all that is missing to strengthen the CSE and the commodity exchange," said Prof Shibli Rubayat-Ul-Islam, chairman of the BSEC, at the event.

"The CSE has an eligible board which can run a commodity exchange with the help of a strategic partner, so it has been allowed to launch the exchange."

A commodities exchange is a legal entity that determines and enforces rules and procedures for trading standardised commodity contracts and related investment products.

According to experts, a commodity exchange allows farmers to lock in prices using forward contracts. This also reduces the risk of any drastic price changes.

Traders rarely deliver any physical commodities through a commodities exchange. Instead, they trade futures contracts, where the parties agree to buy or sell a specific amount of the commodity at an agreed-upon price, regardless of what it currently trades at in the market at a predetermined expiration date.

Earlier this year, the CSE appointed the Multi Commodity Exchange of India as a consultant to aid the launch of the exchange.

Islam said with the commodity exchange, there will no longer be improper pricing of commodities and inflationary pressures will be reduced.

"The CSE and ABG Ltd will work together to improve the stock market scenario and strengthen the CSE," said Asif Ibrahim, chairman of the CSE.

He thanked ABG for buying the CSE's stakes amidst the present economic situation.

The CSE has been trying to secure a strategic partner for years, arranging a roadshow and communicating with many foreign exchanges and firms. However, none came forward.

"Then we found the local conglomerate," said Ibrahim, adding that ABG has many plans that would improve the market.

Bashundhara Group Chairman Ahmed Akbar Sobhan said there was potential for around Tk 20,000 crore worth of daily transactions in the commodity exchange planned by the CSE

"If it becomes operational, it will benefit the economy. People always talk about investment by foreign firms but local firms can also improve the market scenario."

Salman F Rahman, the prime minister's private industry and investment adviser, said he was surprised and happy to see Bashundhara take the stake as it was never interested in the stock market.

According to him, there were two contradictions in Bangladesh's economic development: the low tax-to-GDP ratio and the low market capitalisation-to-GDP ratio.

"A fundamental weakness of our stock market is that institutional investors are low. So, there is a lack of informed decisions. Infrastructure is there but somehow the institutions are not coming," he said, adding Bashundhara's entry will put a positive effect on the institutions.

Saifuzzaman Chowdhury, land minister, also spoke at the event.