Budget offered little for stocks

The stock market received little focus in the proposed national budget for fiscal year 2022-23, said stock market specialists yesterday. 

However, the government proposed several steps to turn the economic indicators vibrant and if attaining that is possible, the stock market will benefit, they added.

Their comments came in a seminar titled "Budget FY2022-23 Implications for the Capital Market" organised by the Bangladesh Institute of Capital Market (BICM) on its premises in Dhaka.

The capital market received a huge number of policy support in previous years but the figure was quite low in the recently proposed budget, said Md Eunusur Rahman, chairman of Dhaka Stock Exchange (DSE).

There was little focus on the stock market as the government had to concentrate more on the economic situation in other frontiers such as containing inflation and keeping the foreign exchange market stable, he said.

The DSE sent seven recommendations to the government, one of which was taken into consideration and adopted through a reduction in corporate tax, although some preconditions have been attached.

"We recommended raising tax-free dividend income to Tk 1 lakh from the present Tk 50,000," said Rahman, a former senior secretary to Financial Institutions Division.

The success of the capital market depends on the economic success of an economy, so the proposed budget will be helpful for the market as it tried to make the economy vibrant and stabilise the macroeconomic situation, he added.

The government focused on macroeconomic stability, inflation containment and attaining a stable foreign exchange market, all fit for the moment, said Mohammed Helal Uddin, director (research) at the Centre on Integrated Rural Development for Asia and the Pacific.

The government paid little focus on the share market since it was less of a necessity at this moment considering the overall economic situation, he said.

There was nothing in the budget that turned out negative for the stock market. If the economy can be revived in such a tough period, it will be good for the market, said Uddin, also a professor of economics at the University of Dhaka.

Black money was not allowed to be whitened through the stock market this year, so people were pondering whether this would have a negative impact on the market, he said.

But not much money was whitened through this method in the previous years, so it is not a big deal for the market, he added.

Uddin recommended reducing the supply of shares by limiting the entry of new companies through the issuance of initial public offering (IPO) in the market now considering the present situation.

"Private sector investment needs to be raised, but I don't know how it would be increased to 60 to 70 per cent of the GDP from the present 23 per cent," said Asif Ibrahim, chairman of Chittagong Stock Exchange.

"The government needs to ensure a favourable environment for investment," he said. Brokerage commission has been reduced all the while intense competitiveness pervades stock brokerage firms, so it would be better if source tax can be reduced for the brokerage firms, he said.

The government did not increase the tax gap between listed and non-listed companies, so companies are not that interested in getting listed. The companies are going to the banking sector for their financing needs, he added.

"We also did not see any proposal on bringing government-owned companies to the market," Ibrahim added.

The corporate tax rate was higher than that in competing economies, so the government reduced it by 5 percentage points in the last two years even amidst the pandemic, which is laudable, said Snehasish Barua, partner at the Snehasish Mahmud & Co.

But one precondition that over 10 per cent of shares have to be offloaded is not aligned with the Bangladesh Securities and Exchange Commission (BSEC) rules, he said. Another precondition stipulating that the receipt of money and expenses be through banking channels will be quite tough for companies to abide by, he added.

Prof Mahmuda Akter, executive president of the BICM, and Ziaur Rahman, president of Capital Market Journalists' Forum, also spoke.