Bourse revving up to fire on all cylinders

The stock market has started to bounce back despite the ongoing pandemic thanks mainly to investors' growing confidence in the new leadership at the Bangladesh Securities and Exchange Commission (BSEC) as they took some measures to restore discipline.

In the last two months, DSEX, the benchmark index of the Dhaka Stock Exchange, surged 680 points, or 17.1 per cent, to hit 4,633.37 yesterday.

During the period, the market capitalisation rose 13.6 per cent to Tk 352,219 crore.

Turnover, another important indicator of the market, reached Tk 1,100 crore in the last three days from Tk 38 crore two months earlier.

Market analysts say the participation of retail investors in large numbers helped the index to spiral.

Exemplary punishment handed out to rogue players, compelling listed companies' directors to hold a minimum 2 per cent shares individually and 30 per cent shares jointly, buoyant monetary policy, positive export growth and a beginning of an economic recovery are the main reasons for the surge in confidence, they say.

"The regulatory step was crucial for the rise in the confidence of the stock investors, which geared up the index," said Md Moniruzzaman, managing director of IDLC Investments.

BSEC hit the right place by punishing errant directors and brokerage houses and compelling minimum shareholding.

"The expansionary monetary policy also impacted the market positively."

The central bank has recently reduced the bank rate to 4 per cent from 5 per cent and proposed to cut overnight repurchase rate from 5.25 per cent to 4.75 per cent to make funds available for banks at cheaper rates.

The announcement came in the monetary policy for the last half of the current year.

The V-shaped recovery of local businesses and export earnings is happening, although it is yet to reach the pre-pandemic level, Moniruzzaman said.

A V-shaped recovery involves a sharp rise back to a previous peak after a sharp decline.

Exports earnings in July rose about 44 per cent from the previous month to $3.9 billion, according to the Export Promotion Bureau.

"The economy did not face the devastation that people had feared. People are optimistic now."

Investors come to the market with money when a rally happens.

"And that is happening now," Moniruzzaman added.

Khairul Bashar Abu Taher Mohamed, chief executive officer of MTB Capital, echoed the same, saying the market has been rising after staying low for a long time mainly due to the growing confidence in the new commission.

The new commission has taken some steps against errant directors of listed companies and voided some initial public offering proposals, sounding out a clear message that it would not be easy to manipulate and bring weak companies to the market under the new leadership.

"The message gave confidence and the confidence influenced people to pour money," he added.

In the middle of May, Shibli Rubayat Ul Islam, a professor of Dhaka University, was appointed the new chairman of the BSEC along with three new commissioners.

The past commission led by M Khairul Hossain was blamed for creating an opportunity for weakly performing companies to get listed with the bourses, denting investor confidence.

Moreover, rogue directors and players remained almost untouched during his nine-year stint. So, insider-trading, gambling and fall were a commonplace.

A top official of a stockbroker credited the retail investors' investment for the recent rise.

Recently, 15 banks formed a fund of Tk 1,650 crore by taking loans from the Bangladesh Bank through repo agreement. The banks invested about Tk 260 crore into the market, according to the central bank data.

"But the institutional investors are still silent."

The stock market regulator should ask them why they are not investing now because the rally would not sustain in the long-run if they do not come to the market.

Many stocks are in a very lucrative position now and they can invest buy them.

Some stocks are rising abnormally, but their earnings would ultimately fall amid the pandemic.

Several banks may incur losses in the third quarter of the year, which would affect the market in the days to come, he added.