The stockmarket can play an important role to meet the investment needs of the public and private sectors and turn the country into a developed nation by 2041, Finance Minister AMA Muhith said yesterday.
Thanks to the reforms taken in the last eight years, the stockmarket is now more efficient and ready to march ahead, he said. He spoke at the inauguration of the World Investor Week-2018 at the Krishibid Institution Bangladesh in Dhaka. The Bangladesh Securities and Exchange Commission (BSEC) organised the event as a member of the International Organisation of Securities Commissions, the global standard setter for the securities sector.
Muhith said the country is lagging behind the neighbouring countries in the investment indicator. India's investment-to-gross domestic product (GDP) ratio was 30 percent in 1930s. “Our investment-to-GDP ratio is still more or less 30 percent. We should get more investment than this now,” said the minister.
He said the Awami League government should stay in power for one more term to improve the investment situation.
“We also have to meet some international goals during this time. This is a very important time for Bangladesh.”
The regulator is trying hard to protect investors' interest, said M Khairul Hossain, chairman of BSEC. Now institutional investors should be more active and play an important role, Hossain said.
He said institutional investors should determine an appropriate cut-off price. If they fail to do so the regulator will either discontinue or postpone the book building system or review it, he said.
When a company wants to sell shares in the market with premium, it has to come through the book building method.
In this method, institutional investors settle on a cut-off price through bidding and buy shares at the price. General investors, however, buy shares at 10 percent lower than the cut-off rate.
“Some companies are doing window dressing on their accounts but it is not good for the capital market. Merchant banks should be careful about the initial public offering (IPO) of companies.”
Md Asadul Islam, secretary of the Financial Institutions Division of the finance ministry, stressed acquiring knowledge about a company before investing in it. “Investors should shun the tendency of becoming rich overnight,” he said.
After the inauguration of the weeklong event, a conference on the “Importance of financial literacy and investors' protection” also took place. The economy of Bangladesh is growing at more than 7 percent per annum, Md Mahbubul Alam, executive director of BSEC, said at the conference.
To meet the financing needs of the economy, the stockmarket will play a very important role in the future, he said.
M Shaifur Rahman Mazumdar, managing director of the Chittagong Stock Exchange, said the market has the potential to expand, and the growth should be qualitative as well. The government should give special incentives so that well-performing companies come to the market, he said.
“It would lessen pressure on banks and promote the stockmarket.”
Mazumdar said when a company floats shares, investors hanker after the securities without considering its fundamentals.
“As a result, all IPOs are oversubscribed. It is also seen in the secondary market. It means investors still have knowledge deficit.” Farhad Ahmed, executive director of the BSEC, also spoke.