The fragile state of the stock market

On July 24, the DSEX, the benchmark index of the Dhaka Stock Exchange, took the biggest single day leap since January 8, this year. To make the situation more complicated, investment from financial institutions—suffering from liquidity crises—is soaring. The present effort by the Bangladesh Bank to verbally seek non-banks who have the capacity to invest in the market, and Bangladesh Securities and Exchange Commission (BSEC) to ask the DSE to order all investors to physically place stocks—for due authorisation—came far too late to result in a sustainable reversal of investors’ confidence. “As per its information, 19 lenders have the scope to Tk 2,000 crore in the market,” was stated in The Daily Star’s report. But how long can this amount support the market? Unless investors’ confidence is restored, the fate of the capital market will always remain uncertain.

Experts have suggested that long term policy support should be incorporated in budget documents for businesses to stabilise the stock market. The BSEC chairman has recently written to the National Board of Revenue (NBR) that the “development of the bond market is essential for the much-expected expansion of the stock market.” All that aside, the main focus for the BSEC should be to enforce regulations and fix the current loopholes.