Offload more quality shares to prevent stock market from overheating

ADB Country Director Hua Du speaks at a seminar on 'Bangladesh Capital Markets Engine of Economic Growth' jointly organised by ADB and Citigroup Global Markets Bangladesh Private Limited at Dhaka Sheraton Hotel yesterday. SEC Chairman Faruq Ahmad Siddiqi and Managing Director and Citi Country Officer-Bangladesh Mamun Rashid are also seen.Photo: STAR

Asian Development Bank (ADB) Country Director Hua Du yesterday pleaded for immediate increase in supply of quality shares to prevent any possible overheating or price shocks in the country's stock market.
"The rise in capitalisation and index values in Bangladesh is mostly demand-driven, which is somewhat risky, it must be backed by quality shares with strong economic fundamentals," she said addressing the closing session of a daylong seminar.
ADB and Citigroup Global Markets Bangladesh Private Limited jointly organised the seminar on 'Bangladesh Capital Markets Engine of Economic Growth' at Dhaka Sheraton Hotel.
Hua Du said although Bangladesh's market capitalisation to GDP ratio reached 14 percent this year, the ratio is still behind compared to that in neighbouring countries. Market capitalisation to GDP ratios stands at around 70 percent in India and over 40 percent in Pakistan, she referred.
Welcoming the government decision on offloading shares of Jamuna and Meghna oil companies, she hoped that the government would encourage more state-owned enterprises (SoEs) to offload their stakes in the bourses.
Offloading SoE shares will not only ensure common public participation in the organisations, but also brings transparency and accountability in the institutions, she pointed out.
Securities and Exchange Commission (SEC) Chairman Faruq Ahmad Siddiqi said it is needed to review the pricing system of initial public offerings (IPOs), as the entrepreneurs feel hesitated to come into the market with the existing IPO pricing methods.
“The SEC is working on how to improve the pricing systems so that the entrepreneurs are encouraged to go for IPO with a proper value of the shares,” he said.
Once again terming the recent surge in the stock market 'overheated', he said a mismatch between demand and supply has contributed to such a surge.
He also pointed to the fact that there is a huge demand for new shares in the market.
Referring to the government steps of offloading its stakes in the SoEs, he said some government entities in energy, power and telecom sectors will come into the market in near future.
Along with the government, the private sector enterprises should also come forward to list their organisations in the stock market, he observed.
Mamun Rashid, managing director and Citi country officer Bangladesh, said: “The workshop marks our constant effort in developing the capital market in Bangladesh using our in-depth global knowledge and access to the capital markets across the world.”
Earlier, six sessions on 'Global Equity and Debt Capital Market Overview', 'Capital Market Development in Bangladesh-Improvement of Capital Market and Insurance Governance Project', 'Role of Credit Rating Agencies for Capital Market Development in Bangladesh', 'Local Currency Financing and Bond Issuance for Infrastructure Development ADB's Experience and Lessons Learned from a Regional Perspective', 'IPO and Book Building', and 'Company Valuation Methodologies and Techniques' were held at the seminar.