Govt steps not enough to prop up stocks: analysts
Left, plainclothes policemen take Mizanur Rashid Chowdhury, president of Bangladesh Capital Market Investors Unity Council, into custody from a protest yesterday. He was released later in the afternoon. Centre, a leader of the investors breaks into tears at a press briefing. Right, policemen arrest another retail investor. He was also released later. Photo: STAR
Analysts, merchant bankers and investors believe steps taken to revamp the stockmarket would not work unless institutions ensure their participation.
The government yesterday took a number of actions that include withdrawal of 10 percent tax on the mutual funds and reduction of tax at source on brokerage commission by half to 0.05 percent.
The central bank has also given green signal to banks to increase its investments to stocks.
Despite all these positive initiatives the market yesterday saw the lowest trading since January 26 this year.
Also, retail investors, who have been on a fast-unto-death programme from Sunday morning, yesterday vowed to continue their fasting programme, although they were dispersed by police from in front of the Dhaka bourse yesterday morning.
Prof Salahuddin Ahmed Khan, former chief executive officer of Dhaka Stock Exchange, said only the initiatives would not work, ensuring institutional investors' participation is very important to stabilise the market.
Khan, who teaches at Dhaka University, said it would take time to increase liquidity flow into the market, as the central bank is still working on the issue.
“The steps taken yesterday will not work if banks do not come up with their investments,” said a merchant banker preferring not to be named. He also expressed concern on the banks' time to decide on their investments to stocks.
After a meeting with the central bank governor, Nurul Amin, vice chairman of Association of Bankers Bangladesh, told journalists that ABB needs one week time to decide on their investments to stockmarket.
Akter H Sannamat, a market analyst, said the National Board of Revenue's tax reduction move might boost up the investors' confidence. But investors expect an SRO (statutory regulatory ordinance) on black money issue, he said.
General index at Dhaka Stock Exchange rose 0.68 percent to nearly 5,424 points yesterday. Total issues traded were 259, of which 178 advanced, 71 declined and 10 remained unchanged. Total trade value was less than Tk 228 crore, the lowest in nine months.
SEC BRIEFING
The Securities and Exchange Commission at a press briefing informed journalists that the government reduced the tax at source on brokerage commission by half to make the tax ratio similar to that of the last fiscal year.
“The NBR has already issued a SRO where it stated that the tax on brokerage commission will be 0.05 percent, instead of 0.10 percent and it will be effective from today [yesterday],” said Prof M Khairul Hossain, chairman of the stockmarket regulator.
He said the tax rebate facility, which was withdrawn from this fiscal year, was also reinstated by the NBR through another SRO. “It means the investors will get a 10-percent tax rebate for their investment in the stockmarket and the facility will be effective from July 1 this year.”
The SEC chairman said any kind of income by the mutual funds will be income tax-free. “The NBR has issued another SRO to this effect,” he said.
The government imposed a 10-percent tax on profit made by the mutual funds from this fiscal year.
“The finance minister himself was scheduled to disclose the decisions. But, the minister requested me to announce the decisions as he got busy with other important issues,” the SEC chief said.
Hossain said the government has formed an 'Advisory Council' that will monitor the market and make recommendations to it.
The council will be led by finance minister AMA Muhith. Other members include M Farashuddin Ahmed, a former governor of Bangladesh Bank, Faruq Ahmad Siddiqi, a former SEC chairman, Anisul Haque, a senior advocate of the Supreme Court, a major general and a joint secretary of the finance ministry.
Hossain said he had series of talks with the high-ups of the government including the prime minister and the finance minister, and they all want to see a stable and vibrant stockmarket.
“The government is gradually implementing our suggestions and recommendations that we are making from time to time to stabilise the market,” he said.
BANGLADESH BANK'S MOVE
Bangladesh Bank Governor Dr Atiur Rahman yesterday asked the banks that have investments to the stockmarket less than 10 percent of their liabilities to go for further investments.
“The governor has told the ABB that the under-invested banks in stocks can now invest,” said Nurul Amin, also the managing director of NCC Bank.
BB will also be flexible with the margin loan and rescheduling of loans for the sake of the investors, Amin said. But ABB has brought the declining confidence issue before the governor.
He said he has requested the governor to help implement different government decisions taken to boost up the market and the recommendations of the probe committee on stockmarket debacle in last December-January period.
INVESTORS' PROTEST
The police yesterday dispersed the investors who have been observing the fast-unto-death programme in front of the DSE building since Sunday, protesting the continuous downtrend in the market .
Baton-wielding policemen swooped on the protesters at around 8:45am and drove them away from there hours before the stockmarkets were scheduled to start the day's trading at 11:00am.
Police detained at least five investors including Mizanur Rashid Chowdhury, president of the Bangladesh Capital Market Investors Unity Council.
A large number of police were deployed in front of the DSE building and adjacent areas.
Later the demonstrators gathered on the National Press Club premises and held a press briefing at noon.
“We were continuing our protest programme in a quiet manner. But, the police forced us out of the DSE area,” said Kazi Nazrul Islam, acting president of the unity, while weeping.
“We will hold our hunger strike programme here. Our protest will continue until the prime minister gives specific orders on the issue,” he said, adding.
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