SEC package only a brief relief: analysts
The stockmarket stabilisation package announced by the Securities and Exchange Commission (SEC) will only give a temporary relief to the retail investors, analysts said yesterday.
The reaction came after M Khairul Hossain, chairman of SEC, unveiled a 21-point package to stabilise the troubled stockmarket.
AB Mirza Azizul Islam, former finance adviser to a caretaker government, said the SEC steps will only raise demand in the market.
Islam, also a former chairman of the SEC, stressed the need to increase supply of shares to permanently stabilise the market.
He said, once the present crisis is over, the commission will have to focus on its own management instead of stock indices.
Islam also said involvement of the banking sector with the capital market will have to be cut down.
If the banks make a huge investment and lose money, they will reduce their dividend declaration and finally their prices will decline.
The calculation of the banking sector's exposure to the stockmarket will also have to be redefined following international best practices, he added.
Khondaker Golam Moazzem, senior research fellow of Centre for Policy Dialogue, said the initiatives of the SEC will give a short-term remedy to the investors and the market will get some capital as most of the steps are related with banks.
The commission should declare a timeframe when it will implement the mid- and long-term measures, Moazzem said.
He also said most of the recommendations of the probe report on the stockmarket crash in February are yet to be implemented due to the absence of a timeframe.
Prof Salahuddin Ahmed Khan, who teaches finance at Dhaka University, said: “The SEC package is not motivational; it is a plan to change the structural format of the market.”
Khan said the SEC steps were not well researched as the commission lacks qualified officers.
The commission should appoint qualified consultants on contract and give them some administrative responsibilities, he added.
Prof Mahmood Osman Imam, another teacher of finance at Dhaka University, criticised a regulatory decision that compels sponsors, directors and promoters of a listed company to jointly hold at least 30 percent stake in the firm.
He said the move will help manipulate the share prices of those companies.
The manipulators will use the chance to manipulate these 46 companies' share prices as their sponsors and directors will have to buy 30 percent shares from the market, he said.
Imam also said the regulator should give the sponsors and directors longer deadline to increase their holding.
If the government takes decision to reduce cash reserve requirement and statutory liquidity ratio then the market will get some credit, he said.
But the government should not borrow much from the banking channel as the move will put the banks in severe liquidity crisis.
Abu Ahmed, a professor of economics at Dhaka University, said the market should be monitored closely to assess the immediate effects of the SEC steps.
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