Benefit from meltdown
Ravi Kapoor(left)
In today's integrated and global world economy, no country will remain untouched by the current global financial turmoil. Every nation will face an impact, either directly or through side effects, says Ravi Kapoor, a senior official at Citi South Asia.
However, Kapoor says, there are indeed ways for Bangladesh to take advantage of the global reshuffling and re-allocation of resources that are taking place and come out a winner in the process.
Kapoor, managing director and head of the Capital Market Originations, Citi South Asia, said this in an e-mail interview with The Daily Star.
Q: Many believe that the ongoing global financial crisis will not affect the Bangladesh economy; rather the country will benefit from the meltdown. Many others think that if the financial crunch prolongs, it will put a negative impact on the economy. What do you think?
A: As you have rightly pointed out, there is no consensus response to this question. I am of the personal belief that in today's integrated and global world economy, no country will remain untouched by the current crisis. There will be an impact - either directly or through side effects. However, while we wait for the dust to settle, there are indeed ways for Bangladesh to take advantage of the global reshuffling and re-allocation of resources and come out winner in the process. Timely and coordinated macro policies are crucial in ensuring that Bangladesh continues to remain on the radar of major market players.
Q: What are your views on the economy of Bangladesh and its development potential?
A: Citi has been operational in Bangladesh since the late 80s and have since then maintained a positive outlook for the country's growth potential and economic resiliency. We hope that Bangladesh will continue on its current growth trajectory, adjusting for the global economic impacts.
Q: South Asian countries, including Bangladesh and India, are talking about introducing 'cross border trading' among the regional countries, for a long time now. What is your view about cross-border trading?
A: Despite the current setback, Asia will continue to be a hub of economic growth this decade, with South Asia continuing to play a major role. As such, any sort of formalised and well-planned 'cross-border trading' mechanism will benefit all the parties and develop our regional strength further and increase our regional self-sufficiency. However, proper emphasis has to be given to adequate disclosure, transparency, governance and other risk control measures to ensure robust businesses that can survive the test of time.
As an example, Bangladeshi corporate organisations can look to access capital through the Indian Depository Receipt platform that has been set up in India. Similarly, we may think of ways to set up proper investment vehicles for Bangladeshis to invest in regional companies and participate in the 'success' of the region. There are endless opportunities and very many permutations of 'cross border' partnership.
Q: How should our corporate organisations be preparing for the next growth trajectory?
A: While the global scenario has changed drastically, and we are still waiting to see the aftermath of the recent meltdown, some things that Bangladesh corporate organisations can benefit from by incorporating in their strategies include:
Change is the only constant: Management needs to be proactive in anticipating changes that may come from the standpoint of customers, competitors or from the changes in technology or environment.
Capital is global: The world's capital is mobile and will flock to quality investment opportunities, irrespective of country or creed. Bangladesh corporates can benefit from this by building world class franchises in the country and availing global capital or can become a 'forgotten story' if they cannot remain in front of the global investors' mind-set.
Q: What are your views on the development of the private sector in Bangladesh and the role of capital market in driving growth?
A: In terms of opportunities for Bangladeshi capital markets to act as partners in the private sector's ongoing growth strategy, we believe that there is enormous untapped potential.
The corporate organisations and investors are increasingly getting more sophisticated in their funding/investment approaches and we believe that this will translate into further development of the corporate bond market along with additional development of the equity and equity linked markets. As you know, well-functioning markets ensure funding efficiency and optimal allocation of resources.
Q: Please share with us your experience about the growth story of the Indian capital market over the last decade.
A: India's GDP grew on the back of reforms introduced in the early nineties, increases in domestic consumption and emergence of the services sector.
The Indian markets became more in-depth and vibrant on the back of constant reforms introduced by the regulators in a calibrated manner. The reforms which facilitated the growth in Indian capital markets include introduction of electronic trading platforms, dematerialisation of stocks, efficient settlement systems, de-mutualisation of stock exchanges, emergence of new investment vehicles to channel retail savings.
Q: The Bangladeshi stock market is mostly driven by speculation and rumours. Please comment on this.
A: 'News-based trading' is prevalent in every market. Such trends are deemed to be signs of a healthy vibrant market place, where capital allocation is instantaneously based on demand and supply. There is an optimisation of capital usage. However, while this sounds good in theory, we have to be extra cautious about ensuring that the right news goes to investors at the right time and from the right sources to ensure that the right investment decisions are taken. Otherwise, retail driven, shallow liquidity markets are particularly vulnerable to 'market manipulation'. Regulators and market players together have a major role to play in ensuring proper surveillance so that 'speculations' and 'rumours' have minimal impact on the overall market.
Comments