July 18, 2020

Bangladesh capital market has been experiencing a negative trend since mid-2018 and the situation degraded more abruptly due to the Covid-19 shock 2020. The capital market has gone through a massive fall in index and overall market capitalization was decreased.  To escape this situation, both long term and interim policies and actions needs to be adopted, designed and executed. Consequently, in quest of reforming policies and essential market revival or reformation, a Resurgent Dialogue has been arranged namely Capital Market & Covid-19:Charting Impact and Path to Recovery on 18^th July 2020.

The session, moderated by MCCI President Barrister Nihad Kabir, was attended by the BSEC Chairman, CSE Chairman, DSE & CSE Managing Directors, Chairman of BUILD, President of BAPLC, MD & CEO of BRAC Bank, Chairman of Policy Exchange, member of CSE Board of directors, former top civil servants and other very precious stakeholders of Bangladesh Capital Market.

Barrister Nihad Kabir at her introductory speech urged that in last 27 years from the formation of BSEC not adequate good companies have been listed and good corporate houses are reluctant to be listed due to the lack of valuation, regulatory interference and primitive mindset. Dearth of good stock is traditionally being a mammoth obstacle for the Foreign Portfolio Investment. She expected that the new commission should be more friendly and vibrant and work with hasty action than incremental implementations.

Mr. Asif Ibrahim, Chairman of Chittagong Stock Exchange and member of Resurgent Bangladesh steering committee, provided welcome remarks where he accentuated on the importance of reducing the tax for listed companies, listing of good stock and strengthening the Bond market, Foreign Portfolio Investment, ensuring Good Governance from the governing bodies, Subsidizing the Margin Loan interest, three years tax exemption plan for SME’s, prompt introduction of Script Netting System in order to increase the market volume and bring back the confidence to the Capital market.

Mr. Mamun Ur Rashid, the CSE Managing Director, in his informative keynote presentation, presented a comparative statement between the South East Asian countries’ capital market and Bangladeshi Capital Market, GDP to Market Cap ratio, pre and post Covid-19 market capitalization and index scenario which denoted a future strategy formation method. The priority issues revealed from his presentation are implementation of stimulus package, ease and implementation of special fund declared by the Bangladesh Bank, Elimination of Double taxation, Digitization of BO account opening process, Script Netting , Sharing the API, motivating the SME listing, introduction of Buy Back system, listing of Green Field projects, listing of capable multinational companies, transparency in IPO listing process and so on.

The session’s chief guest Professor Shibli Rubayat-Ul-Islam, the BSEC Chairman, at his very optimistic speech stated commission’s genial approach towards the market progress. The IPO process will soon be more digitalized and simplified, Buy Back has been planned and are in review considering the obstruction in Company’s act, the BSEC surveillance software will be more vibrant and functional to ensure transparency, Script Netting & Digital Booth development will be immediately implemented. The BSEC has emphasized the digitalization and a two years master plan has been designed for financial literacy and ensure efficient digitalization which is inevitable to make the new product like Bond, ETF, Future etc. more functional. The zero-coupon Bond tax exemption has been reimplemented and the BSEC is working to gadget the Municipal and Police Bond.

Starting with a comparison of Market Capitalization to the GDP ratio of world capital market, Mr. Azam J Chowdhury, President BAPLC, emphasized to decrease the dependency on traditional Bank financing. The straight punishment to the wrong doers, immediate enforcement of regulation, ensuring good governance, bringing good stocks and new products to market by adequate valuation are the remedies to revive the market confidence. Restrictions (25%) of investments in subsidiaries (Merchant Banks, Brokerage) for commercial Banks should be reviewed since institutional investment is obvious to lessen the liquidity crisis.

Mr. Md. Abul Hossain, Managing Director, ICB stated that the investment of short-term loan in long term basis is not a viable process which is making ICB less proficient day by day. The high rate of interest rate against the loan taken from the private commercial banks by ICB makes the cost of fund huge comparing the rate of return which restrict ICB’s long term investment capacity over the years. Besides, at this moment only 0.31% market share is comprised by the bond market. Mr. Hossain opined to introduce new bonds like social bond, corona bond , other infrastructural Bond etc.  

Mr. Abul Kasem Khan, Chairman BUILD, stated that even after 49 years of liberation we are still depending on Bank financing for the long-term investment. Audit system, governance, accountability of the regulatory bodies should be strict. He opined to allow the Green Field Investment for the sake of market development.

The BRAC Bank MD & CEO, Mr. Selim R.F Hussain emphasized to increase the institutional dependency, 80-90% dependency on the retail base is not ideal for a vibrant market considering the example of big economies. He also opined to diminish the regulatory interferences to sustain the market index since it is not the regulators’’ job rather regulators are the facilitators and market should behave and perform as per supply and demand rule. Therefore, interventions like floor price should be removed. He also urged for the immediate digitalization of the entire market.

Mr. Sanaul Hoq, the DSE MD   highlighted the development of mutual fund and affirmed monitoring of the Asset Management Companies (AMC). He also opined for the implementation of the first track IPO process and rapid digitalization.        

Lastly, the prolific open discussion session was joined by Mr. Sharif Anwar Hussain, DBA leader; Mr. Nasir Uddin, former NBR Chairman; Mr. Shams Mahmud, Director DCCI, Mr. Anis A Khan, former MD MTB; Mr. MD Sayadur Rahman, CSE Director, MD of EBL Sec, former President of MBA; Mr. Nasim Monzur, MD Apex group and so on.

The Policy Exchange Chairman Dr. Masrur Reaz made the concluding remarks where he intuitively summarized the focal points discussed through the session. Micro level regulatory interventions should be lessened rather a narrowed bureaucratic delay is expected. Prompt actions like quick approval of IPO and new product like Bond is expected. To increase the market size and depth, the capable institutional investment is obvious. 80-90% investment comprised by the individual investors cannot affirm a stable capital market. Product diversification and ensuring a good governance at every sphere is necessary to establish a sustainable capital market with immense optimism. 

Finally, the entire session was concluded with the vote of thanks delivered by the CSE MD Mr. Mamun Ur Rashid.

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