Tuesday, July 14, 2020 | ePaper

Vulnerable stock market suffers from confidence crisis

  • Print
THE recent measures to prop up the stock market by the government appear to have failed as the unusual fall of share prices continues to rattle investors. The DSEX, the benchmark index of Dhaka Stock Exchange, slumped to nearly 34-month low to 4,888 points last month, losing 533.61 points or 9.84 percent since July 2. The investors have already lost Tk 31,349 crore in share value. Earlier in May, Bangladesh Bank widened the banks' scope for investing in the stock market as part of efforts to revitalise it. In a circular, the BB said the banks' investment in non-listed securities -- such as equity, non-convertible cumulative preference share, non-convertible bond, debenture and open-ended mutual funds -- would not be counted as capital market exposure. In July, Bangladesh Securities and Exchange Commission, the regulator of the stock market, held a meeting with stakeholders and took 22 initiatives to win back the confidence of investors.
Meanwhile, share prices have been going down due to the ongoing liquidity crisis of financial institutions. These institutions don't want to invest in the market now as they fear further "pressure" in the coming days. The asset quality of banks is questionable, and their operating cash flow is also very low, which will ultimately put more pressure on liquidity. It is only by solving the liquidity crisis by ensuring good governance that banks will find it possible to invest. The financial sector, especially banks and non-bank Financial Institutions (NBFIs) has been facing severe liquidity crunch since February 2018. Banks and the NBFIs are the drivers of the stock market but they have been plagued by rising nonperforming loans (NPLs), scams and lack of governance. NPLs stood at Tk 112,000 crore or 11.50 percent of the total outstanding loans. If rescheduled and written-off amounts are included, the stressed assets of banks would be around 20 percent of the total loans.
However, lack of quality stocks is a key reason behind poor participation of investors in the stock market. It will be more difficult to restore the investors' confidence if the government fails to bring reputed local and multinational companies to the market. Foreign investors are also selling off shares over the last few months due to confidence crisis and the tussle between the Telecom Regulator and Grameenphone over audit claims.

More News For this Category

UNO sets example of pro-people public office

HAKIMPUR Upazila of Dinajpur district has set an example of low Covid-19 cases by enforcing  the mandatory face mask use and by encouraging people to maintain social distancing. From March

Five recommendations to attract investment, but who will act on them

BANGLADESH needs to make progress in five key areas in the coming days to attract both domestic and overseas investments, as per a report of a local daily on the

Hill Tracts Is A Land Of Conflict Forever?

After more than two decades of instability and deadly conflict, with an aim of bringing overall peace, coexistence of all communities and prosperity in the Chittagong Hill Tracts, on December

Expatriates In The Crisis of Corona Pandemic

Corona virus has had a negative impact on every aspect of the world. In its continuation, the immigrant Bangladeshis have fallen into a great crisis. More than 14 lakh immigrants

Tuition fees should be tolerable for guardians: Govt funding necessary

TENSION is growing between parents and guardians of students and educational institutions over the payment of tuition fees. Guardians have started street agitations demanding a 50 per cent waiver for

Readers’ Forum

Violence Against Women: Where Is The End?Violence against women is increasing alarmingly day by day. We are constantly reading in the newspaper about murders, disappearances, rapes, gang-rapes, murders after rape

World As Expected After Covid-19

Covid-19 is fighting a different kind of war. The future of this war is unknown and uncertain. The whole world is terrified of this war. Although we have learned something

E-waste Emerging Threat To Environment

Afsana Rezoana Sultana :Present days are getting easier with the blessings of technology. Various electrical products have become an essential means of exchanging information and entertainment. The need for these

Killing of Bangladeshis in border areas has increased

KILLING the Bangladeshi citizens in border has increased over the last six months for aggressive actions by The Indian  Border Security Force (BSF). Twenty five Bangladeshis were killed though no

When the ones highest in government don't regard law, don't blame DCs

A NATIONAL daily on Saturday reported that the Deputy Commissioners of nearly half of the country's 64 districts continue disregarding the government's directive to upload information on allocation and disbursement