Demand for BSEC overhaul gets louder as bloodbath hits stock market
Special CorrespondentÂ :
Share market analysts on Friday urged the government to push for an immediate overhaul in the Bangladesh Securities and Exchange Commission (BSEC) what they said the current Commission lost credibility in upholding investors' interest and prop up the country's ailing capital market.
They came up with the recommendation amid free fall in share price indices at the country's two bourses.
"Reconstitution of the incumbent BSEC is necessary as the regulatory body has not been able to carry out its responsibilities effectively and efficiently," Khondkar Ibrahim Khaled, a former deputy governor of Bangladesh Bank, told The New Nation.
He said stock investors have long been suffering from confidence crisis and its impact is evident on the stock market. Their confidence will not be regained without 'proper' reformation of the Commission.
"Weakness of the Commission is responsible for the current situation of the capital market. So, the change in leadership of the regulatory body is urgent in overcoming this critical situation," he added.
Khondkar Ibrahim Khaled, who heads of the inquiry committee formed after 2010 stock market crash, mentioned that the BSEC chairman couldn't get more than two consecutive terms in office. But the current chairman has been appointed for the third term after gaining favour from an 'influential quarter.'
So, he could not take any strong steps when a bad situation arises in the capital market.Â Â Â Â
This is further wreaking the investors' confidence. The confidence can be gained through changes in regulatory bodies and the government has to take a role in this regard immediately, he said.
When asked, he said, "The market manipulation is going on unchecked due to the failure of the Commission. The same 'unwanted' people, who played game in 1996 and 2010, are still playing in the market. The ongoing market chaos will not be eliminated if BSEC fails to take stringent measures against them."
So, the government should immediately appoint a competent person as the new SEC chairman who is capable of proper use of power and have the 'courage' to bring the 'wrongdoers' under the book, he added.
Following a 13.8 per cent fall in 2018 and 17.3 per cent in 2019, the key benchmark at the Dhaka Stock Exchange (DSE) has lost 9.4 per cent within the first 10 working days of January this year.
DSE closed past week with the highest single week fall in key index since 2013 as the investors resorted to panic sales in all sessions amid lack of confidence.
The key DSE index, DSEX, also hit the 44-month low as majority number of listed securities witnessed price corrections throughout the week on the DSE.
The DSEX displayed free falls in all sessions and lost 5.87 per cent or 261.90 points to close at 4197.39.
The erosion of 261.70 points was the highest single week fall since 2013 while the loss of 252 points was the second highest single week fall observed in February 2017.
At the end of the week, the market capitalisation of the premier bourse DSE came down to Tk 3.26 trillion on Thursday with a loss of 5.04 per cent or Tk 171.61 billion from the closing mark of the previous week.
"The current market trend is signaling an act of manipulation. But no regulatory is yet to be taken against such wrongdoing. Even, there is lack of proper enforcement of laws that leads to dampen investors' confidence prompting them to sell-offs," said Faruq Ahmed Siddiqi, a former chairman of BSEC.
Reviewing the current market situation, he said, one reason that created the market crisis is lack of liquidity. Apart from riasing liquidity, regainingÂ investors confidence is also essential. For this, the good governance must be ensured in the market.
"In case of irregularities and suspicious trading actitives, investigations should be launched and punishment should be ensured if any body found quilty. It will help boost investors confidence and thereby improves the market conditions," he noted.
Faruq Ahmed Siddiqi further said that the BSEC has already allowed listing of many 'fundamentally weak' companies and it has had a negative impact on the market. BSEC must not allow listing of such companies in future for the betterment of the capital market.
"The market went down significantly in the last two years and a fresh downturn is also in sight in this year creating credibility crisis of BSEC," a share market analyst told The New Nation yesterday on condition of anonymity.Â Â Â
He said the market is influenced largely by 'wrong' instructions with weak investors confidence. Besides, gamblers are active in the market to manipulate share prices Â
As a bloodbath hit the stock market, he said, "Reformation of the BSEC is the first condition to prevent it from further 'bleeding' and restore the investors' trust. Competent and credible people should be appointed in the Commission for managing the capital market.
"BSEC has also some limitations in working independently. It should be freed from influence of the Finance Ministry and politicians so that it can take appropriate decisions in crucial moment," he added.
Earlier, stock investors also demanded reforms in BSEC by changing the top officials for their failure to uphold the capital market's integrity.
They also alleged that the current Commission failed to curb rampant manipulation of many stocks, which dented investors' confidence that led to the market's slump.