OTC market turnover drops 93% in 2020

Turnover at the Over-The-Counter (OTC) market in the Dhaka Stock Exchange (DSE) dropped by 93% in the year 2020, compared to the previous year. 

However, the outgoing year saw an 18.59% rise in the main market of the DSE.   

The premier bourse introduced the OTC market for delisted companies that were or will be removed from the main trading board for non-performance and non-operation.

Although the transaction in the OTC market increased in 2018, both trades and share transactions of the market fell in the next two years.

After the decline in transactions in 2019, 2020 also ended with a massive fall in transactions in the market.

According to the DSE, the premium bourse saw the fifth highest transactions in 2020 since its inception. Though the market was severely affected by the pandemic in 2020, DSE transactions increased by 18.59%, or by Tk21,159.33 crore, than the previous year.

Throughout the year 2020, DSE had 208 trading days -- 38 working days less than the previous year. Despite being closed for 66 consecutive days during the virus-led shutdown, DSE saw an average daily transaction of Tk648.94 crore.

In 2020, around 10.18 lakh stocks were traded in the OTC market worth nearly Tk1.09 crore. In the previous year, around 1.53 crore shares were traded in the market worth Tk22.32 crore. The figures show that transactions in the OTC market declined by 93.56%.

After assuming office, the Bangladesh Securities and Exchange Commission (BSEC) initiated inquiry about the financial affairs of the companies that have been languishing in the category for a long time.    

Initially, special auditors have been appointed to scrutinise the financial affairs of 21 companies. Besides, an initiative has been taken to inspect the factories of 43 companies.

BSEC sources said the stock exchanges will investigate all financial and non-financial information of OTC companies and will check the existence of land, building and property to assess their values.

Besides, the exchanges will scan the operational status of the companies and other relevant issues, if any.

These companies are not allowed to sell, mortgage, pledge, or transfer any of their properties and assets as well as the shares held by sponsors and existing directors without the commission's permission.

According to the DSE sources, companies belonging to the OTC bracket are financially weak. Some of them failed to hold AGM for years while others have turned into loss-making corners for years. Therefore, the investors have been shying away from the enterprises.  

According to the same sources, around 1.53 crore shares were traded in the OTC market in 2019 worth Tk22.32 crore. That year clocked 68.25% fall in share transactions in the OTC market.     

In 2018, OTC traded 2.16 crore shares worth Tk70.31 crore with a 99.23% rise in transactions.

The DSE launched its OTC in October 2009 with 51 companies. The companies were ousted from the mainboard to the OTC because of their underperformance or nonperformance in business, failure to hold shareholders' annual general meetings over the years, and for converting their own shares into electronic ones instead of paper certificates.

In the second phase, 29 more companies were sent to the OTC. Later, 14 companies managed to come back to the main market by complying with relevant rules and performing better in their businesses. Besides, six companies were delisted from the stock exchange.

Thus, the total number of securities under the OTC facility stood at 60 as of 1 October, 2020.