A year of much praised leadership at securities regulator

April-May 2020 was almost the end of the world to most of the stock investors in Bangladesh as the secondary market slid abnormally, primary market governance was questioned, and very importantly the market went through an unprecedented 66-day shutdown.

The investors' confidence in the capital market regulator – the Bangladesh Securities and Exchange Commission (BSEC) – was at its bottom at that time, and the then outgoing top regulatory officials were counting days for an exit following their unprecedented nine-year tenure at the office. Then the government appointed three Dhaka University professors, two from Finance and one from Accounting background, and a veteran bureaucrat at the helm of the capital market in mid-May last year.

The Dhaka Stock Exchange (DSE) believes the first year of the new leadership at the BSEC was "successful" in terms of "the development of the capital market." Top DSE officials on Tuesday handed over their congratulation letter to the BSEC Chairman Professor Shibli Rubayat-Ul-Islam.

DSE Chairman Md Eunusur Rahman said in the letter, "The commission, with their leaders' prudence and talent, has played a significant role in the development, reforms and also in the regulation of the market."

"Some fantastic initiatives of the new commission helped increase the confidence of investors and the other stakeholders of the market and that is reflected in the positive trend in the market," said the DSE chairman who was heading the Financial Institutions Division at the Ministry of Finance before joining DSE board.

The DSEX, the broad-based benchmark of the DSE, was below 4,000 points before the new commission took charge on 17 May, 2020, and it closed above 5,800 points a year later on Tuesday.

Analysts also thanked the money market liquidity, better than expected economic performance amid the pandemic alongside the increased confidence on the regulator for the market's better condition.

DSE also appreciated the commission's efforts for qualitative changes in the capital market alongside the size growth.

The biggest change, so far, has been the new commission's constructive attitude that positively changed the way investors, intermediaries, issuers, market professionals communicate and collaborate with their regulator.

Reaz Islam, the chief executive officer of asset manager LR Global Bangladesh, said in a recent press conference, "We found conversation with top market regulators worthy after a long gap of more than a decade as they are for constructive solutions of the problems now."    

Stock market expert Abu Ahmed said, this commission has taken some much needed long pending initiatives, such as restructuring the boards of underperforming listed companies, making the sponsors-directors more accountable to their shareholders, and warmly welcoming both the issuers and the investors at a time.

The honorary professor of economics at the University of Dhaka also observed the stronger advocacy efforts by the BSEC for the development of the capital market and it "needs to be expedited further" as too many things depend on policy decisions from other offices including the central bank, revenue authority and other primary regulators.

"Bringing more than a hundred well performing companies to the bourses should be on top of the agenda of the new commission," said Professor Abu Ahmed, "otherwise market rallies would not be sustainable once due to lack of market depth."

A message and steps for better governance by the new commission, and process streamlining have been the key takeaways for Bangladesh Merchant Bankers Association Vice President Md Moniruzzaman.

Like other investment professionals, he is also optimistic about the "commission's efforts for product diversification in the capital market," mainly debt securities.

Alongside equity securities, the BSEC is inspiring issuers to meet their financing needs through various bonds.

However, the much needed secondary market for bonds is yet to become a reality.

Moniruzzaman who is the managing director of a leading merchant bank IDLC Investments Ltd also praised the new commission's efforts to address the accounting mistreatments by some listed companies.

In terms of secondary market governance, the commission has penalised a number of wrongdoers and it should go deeper and stricter in coming days, said Professor Abu Ahmed.

Moniruzzaman, a Chartered Financial Analyst, observed that the market is still speculation-dominated, instead of demonstrating a stable market behavior.

"If investors do not find sufficient companies with sound fundamentals, speculators get stronger in the market," said Professor Abu Ahmed. 

"For the desired change, the market also needs a qualitative change in the investors' base too, on top of listing fundamentally sound and well governed companies," said Moniruzzaman.

BSEC Chairman Professor Shibli Rubayat-Ul-Islam in a previous conversation with The Business Standard said, "We are working for a developed capital market that would cater to the financing needs of the economy as well as offering all types of investors ample opportunities to put their money into."

BSEC Commissioner Dr Shaikh Shamsuddin Ahmed said, "We are objective and open to each of the positive efforts alongside discouraging wrongdoings in the market."