2025: A troubled year for the capital market

The year 2025 is set to be remembered as one of the most difficult periods for Bangladesh's capital market, marked by persistent volatility, weak investor participation and steady erosion of confidence. 

Despite a series of regulatory initiatives and reform-oriented moves, the market remained under pressure throughout the year, weighed down by political uncertainty, economic challenges and a prolonged absence of fresh listings, according to the market analysts.

The benchmark DSEX index ended the year at 4,865 points, shedding 351 points or 6.73% compared to the previous year. The blue-chip DS30 index also declined sharply, losing 86 points or 4.44% to settle at 1,853. 

Market activity remained subdued, with average daily turnover falling 18% year-on-year to Tk521 crore, reflecting investors' reluctance to deploy fresh funds in an uncertain environment.

The overall size of the market relative to the economy also weakened. The market capitalisation-to-GDP ratio dropped to 12.21%, underscoring the shrinking role of equities in the broader financial system. 

Valuations, however, became more attractive on paper, with the market price-to-earnings ratio edging down to 8.59, although low valuations failed to lure investors back in meaningful numbers.

Market movements during the year reflected sharp swings driven more by sentiment than fundamentals. The DSEX reached its highest point at 5,636 on 7 September, while the lowest level of the year was recorded at 4,615 on 28 May. 

Turnover also fluctuated widely, peaking at Tk1,442 crore on 4 June but dropping to a low of Tk224 crore on 7 September, highlighting the fragile and inconsistent nature of investor participation.

One of the clearest indicators of the year's stress was the steady exit of retail investors. Around 66,500 beneficiary owner accounts were emptied of shareholdings during 2025, leaving the number of BO accounts with shares at just over 12.05 lakh. 

Market insiders said this trend reflects not only losses suffered by small investors but also a broader sense of fatigue and distrust built up over years of market instability.

'Deeply troubled year for market'

Minhaz Mannan Emon, shareholder director of the Dhaka Stock Exchange and managing director of BLI Securities Limited, described 2025 as an unfortunate and deeply troubled year for the market.

He told The Business Standard that many investors left after suffering losses amid a prolonged bearish trend and persistently low turnover. 

According to him, most market intermediaries also became largely inactive due to the absence of initial public offerings, uncertainty surrounding the national election and a challenging economic backdrop.

He said the year was largely dominated by the formation of task forces and focus groups, as well as punitive actions taken by the reconstituted Bangladesh Securities and Exchange Commission (BSEC) under the interim government. 

While these measures were intended to clean up the market and restore discipline, they failed to generate any immediate positive reflection in prices or trading activity. 

However, he expressed hope that these steps could produce better outcomes in the coming year, particularly if the election is held on time and political clarity returns. 

"Investors are waiting for the next elected government," he said, adding that a turnaround remains possible if confidence is restored.

Factors shaping 2025 market 

A combination of factors kept the market under pressure throughout the year. Uncertainty over the upcoming national election weighed heavily, discouraging both local and foreign investors from taking long-term positions.

Broader economic uncertainty, a deterioration in law and order and weak private investment further eroded sentiment. Tighter margin loan rules and bank mergers also made traders more cautious, market insiders said.

Regulatory actions significantly shaped market behaviour. The BSEC took punitive steps against several high-profile investors accused of wrongdoing, including banning former chairman Shibli Rubayat Ul Islam, Salman F Rahman, vice-chairman of Beximco and former adviser to the ousted Prime Minister Sheikh Hasina, from the capital market.

Heavy fines were imposed on some large investors for alleged manipulation. While many welcomed the move as overdue accountability, others said the abrupt actions heightened short-term uncertainty and froze trading activity.

Confidence was also hit by internal challenges at the regulator. Reports of operational chaos and delays in finalising key regulations left investors uncertain about policy direction.

The absence of any new IPOs throughout the year further narrowed investment options, leaving the market reliant on secondary trading of existing stocks.

At the same time, 2025 laid the groundwork for reform. The regulator introduced new margin loan and mutual fund rules, drafted updated IPO regulations and cut the annual BO account maintenance fee to Tk150, a reduction of Tk300.

Task forces and focus groups were formed to recommend structural reforms, while initiatives were launched to facilitate listings by state-owned enterprises, multinational companies and leading private firms.

'Reform most significant development'

Moniruzzaman, managing director and chief executive officer of Prime Bank Securities, said that regulatory reform was the most significant development for the capital market in 2025. 

He noted that holding influential individuals accountable through punitive measures marked a major shift in regulatory approach. He also highlighted the unprecedented engagement of private sector representatives in reform committees, calling it a first in the history of Bangladesh's capital market.

According to him, based on committee recommendations, the BSEC finalised margin loan and mutual fund rules, while IPO regulations are in the pipeline awaiting final approval. 

However, he cautioned that regulatory changes often take time to be absorbed in Bangladesh, as market participants are not always comfortable adapting to new frameworks. "It takes time," he said, expressing optimism that investors may start to see tangible benefits in 2026.