Bond market not gaining momentum due to low demand
The trading of government securities on stock exchanges has not been gaining momentum due to a lack of awareness and complications regarding transactions, said people involved in the capital market.
So transactions have not increased despite a rise in the market capitalisation, they added.
It is necessary to solve the identified problems to increase transactions of government securities or bonds on the stock exchanges, said the stakeholders at a roundtable discussion titled "The basics of government securities and trading on the exchange platform", organised by the Dhaka Stock Exchange on Thursday.
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On 10 October, the Bangladesh Securities and Exchange Commission (BSEC) allowed trading of 250 government securities with tenures ranging from two to 20 years on the Dhaka Stock Exchange (DSE) on a trial basis.
At the programme, BSEC Commissioner Shaikh Shamsuddin Ahmed said, "There were only eight government securities transactions in 20 days. During an investigation, we found out that there is a gap between demand and supply. The problem was that sufficient demand has not been created through a proper campaign."
Discussants at the programme also identified differences in trading settlement of the Bangladesh Bank and the stock exchange, limitation of brokerage houses' knowledge about bond pricing method, investors' ignorance, circuit breaker, problems in banks' accounting system due to T+2 (trade date plus two days) trading settlement, and brokerage commission as major problems in trading bonds in the capital market.
Besides, there are problems regarding taxation, market valuation for banks as per the Bangladesh Bank guidelines, business partner identification number, beneficiary owner identification number, and securities transfer.
Saifur Rahman Mazumdar, acting managing director of DSE, said mainly banks and financial institutions are holding the government securities. They are buying and selling the bonds on the platform of the Bangladesh Bank. General investors will be interested in trading government securities if transactions on the DSE platform increase.
DSE Chairman Md Eunusur Rahman, who presided over the programme, said, "Bangladesh has progressed in social development, but lags behind in the financial sector. If this sector cannot be developed, it will be difficult to develop the country sustainably."
