Brokers push for listing state firms, offloading govt stakes in MNCs

Hoping to supply quality stocks, stockbrokers — key intermediaries in the capital market — today (18 March) urged Chief Adviser Professor Muhammad Yunus to list state-owned enterprises (SOEs) and offload the government's stakes in multinational companies.

The DSE Brokers Association of Bangladesh (DBA), representing stockbrokers of the Dhaka Stock Exchange (DSE), today wrote to the chief adviser, urging measures to address the issues.

However, the listing of SOEs and multinational companies has been a long-cherished demand of stock market intermediaries and investors.

No concrete steps were taken in past years to list SOEs. Whenever the stock market experiences a downtrend, the demand for listing quality companies — such as SOEs, MNCs, and firms from large conglomerates — intensifies.

Despite recent demands from entrepreneurs to amend public issue rules to attract quality firms to the capital market, the issue remains unaddressed.

Some 13 MNCs and 18 state-owned firms are listed on the capital market, according to the Dhaka Stock Exchange (DSE).

Except these, some MNCs are operating in the country but are not getting listed on the bourses. 

The letter, signed by Saiful Islam, president of the DBA, states, "We must enrich the market with IPOs and introduce new products and companies to come out of stagnation and depression in the market and the sufferings of intermediaries and existing investors.

"Low trade volume, lack of investable stocks, and supply mismatch lead to the breeding ground for speculative and manipulative tactics. To fend off this environment, bringing high-quality IPOs to the capital market as soon as possible is necessary."

Fundamentally sound stocks against market manipulation 

The letter reads, "We have numerous profitable SOEs in commercial and infrastructural sectors. If all these companies are listed in the market, the market will have an increasing supply of quality stocks that help create a balance between supply and demand.

"A large number of fundamentally sound stocks would create natural resistance against market manipulation and speculation tendencies, helping to promote the long-term orientation of investment. 

"SOEs would be subject to more and sometimes significant scrutiny by the investors' community and market intermediaries for their activities and corporate actions, which would improve the accountability framework of these enterprises, which is expected to result in better governance."

Govt stake offloading 

The DBA also urged the government to offload its stake in different multinationals at fair value through a direct listing. 

It states, "There are many well-governed, large and deep into economy multinational companies operating in Bangladesh from very long time, some of them are from hundred years, mobilizing country's infrastructural, financial and human resources.

"This is the right moment for the nation to assert national interest and pursue them for listing in the Bangladesh capital market for a fair price and share the company's potential with people of the next generation. These are the companies making profits out of this country; it is fair to ask them to share their franchise with the countrymen."

Market situation 

About the recent market situation, the DBA said Bangladesh's capital market has experienced extreme bubbles and busts, misgovernance, untenable leverage, and institutional failures for the last fifteen years.

The letter states, "These have resulted in persistent negative actual returns and capital erosion, shrinking the market to around 40% in real terms.

"Due to various adverse local and international geo-political events, the market has been unable to turn around.  Notably, the 1996 and 2010 scams stand as some of the country's most significant financial market crises, causing lasting damage to investor confidence and the overall integrity of the market.

"In both instances, the stock prices of numerous companies are artificially inflated and driven by speculation rather than actual business performance or market fundamentals. As is typical with such bubbles, when the market eventually corrected, the inflated stock prices crashed, leading to substantial losses for investors. This situation caused financial distress for individuals and institutions and severely damaged public trust in the capital market.

"Covid-19 in 2020 and the long-term imposition of floor prices on share prices, around 20 months, have caused irreparable damage to the market. This has caused international fund managers to shy away from Bangladesh and inflicted irreparable damage on local investors' savings and investments.

"Most notably, thousands of crores of taka have been looted from the market through the listing of bad IPOs, which, in turn, created a permanent loss of confidence and a liquidity crisis in the market. 

"By manipulating the share prices of these bad companies, the capital originating from the savings of ordinary investors siphoned away."