DSE outlines major reforms, including tax rebate, exposure limits 

Infographics: TBS

The Dhaka Stock Exchange (DSE) will pursue a series of plans with the government authorities to develop the capital market, including a market-friendly tax policy and stock investment exposure limits for banks and financial institutions.

Outlining their plans at a press conference today (9 January), DSE Chairman Mominul Islam further said they have also charted various measures to ensure accountability and transparency in the market while protecting the interests of investors.

"Rampant irregularities and malpractices over the last 15 years have severely undermined investor confidence in the market. While it may not be possible to regain trust within the next three months, the DSE board will actively work toward this goal through the implementation of these plans," he added.

The press conference, organised at the Dhaka Club, was attended by capital market stakeholders, including representatives from the Chittagong Stock Exchange, Bangladesh Merchant Bankers Association, DSE Brokers Association.

At the event, Minhaz Mannan Emon, a shareholder director on the DSE board, called on the government to form a committee to investigate the wrongdoings that occurred during the previous regime. 

"The findings will help plan the necessary measures to address the issues and move the market forward," he added.

In a PowerPoint presentation, the DSE chairman said they will engage with the government to ensure a market-friendly capital gains tax, dividend tax, and turnover tax for brokerage firms, as well as an increased tax gap between listed and non-listed companies in the upcoming national budget. 

He mentioned that the government has already reduced the capital gains tax in response to stakeholder demands, indicating that the interim government is attentive to their concerns.

Mominul Islam said, "The capital market has been squeezed by various pressures and has failed to make the contribution it should to the economy." 

"Most of the IPOs in the past 10 years have been weak. Those who cannot afford loans from banks have raised capital from the market. The number of BO accounts in share trading has halved, with a very low number of active investors. Foreign investor participation has also decreased," he pointed out.

He revealed that 1% of the total transactions on the DSE were carried out by foreign investors. 

The DSE chairman compared Bangladesh's capital market performance to peer countries. 

In 2024, Bangladesh's major index decreased by 16%, while India, Pakistan, Sri Lanka, Thailand, Vietnam, Indonesia, and the Philippines saw indices increased by 9%, 85%, 50%, and 12%, respectively.

Statistics also show that Bangladesh's market cap-to-DP is the lowest among peer countries, at just 6.6%. 

The DSE chairman expressed his expectation that brokerage houses should consolidate customer accounts, stop embezzling funds, cease insider trading and manipulation, and actively work to bring both domestic and multinational companies to the market.

DSE to work free from external influence

Mominul Islam said the current DSE board is operating transparently, free from external influence, and will continue to do so in the future. 

He mentioned that the capital market regulator also intends to collaborate with the bourse, leading to the separation of market regulator intervention into market operations, which will significantly enhance market management efficiency.

Regarding de-mutualization and strategic investors in DSE, Mominul said initiatives will be taken to review the De-Mutualization Act. He emphasised that both the market and strategic investors need to be capable of cooperation, as strategic investors currently lack the ability to deliver what they intend to give. 

He also highlighted the problem caused by the high number of market intermediaries in a relatively small market, noting that this creates challenges for both business and regulation. 

He suggested that only qualified individuals with business experience should be granted licences, and pointed to the examples of intermediary mergers in other countries as a potential solution. Without strong intermediaries, he stressed, the market cannot improve.

Call for forming fact-finding body  

DSE Brokers Association President Saiful Islam said, "A fact-finding committee should be formed to investigate the irregularities and frauds that have taken place in the last 15 years." 

"The commission has also formed a committee in this regard. However, we are unaware of any details about these irregularities. If we are left uninformed, the path to addressing these issues will be blocked. Therefore, I am demanding the formation of a fact-finding committee by the government," he added. 

He also shared his views on the formulation of de-listing rules.

Mazeda Khatun, president of the Bangladesh Merchant Bankers Association, said, "The IPO process needs to be simplified to facilitate capital raising. In addition, tax exemptions should be considered for companies during listing." 

"Both entrepreneurs and the government should also focus on the capital market as a source of long-term financing," she added.