Govt aims to upgrade stock market from frontier to emerging status

The government is planning to upgrade Bangladesh's stock market from its current frontier market status to an emerging market in a bid to strengthen the capital market and restore investor confidence, Prime Minister's Adviser on Finance and Planning Rashed Al Mahmud Titumir has said.

He said the government's immediate priority is to deepen and broaden the capital market while increasing participation from ordinary citizens so that more people can take part in economic activities not only as consumers but also as owners.

Titumir made the remarks at a discussion titled "Challenges and Way Forward for the New Government in the Capital Market," organised by the Capital Market Journalists Forum (CMJF) at Fars Hotel in Dhaka yesterday.

Bangladesh's equity market is currently classified as a frontier market by major global index providers, a category generally used for smaller or less liquid markets that are still developing and have not yet reached the scale and accessibility of emerging markets.

Speaking at the event, Titumir said structural reforms are essential to transform the capital market and achieve the government's long-term goals.

According to him, the market has long suffered from stagnation due to persistent problems such as manipulation, lack of transparency and weaknesses in the regulatory framework.

"If the market itself does not function properly, external oversight alone cannot solve the problem," he said, stressing the need for greater accountability among institutions responsible for maintaining market discipline.

The adviser noted that auditors, asset valuers and credit rating agencies play a critical role in ensuring transparency in the financial system. If these institutions fail to perform their responsibilities properly, investor confidence in the capital market will continue to decline, he added.

Titumir also emphasised the need for a clear financing structure in the economy. Policymakers, he said, must determine which companies should rely on bank loans and which should raise long-term funds from the capital market.

He further suggested that the government could finance large public infrastructure projects through bonds rather than relying solely on budgetary allocations.

Highlighting the need for diversification of financial instruments, the adviser said Bangladesh should gradually move toward a bond-based financing system and develop new products in the capital market.

He also proposed establishing an Islamic stock exchange in the country to attract investors from Indonesia, Malaysia and Gulf countries, alongside creating an investment gateway for non-resident Bangladeshis.

Titumir said an economy driven mainly by consumption or borrowing cannot be sustainable in the long run. "We want to move from a debt-dependent society to an ownership-based society," he said, noting that the capital market could serve as an important platform for economic democratisation.

At the event, Bangladesh Securities and Exchange Commission (BSEC) Chairman Khandoker Rashed Maqsood said the regulator has conducted around 200 investigations and imposed fines amounting to nearly Tk1,500 crore as part of recent reforms in the market.

National Board of Revenue Chairman Abdur Rahman Khan said incentives provided to the capital market in the past did not produce the expected outcomes. He stressed the need to address negative perceptions about the market while ensuring sustainable revenue collection.

Market stakeholders also highlighted structural challenges in the financial system. Md Moniruzzaman, managing director of Prime Bank Securities, said Bangladesh faces three major problems: liquidity shortages in the capital market, pressure on the banking sector and low tax collection.

Dhaka Stock Exchange Chairman Mominul Islam emphasised the need for coordination among ministries to bring more state-owned institutions to the market.

Chittagong Stock Exchange Chairman AKM Habibur Rahman said a strong capital market requires a stable banking system, a stable economy and the rule of law.

Bangladesh Association of Publicly Listed Companies President Riyad Mahmud called for greater digitalisation and said high listing fees are discouraging companies from launching initial public offerings.

Bangladesh Merchant Bankers Association Secretary General Sumit Poddar said no new companies have entered the market in the past two years, stressing the importance of attracting a few high-quality firms during IPO seasons rather than focusing on the number of listings.