Investors take to the streets as BSEC efforts to prop up market fail

The bearish trend in stocks continued on Tuesday, extending the losing streak after a brief, marginal rebound in the previous session, as the regulator's meeting with capital market intermediaries failed to improve investor confidence.

A group of general investors staged protests in front of the DSE building at Motijheel Tuesday. At that time, they chanted slogans demanding the implementation of a buy-back law and a halt to the listing of weak companies.

Abdur Razzaq, president of the Bangladesh Pujibazar Biniyogkari Oikya Parishad, said the demand must be accepted by next Monday. Otherwise, the protest will continue with participants wearing black clothes over their faces.

The benchmark index DSEX of the Dhaka Stock Exchange (DSE) fell by 41 points to settle at 5,633, while the blue-chip index DS30 lost 3 points to close at 1,980 on Tuesday.

Since the removal of the floor price on 19 January, the DSEX has lost 703 points, resulting in Tk84,000 crore being wiped out of the country's premier bourse in value. Currently, the market capitalisation stands at Tk7.03 lakh crore.

According to the Central Depository Bangladesh Limited, the number of beneficiary owner (BO) accounts with zero shares rose by 60,784 to 3.63 lakh in the last three months. Due to massive sell-offs, the number of BO accounts with a share balance fell by 56,874 to 13.48 lakh.

On Monday, the Bangladesh Securities and Exchange Commission (BSEC) held a meeting with top brokerage firms and merchant banks to address the ongoing bearish trend. However, according to market insiders, they were unable to reach any decisions that could boost investor confidence."

According to EBL Securities' daily market review, the downbeat capital market extended its free fall after a short-lived marginal recovery in the previous session, as investors returned to selling mode following the regulator's meeting with capital market stakeholders, which failed to act as a major trigger to alleviate the enduring pessimism pervading the trading floor.

Top officials at brokerage firms and merchant banks who participated in the BSEC meeting stated that the liquidity crisis is the main problem in the market. However, no one could provide a good solution on how liquidity would be addressed.

As always, the regulator has called for increased investment from broker dealers, various banks, and mutual funds.

Leaders who attended the meeting expressed concerns that no reputable companies have been listed for years. Serious doubts are arising regarding the quality and transparency of the companies being listed.

They further stated that the stock market is being manipulated, and no measures are being taken at the responsible level to prevent such manipulation.

Due to a lack of good governance, investors have lost confidence in this market and are withdrawing their investments."

Investor confidence remains subdued

Investor confidence in the country's capital market remains subdued, as reported by the World Bank in its "Bangladesh Development Update," released on 2 April.

In its report, the World Bank mentioned that the BSEC withdrew floor prices on equities on 18 January, a move deemed to have alleviated a major market distortion.

Through the floor price, which was imposed in July 2022 to prevent the fall of the stock market, the regulatory body artificially kept the market within a limit for more than one and a half years, said the global lender. But after the floor price restrictions were lifted, the market could no longer be tied, it said.

Moreover, FTSE Russell, a subsidiary of the London Stock Exchange Group, has maintained the rating for the Bangladesh capital market as "Not Met" in the criterion of efficient trading mechanisms as the bourse has yet to fully lift the floor price restrictions.

FTSE Russell is a leading global provider of index and benchmark solutions, spanning diverse asset classes and investment objectives.

In a report titled "FTSE Equity Country Classification Interim Announcement March 2024," published on 27 March, FTSE Russell stated that the "Efficient Trading Mechanism" criterion for Bangladesh has been downgraded from "Restricted" to a "Not Met" rating.

FTSE Russell has noted that following the recent announcements by the BSEC to lift the floor price restriction on all but six listed securities, it continues to engage with the regulator to confirm when the final restrictions will be lifted.