IPO drought to end as quality companies enter capital market soon: BSEC chief

The capital market regulator plans to cut the approval time for initial public offerings (IPOs) to three months from nearly 18 months, Bangladesh Securities and Exchange Commission (BSEC) Chairman Masud Khan said today (4 October).

Several quality companies, including a foreign-owned firm, are also expected to submit IPO applications soon, he said, expressing hope that the prolonged drought in new listings will end.

"We cannot allow the IPO drought to continue," Masud said, adding that the BSEC has identified complexities in the existing process and taken initiatives to reform the rules.

He was speaking at the opening of a weeklong programme organised by the BSEC in line with the International Organization of Securities Commissions (IOSCO)'s World Investor Week at the Krishibid Institution Bangladesh auditorium in Dhaka.

Finance Minister Amir Khosru Mahmud Chowdhury attended the event as chief guest. Tanvir Shahriar Ghani, special assistant to the prime minister for investment and capital market affairs; Financial Institutions Division Secretary Nazma Mobarek; and Insurance Development and Regulatory Authority (IDRA) Chairman Mir Nadia Nivin also attended.

Masud said the proposed new IPO rules would streamline the process after applications are submitted. The BSEC, Dhaka Stock Exchange and Chittagong Stock Exchange would coordinate their processes to reduce approval time.

Direct listing for top-tier firms

The BSEC chairman said direct listing would also be introduced to attract large local and multinational companies to the capital market.

"Companies will have the option to come through IPOs or direct listing. We are keeping both options open," he said.

Masud also highlighted measures taken since the current commission assumed office, including withdrawing floor prices, restructuring the Beximco board, deregulation and empowering the DSE.

Focus on digitalisation, investor protection

Masud said greater use of digital technology is needed to strengthen investor protection and restore market confidence.

The commission is working to bring brokerage houses' back-office software under an integrated system with real-time connectivity. This would allow regulators to access information on brokers' accounts and funds held in their bank accounts, he said.

The BSEC is also working to introduce an order management system and replace physical slips with automated processes.

The commission is taking steps to expedite the disposal of investor complaints and cases, Masud said.

Necessary amendments to securities laws and ordinances have been finalised and sent to the ministry for approval. 

Bond market, institutional investment

Masud said the BSEC has approved bonds worth nearly Tk3,000 crore since the new commission took charge, with issuers required to list on the main board of stock exchanges.

"Developing the bond market requires an effective link with the stock market," he said, adding that the commission is working to expand markets for corporate, green and other bonds.

He also said there was significant scope to increase institutional investment in Bangladesh's capital market.

Policy initiatives would be considered to allow part of the funds held by pension and gratuity funds and insurance companies to be invested in corporate bonds and equities, he said.

Masud described the insurance sector as a potentially major source of investment for the capital market and stressed the need to develop the largely inactive sector. He also called for greater focus on the mutual fund industry.

Reforms to strengthen market

Tanvir Shahriar said the BSEC had undertaken wide-ranging reforms to ensure sustainable market development, investor protection and alignment with international standards.

"The positive results of these reforms will become visible in the stock market within the next 12 months," he said.

Tanvir said the commission had been taking initiatives in line with IOSCO's mission since assuming office four months ago. It is also monitoring indicators such as market capitalisation-to-GDP and average daily turnover to assess market conditions.

Insurance sector can become major investor

IDRA Chairman Nadia said her sector could become a major source of long-term institutional investment in Bangladesh's capital market.

Greater insurer participation could create a significant source of long-term financing for bonds, equities and infrastructure, she said.

Nadia said World Investor Week aims to educate investors, as knowledge and information help build resilience and support informed decisions.

She said expanding market size alone would not be enough. Greater depth would require long-term institutional investors, a role played largely by insurance companies in developed economies.

Life insurers may face liabilities stretching 10, 15 or 20 years against policy premiums, creating a need to invest in long-term assets, she said. Such funds can support government and corporate bonds, infrastructure and equities.

Nadia said insurance-sector assets in Malaysia were equivalent to about 22% of GDP, while India's insurance sector accounted for around 3.5% of GDP. The assets of India's Life Insurance Corporation alone were about $500 billion, she said.

In Bangladesh, the insurance sector currently accounts for only 0.33% of GDP. Raising the ratio to 3% could create an investment pool of nearly $100 billion, which could provide long-term institutional capital to the bond and equity markets as well as infrastructure, she added.