12,000 BOs emptied as trust erodes amid market tumble

The current downward trend is not merely a bearish run; it resembles a market crash, say stockbrokers, expressing their frustration over eroding investor confidence.

Investors have exited the market due to a lack of clear direction amidst competitive concerns, they added.

"This is not merely a bearish trend but a market crash, as investors have received no clear guidance to help restore their confidence," Saiful Islam, president of the DSE Brokers Association (DBA), told The Business Standard.

"What we now refer to as a market crash was completely unexpected, with investor confidence being the primary factor behind it. This distrust didn't emerge overnight; it has been building up over time. Government guidance is essential to overcome this," he added.

Agreeing with the DBA president, Ashequr Rahman, managing director of Midway Securities Limited, said the "market crash" has compelled investors to withdraw their funds rather than make further investments.

Following the fall of the Awami League government, the benchmark DSEX index of the Dhaka Stock Exchange (DSE) rose by 786 points to reach 6,015 in just four days. This increase reflected hopes that a new era would address the economic uncertainties stemming from corruption, misinformation, and misgovernance.

However, investors' optimism has faded, leading to a sharp decline in the market, as the reform initiatives by the government and the regulatory authority have not been sufficiently visible or trustworthy. Furthermore, decisions made without consulting market intermediaries have fuelled distrust and negatively impacted market sentiment, according to insiders.

In this context, the DSEX experienced a significant decline of 149 points on Sunday, marking its largest single-day drop since 15 March 2020. The index closed at 4,965 points, the lowest level since 2 December 2020.

The bearish trend began in mid-August, resulting in a loss of over 1,000 points by Sunday, while market capitalisation decreased by around Tk66,000 crore. From 6 August to 24 October, investors emptied over 12,000 beneficiary owner (BO) accounts due to their reluctance to remain in a distrustful market, according to the Central Depository Bangladesh Limited.

However, the situation cannot be solely attributed to the Bangladesh Securities and Exchange Commission (BSEC). In other countries, finance ministers provide direction to prevent market collapse and restore investor confidence. Currently, we don't have a finance minister; although we do have financial advisors, they have remained silent, the DBA president said.

Earlier, on 20 October, a statement was issued by the finance ministry regarding the decline in the share market. It stated that the reform initiatives taken by the securities regulator will benefit those who have suffered from past misrule and share scams.

It emphasised that during the last 15 years of the fallen Awami League government, free looting had occurred in the capital market, as in other sectors of the economy. During this time, numerous weak and almost non-existent companies were listed on the capital markets.

According to the press release, various artificial measures, such as the imposition of floor prices and upper and lower limits on circuit breakers, were previously employed to stabilise market conditions. However, it noted that with the withdrawal of these interventions, the inevitable consequences of ongoing irregularities, corruption, and manipulation have become more apparent.

BSEC Chairman Khondoker Rashed Maqsood emphasised the need for sufficient time and carefully planned measures to address the existing challenges in the country's capital market during several meetings with stakeholders.

The DBA president stated that reform is a continuous process that always progresses, independent of the stock market's fluctuations. However, he warned that the extended time sought by the government and regulatory body may leave investors with little capital remaining.

The Midway Securities managing director explained that in the current depressed market, company earnings disclosures are proving ineffective. Typically, it's expected that shares of companies with declining earnings will fall; however, shares of companies reporting strong dividends and profit growth are also declining.

He cited China as an example, where the government recently introduced a stimulus package to counter the continuous drop in its stock market, successfully restoring investor confidence and stabilising the market. In contrast, there has been no similar initiative from the government, and discussions on these issues are often met with "tagging to the previous regime."

He added that the current commission lacks market experience, as seen in decisions like categorising certain company shares as "Z-category," which further unsettled the sensitive market and eroded investor confidence. Meanwhile, general investors protested in Motijheel over the continuous decline in the stock market, announcing plans to surround the BSEC building on Monday.