Market performance in the last five months: A rollercoaster of hopes and slumps

Following the fall of the Awami League government, the benchmark DSEX index of the Dhaka Stock Exchange (DSE) experienced a significant rise of 786 points, reaching 6,015 within just four days.

The surge was a reflection of investor optimism, as it radiated hopes that a new government will bring necessary changes to the bourse and address the economic uncertainties stemming from corruption, misinformation, and misgovernance, according to the market insiders.

However, this optimism was short-lived as the hopes soon faded due to the absence of visible and trustworthy reforms from the government and regulatory authorities, leading to a sharp decline in the market.

Moreover, decisions made without consulting market intermediaries further eroded investor confidence, fuelling distrust and negatively impacting market sentiment, the insiders noted.

Given this context, the bearish trend began in mid-August, resulting in a loss of around 1,000 points as of today (8 January), while market capitalisation decreased by approximately Tk55,000 crore.

The turnover, a key indicator of stock market activity, remained low at Tk300 crore as market participation stagnated due to subdued investor confidence. 

This is in stark contrast to the turnover reaching the Tk2,000 crore mark on 11 August.

Stakeholder and regulatory reactions

From 6 August to 7 January, investors emptied over 26,000 beneficiary owner (BO) accounts due to their reluctance to remain in a distrustful market, according to the Central Depository Bangladesh Limited.

Moreover, over the past five months, a group of affected investors has staged peaceful protests in response to frequent market declines and an unstable bourse. They have formed human chains multiple times in front of the Bangladesh Securities and Exchange Commission (BSEC) and the DSE, demanding the resignation of the current BSEC chairman.

Given the volatile market conditions, the DSE yesterday announced a press conference for 11:30am today to address the current situation. During the event, the bourse will outline its future steps aimed at stabilising the market and restoring confidence.

Earlier on Tuesday, Finance Adviser Salehuddin Ahmed, in a meeting with capital market stakeholders at the DSE office, stated that several reforms are being implemented in the stock market. 

He acknowledged that all reforms come with some short-term challenges, emphasising that the stock market reform process will also face temporary difficulties.

He further clarified that the current interim government's goal is to strengthen the stock market.

Salehuddin remarked, "Everyone is pleased when the stock market index rises. However, when the market soars too high, caution is necessary. Problems often arise in the market due to the wrong policies of the regulatory body, which ultimately affect general investors."

He shared an example from the past, saying, "I've witnessed a situation where the market surged significantly due to heavy bank investments. But when the Bangladesh Bank suddenly ordered banks to reduce their investments, it had a negative impact on the market."

DSE Brokers Association President Saiful Islam stated, "The main issues facing the market are a lack of transparency, accountability, and investable securities. If you invest Tk100 crore, you can only access 10 to 20 securities."

During the same meeting, Khondoker Rashed Maqsood, chairman of the BSEC, said, "If the stakeholders involved in the capital market do not fulfill their respective responsibilities properly, it will not be possible for the BSEC alone to improve the overall market situation."

"We have presented the issues to our task force. We are not trying to tackle everything ourselves but are working as part of the broader reforms being undertaken by the state," he added.

Reform efforts by the BSEC

Since the appointment of the chairman and commissioners under the interim government, the BSEC has taken several steps to restore investor confidence.

These actions include imposing fines of around Tk700 crore on stock manipulators, forming a task force to reform the capital market, and establishing multiple inquiry committees to investigate the wrongdoing of S Alam, Salman F Rahman and others.

The managing director of a brokerage firm said, "Our regulators have failed to fulfill their responsibilities. It is essential for regulators to perform their assigned duties, and it is not a matter of waiting to see what happens to the market."

"The current situation is a result of these tasks being neglected. If the right actions, such as enforcement, are taken today, the market will improve in a few years. Ensuring transparency in financial reporting must be a top priority, and the mistakes that have been made need to be corrected," he added.