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‘Don’t put all eggs in one basket'

  • Published at 06:47 pm February 4th, 2018
‘Don’t put all eggs in one basket'

Do you think mutual fund managers are playing their role as market players?

Mutual funds should be the first choice of stock investors, especially for new investors as they do not have enough knowledge in making investments. Last year, we did not see expected activities from the people in this sector. Dhaka Stock Exchange (DSE) is going to take initiative to work jointly to make the mutual funds more appealing. In making investors aware about mutual funds, we are going to introduce a bulletin board through which the fund manager will be able to disseminate information including valuation and market demands to the investors.

Capital market is a great source for collecting funds for industrialization. Does the stock market help Bangladesh industrialize?

In helping the country’s industrialization, there is no alternative to stock market in raising funds as it costs less than other means. In the just concluded year, I did not see proactive involvement of the stakeholders in attracting companies to come to the stock market. I think this is because of the lack of knowledge about corporate governance, fear about regulations, and ultimately the negative attitude towards owners and companies to be enlisted. In attracting new companies, issue managers and merchant banks will have to play a proactive role. But there is hope as the market is stable and stakeholders are working together.

What will be the focus of the current year?

The year 2018 will be a vibrant one for stock market investors as the reforms and initiatives taken to stabilize stock markets in the previous year will mostly come into effect this year. The initiatives include automation of Over-the-Counter (OTC) market, bulletin board for mutual funds, platform for small cap companies, changes in book-building method and reforms in other regulations. According to Bangladesh Securities and Exchange Commission’s (BSEC) decision, a company with a minimum paid-up capital of Tk5 crore will be eligible to raise funds by using the small capital platform.

What are the key challenges in bringing a new company to the stock market?

It takes time to complete an Initial Public Offering (IPO) process by complying with the listing regulations and the new book-building method, which needs to be easier and shorter. Nevertheless, there is hope as many companies have already submitted proposals to the BSEC and the market will be saturated with new companies if they get approval from the regulator. The merchant bankers have the responsibility of bringing new companies into the stock market. But as stakeholders, we also have some part to play and work with the government to bring positive changes. On the other hand, the government is working to offload at least 5% share of its companies, especially in the power sector. The finance minister has already given instructions to concerned officials. As previously mentioned, the stock market regulator is going to introduce a small cap platform, where a company having paid up a capital of Tk5 crore will be able to offload shares to the public.

Do investors behave more rationally now than compared to before the stock market crash in 2010?

In recent times, there have been changes in trading and investment patterns. But the rumour-based trading being influenced by friends and relatives still persists. It will take time to make them understand to invest based on the companies’ performance. In this regard, we are educating the investors through literacy programs.

What is your advice to investors?

Risks regarding investment in stock market are a common phenomenon. But it can be minimized by researching about the company the investor is pouring money in. For risk reduction, a stock investor will have a basket portfolio, consisting of long-term, short-term, and some trading stocks. An investor should keep in mind when making investment decisions, to not put all eggs in one basket.

What is your comment on the current market status?

Considering all aspects of the current situation of the market, I will say, it is stable now. And the credit goes to literacy and awareness programs that have been able to stop risky investments without having proper knowledge.

What could be the next steps in restoring confidence of stock investors?

Investors’ confidence in the stock market depends on the stability of the market. This stability in turn is determined by the political and economic stability of the country. Bangladesh stock markets have seen stability last year, and that has boosted investors’ confidence in the present market conditions. Since the regulator and stock exchanges are strictly monitoring the markets, we feel nothing can happen that may affect the confidence of investors in stock markets in a negative manner. Besides, we are working on providing quality training to investors, which will further boost their confidence. We have brought changes at the year-end, which helps to create balance in trading as during the year there is huge pressure on the market. It is now divided into two parts – a calendar year-end and fiscal year-end. So the pressure is less. Investors’ faith in the market has also been positively affected as companies are now more compliant due to good corporate governance.

How are the investor’s rights protected?

In protecting investors, BSEC’s enforcement of regulations is the key element, and it is very active. Dhaka Stock Exchange (DSE) surveillance team closely monitors trading to seek out and stop foul play. If there is suspected foul play, the team investigates and takes punitive action against the brokers or investors involved.
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