‘A stable political situation is a prerequisite to holding investors' confidence in the market. We were already in a challenging atmosphere and the recent unrest has further fuelled the crisis," said Saiful Islam, the president of the DSE Brokers Association (DBA) and a director of BRAC EPL Stock Brokerage Limited, in an interview with The Business Post’s Niaz Mahmud.
How do you evaluate the current state of Bangladesh's economy amid the ongoing unrest?
It is a very challenging situation that we have been going through. The present situation started with the Covid-19 pandemic, followed by the Ukraine-Russia war. The economy had some hidden cracks even before those two events, which could have been managed if the pandemic and the war had not hit us.
We also had a crisis in the financial system, which was primarily denied by the authorities concerned. All the hidden issues that were kept under the rug are now exposed. Inflation has been unmanageable for quite some time.
Along with all these issues, the recent unrest has caused further stress in the system, which certainly causes further tension among policymakers and business groups. It is imperative to accept that we need a stable business environment to steer the wheels back to normal.
The exports need continued growth and the inward remittances should be channelled through the formal banking system. Moreover, the internal revenue should be aligned with the estimated budget figures. Any disruption or interruption in the target numbers will make the current situation more vulnerable.
How is the ongoing situation affecting the country's capital market?
I would say, very badly. A stable political situation is a prerequisite to holding investors' confidence in the market. We were already in a challenging atmosphere and the recent unrest has further fuelled the crisis. The volume is severely low and institutional investors have been staying away. High-net-worth investors are more engaged in managing their core businesses.
Even though there have been a good number of stocks being traded at attractive valuations, we are seeing fewer participants and activities in the market. The rising interest rate is, of course, another issue that keeps investors away from the market.
What should we (stakeholders and government) do to strengthen the capital market?
We need a catalyst to return investors' confidence to the market. It could be institutional investments, active participation of large investors, large IPOs of companies of high repute, or direct listing of state-owned enterprises as directed by the prime minister before the budget.
The latter seems to be the one with the fastest possibility to execute if the concerned regulators and government officials take the initiative. There are also a few unresolved issues between the regulators and the market intermediaries that need to be amicably resolved for the sake of the market.
The Dhaka Stock Exchange is running without people in three key positions, including the managing director, which is against the spirit of demutualisation.
It has been five years since the Central Counterparty Bangladesh Limited (CCBL) was fully funded, though it remained without operations. Without CCBL, the derivative products cannot be introduced, and we cannot speed up the settlement process. The brokers' community also demands the immediate listing of Central Depository Bangladesh Limited (CDBL).
