Stock market lacks corporate governance: CPD

The stock market regulator should ensure corporate governance in bringing back investor confidence in the country’s capital market, the Centre for Policy Dialogue (CPD) has said.

The leading local think tank came up with its observation while explaining the current state of Bangladesh’s economy at an event in Dhaka on Thursday.

“During the pandemic, market manipulations or non-compliances have influenced the share prices,” said CPD Executive Director Fahmida Khatun in her keynote paper.

“Taking advantage of the regulator’s weak monitoring, such practices continues,” she said.

The bubble-like behavior of the market is being contributed by a number of artificial short-term stabilising measures risking the sustainability of the market, according to the CPD.

Such measures would hardly ensure long-term stability in the market and thereby would hardly develop confidence among the market players, it said.

Ensuring corporate governance is a must for the listed companies controlled by family owners and share transactions should be closely monitored, it added.

The BSEC and Bangladesh Bank should not encourage banks to invest in the market for short-term market gain, it said.

Since the beginning of the pandemic, BB and the BSEC undertook a set of decisions considering the operation of the market including strengthening of their mutual coordination, disbursement of cash dividends, inspiring the banks to accelerate the formation of the special funds worth Tk 200 crore.

The CPD suggested that the BSEC should monitor the corporate governance practices by the institutional investors and the Financial Reporting Commission needs to play a strong role in reducing the anomaly in financial reports of the listed companies. Apart from this, the BSEC should bring the brokerage houses under strict surveillance.

“The new leadership in the Bangladesh Securities and Exchange Commission made some visible measures to develop the market. But there is some weakness in the market,” said CPD Research Director Khondaker Golam Moazzem.

He suggested the BSEC remain vigilant about the trading of the Sukuk bond.

Banks’ investment in bonds and other securities rose 8.84 percent to Tk 314,747 crore in the second quarter of last year. Investment income surged Tk 842 crore, or 49 percent, to Tk 2,546 crore in the quarter, according to the CPD.