DSE market cap to GDP rises to 17.2%

Market capitalisation of the Dhaka Stock Exchange to GDP stood at 17.2 per cent as of August as investors continued pouring fund hoping a better return from investment even amid the ongoing pandemic.

In June last year, the ratio was only 11.1 per cent, the lowest among the emerging bourses in the Asia-Pacific region.

However, the current scenario is in stark contrast to that of previous year.

Analysts and market insiders said that investors regained confidence after the Bangladesh Securities and Exchange Commission (BSEC) took some punitive and reformative actions to bring discipline in the market.

Besides, a number of large capitalised companies, including Robi Axiata Ltd and Walton Hi-Tech Industries Ltd, have recently entered the capital market.

They also said that investors’ buying rush continued as they are expecting better returns from the bullish market against the low bank deposit rates.

At the same time, investors’ positive expectations towards the capital market remained persistent, primarily backed by favourable macroeconomic outlook and continuous efforts by the BSEC, which translated into rising market participation and much-needed confidence, the market insiders added.

BSEC’s most notable work includes measures taken regarding market manipulation, mandatory shareholding by sponsor-directors and junk stocks, all of which gave confidence to retail investors to park their funds at the bourse.

“In the last 10 years, the stock market was not allowed to run normally. The regulatory body previously controlled the index, causing damage to the confidence of investors,” said a stockbroker, requesting anonymity.

As of Thursday, the market capitalisation of the Dhaka bourse hit a fresh all-time high at Tk 5,47,868 crore from Tk 3,11,966 crore of June 2020.

According to the EBL Securities data, the market cap to GDP ratio stood at 17.2 per cent in August.

The ratio was 11.1 per cent in June 2020. It later rose to 11.6 per cent in July, 13.2 per cent in August, and 16 per cent in December of the last year. 

The ratio stood at 17.3 per cent In January, at 16.7 per cent in February, 16.2 per cent in June, and 16.8 per cent in July this year.  

Market capitalization, or market cap, is calculated by multiplying the total number of a company’s outstanding shares with the current market price of shares.

The ratio was at its highest at 50.67 per cent in 2010, which came down to 33.23 per cent within a year after the biggest market crash in the country’s history in 2010-11.

The ratio was 12 per cent in 2019, 17 per cent in 2018, 21 per cent in 2017, 20 per cent in 2016 and 21 per cent in 2015.

Talking to The Business Post, Dhaka Stock Exchange Director Shakil Rizvi said, “A few years ago, our stock market was in a liquidity crisis, but now the scene is totally different. The market has become bigger as a result of various initiatives taken by the present regulatory body.”

Rizvi, also a former president of Dhaka Stock Exchange Brokers’ Association (DBA), also added that ensuring accuracy in financial statements, good governance in firm operations and automation are prerequisites in making the stock market vibrant.

The stock market is a good source of funds. But its true potential is still untapped. To attract entrepreneurs, the government has to set an example by offloading shares of state-owned companies, he added.

On Thursday, DSEX, the key index of the DSE, posted robust growth by more than 80 per cent to stand at 6,699 points. It is the highest since its inception in January 2013, and the lowest was at 3,604 points on March 18, 2020.

Chittagong Stock Exchange (CSE) Chairman Asif Ibrahim told The Business Post, “BSEC has taken many steps to restructure and reform the market. More multinational and state-owned companies should be listed to strengthen the capital market.

Tax policy for the listed companies should be made more attractive to attract foreign brokerage houses to trade in our market.”

Stakeholders said that mass vaccination roll-out and new stimulus packages for the low-income people also tempted the investors to keep afloat in the market despite the pandemic.

Analysts and market insiders suggest attracting good companies, simplifying the listing process, bringing government and multinational companies to the market to continually grow.