DSEX fares well among its selected peers

The Dhaka Stock Exchange’s benchmark index, DSEX, posted a robust growth of 3.9 per cent, which is the fourth highest market return among some selected peer countries.

Interim growth rates place Bangladesh ahead of Pakistan, Malaysia, Sri Lanka, Taiwan, and the Philippines, according to the latest monetary policy statement of the Bangladesh Bank.

From June 2021 through May 2022, Indonesia’s capital market returned 19.4 per cent, which was the highest return among the countries.

During the period, the index return of India was 5.9 per cent and Thailand’s 4.8 per cent.

Besides, the return on the capital markets of Pakistan was negative 9 per cent, Taiwan negative 5.3 per cent, the Philippines negative 1.8 per cent, Malaysia 2.4 per cent, and Sri Lanka 3.4 per cent.

The DSEX rose by 399.52 points to close at 6,392.85 points on May 31, 2022.

While unveiling the new policy statement on Thursday, BB Governor Fazle Kabir said at the event that, as a crucial part of the financial sector, Bangladesh Bank will continue to strive for overall stability and long-term development of the stock market in the coming fiscal year 2022-23 as in the past. 

The capital markets in Bangladesh also showed robust performance during the first half of FY22, evidenced by improved growth in the price indices, buoyant turnover, expansion in market capitalization, and issued capital, said the BB.

The strong performances were partly aided by the easy monetary policy, which supported liquidity in the capital market during the same period, the central bank, it said. BB remains committed to the growth of the capital market to ensure the much-needed transition of long-term financing sources away from the banking system to the capital market, supporting the country’s long-term development objectives.

However, during the second half of FY22, the capital market indices experienced a declining trend with some fluctuations. In the backdrop of recent rising inflation and exchange rate volatility, market participants and investors have become cautious. They remained on the sidelines as the profit-taking spree continued, according to the monetary policy statement.

The global capital markets index (MSCI emerging market) witnessed a similar pattern with a solid rising trajectory during FY21 followed by a declining trend since June 2021 caused by lingering fears of rising prices and slowing economic growth prospects originating from the Russia-Ukraine war, it said.

The Bangladesh Securities and Exchange Commission (BSEC) took numerous initiatives to restore investors’ trust in the capital market, said the BB.

The BSEC organised several road shows in developed countries such as the USA, the UK, Switzerland, and UAE to attract foreign investors.

Moreover, BSEC has revised margin loan rules for category-changing sticks, reduced the lower limit of the circuit breaker, raised the investment ceiling for institutional investors, and allowed the Investment Corporation of Bangladesh (ICB) to use the one billion taka capital market stabilization fund.

The government has also taken several initiatives to increase the flow of funds and institutional participation in the capital market. The government has already decided to introduce a universal pension system in the next fiscal year, which is expected to improve the liquidity condition of the capital market.

However, further improvement of liquidity conditions in the capital market will highly depend on expanding its investors’ base and creating more institutional arrangements, promoting and activating corporate bonds, and enhancing surveillance activities of the BSEC for preserving investors’ interests and confidence.