Frequent policy changes could hurt capital market the most

Frequent regulatory policy changes, weak regulatory framework, and a lack of investor optimism might impede the stability of Bangladesh’s capital markets in the year 2023.

Besides, the feeble growth of corporate earnings caused by the recent economic slowdown, according to a survey conducted by LankaBangla Securities, could also obstruct the markets’ prosperity.

A total of 101 professionals from various backgrounds participated in the Bangladesh Capital Market Sentiment Survey 2023. The survey was conducted between January 1 and February 10 this year by the brokerage firm.

The survey respondents gave mixed reactions concerning the capital market scenario in 2022 with 31.7 per cent of respondents opining that last year’s market performance was poor.

On the other hand, 30.7 per cent of respondents thought the performance was moderate, while 28.7 per cent of them said the market performance was bad in the last year.

As many as 41.6 per cent of respondents said the country’s capital market performed poorly due mainly to the weakened investor confidence, while 18.8 per cent held of participants termed manipulation playing a role behind the weak market showoff in 2022.

Talking about the market recovery, 16.8 per cent of the survey respondents felt the need for increased market transparency, while 10.9 per cent stressed the OMS launching of brokerages.

Besides, 8.9 per cent of respondents said the listing of companies with sound fundamentals was needed to gear up the market.

Around 22.2 per cent of respondents anticipated that the DSEX, the benchmark index of the Dhaka Stock Exchange, the premier bourse, would close between 6000 points and 6500 points by the end of 2023.

On the contrary, 37 per cent of participants predicted that the market might become moderately bullish by the end of the current year, according to the survey findings.

Most respondents (33.3 per cent) remained long-term investors in the year 2022, while 31.3 per cent were the midterm investors.

As many as 61 per cent of the survey respondents thought that the pharmaceuticals sector would become the top profit-generating sector, followed by IT & insurance with 49 per cent of votes.

Moreover, 36 per cent of participants wanted to see more pharma IPOs in the stock market, while 14 per cent chose IT and 8 per cent the textile.

28 per cent of respondents believed the macroeconomic issues would influence the capital market in 2023, whereas 20 per cent of participants said regulatory initiatives and incentives would influence the market the most.

Besides, 17 per cent of respondents believed the earnings performance of listed companies to have a great role in influencing the market.

A total of 34.7 per cent of respondents predicted that the average daily turnover would remain between Tk 400 crore and Tk 600 crore in 2023, while another 34.7 per cent anticipated that the average turnover would surpass Tk 800 crore at the end of the current year.

As many as 27.7 per cent of respondents to the LankaBangla Securities survey said the depreciation of the taka against the US dollar was playing a role behind the slim participation of foreign investors in Bangladesh’s capital market, whereas 11.9 per cent believed it to be their lack of confidence on local regulators.

According to the survey, 57.4 per cent of the participants said Bangladesh’s market was too immature to absorb derivatives.

Additionally, 37 per cent of participants believed that floor price was the most prominent feature of the capital market in 2022 to curb the market growth.

Meanwhile, 49 per cent of respondents said the demutualisation has been able to make the market more transparent and vibrant, while 39.8 per cent of participants voted against this perception.

Besides, 53 per cent of respondents thought the involvement of the Chinese firm’s strategic partnership with the DSE did not help improve the market scenario, while 39 per cent voted in favor of the strategic partnership.