With a view to improving service quality mostly technology and introducing new products to make the stock market vibrant, the Dhaka Stock Exchange (DSE) took Chinese consortium of the Shenzhen and Shanghai stock exchanges as strategic investors by selling 25 per cent shares but investors and shareholders are yet to gain even after five years of partnership.
However, it had a huge potential to take the capital market to new heights, indicating that partnership still has the potential for exponential progress, the bourse’s insiders said.
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 favour of the strategic partnership, according to a survey conducted by LankaBangla Securities.
The brokerage firm conducted the ‘Bangladesh Capital Market Sentiment Survey 2023’ on a total of 101 professionals between January 1 and February 10 this year.
Respondents said some of the Chinese consortium's proposals had prospects of bringing about revolutionary changes to Bangladesh's capital market, such as automated management of the DSE and information disclosure processes.
A shareholder of DSE said the consortium had yet to make any contribution to market development.
While talking to The Business Post, a number of DSE members said five years were not enough for the market to make profits from this investment. It would take some more time for that.
They also said the consortium had some development plans, but it was difficult to implement many of them in the Bangladesh context and it would take a long time to execute.
The China Consortium has also offered about $37 million for infrastructure and technological development. Dhaka bourse’s domestic shareholders haven’t found any specific move from the consortium to bring investments to Bangladesh, other than raising the market depth.
On May 14, 2018, the DSE struck a deal with the consortium, allowing them to buy 45 crore, or 25 per cent of the DSE's shares at Tk 22 each, for which the brokers got around Tk 947 crore. But its performance has left the stakeholders disappointed.
Dr. Ahsan H Mansur, economist and executive director of the Policy Research Institute (PRI), told The Business Post that the expected progress of the deal was not made due to three reasons--the COVID-19 pandemic, the instability of the stock market in Bangladesh, and the lack of interests of the DSE members.
There was a big opportunity to take many things from the Chinese. But it had not been possible for DSE. On the other hand, a stable stock market is needed for market development, which Chinese investors may not have received, this analyst believes.
Professor Dr Hafiz Md Hasan Babu, chairman of the DSE, told The Business Post on Saturday, “There are huge possibilities. But why didn't there any progress? We are looking for the reasons. We have already taken the decision to look into the issue.”
In December 2019, the country’s prime bourse launched a new index called the CNI-DSE Select Index (CDSET) to attract foreign portfolio investment in the country. It was jointly designed and developed by Shenzhen Securities Information Company Limited and DSE as part of a technical collaboration plan between the Dhaka bourse and the Chinese strategic partner.
At that time, DSE Chairman Professor Abul Hashem said, “In the spirit of mutual development cooperation between the Dhaka Stock Exchange and Shenzhen Stock Exchange, we have launched the CNI-DSE Select Index, which will represent the largest percentage of capitalization of the investable universe of the Bangladesh capital market.”
He also said, “This collaborative action is a huge step forward for our strategic investors. The progress we have made together is remarkable and has created new opportunities for both of us."
After four years of launching the new index, there has been no progress on the CDSET index. It is running like a name but has no importance in the capital market, stakeholders said.
"We haven’t found any specific move from the consortium to bring investments to Bangladesh, other than deepening the market depth,” said a DSE director, seeking anonymity
The Chinese director appointed by the consortium on the DSE board joined board meetings through videoconferencing, and the board hardly got any input from him.
Experts said that the DSE management fails to utilise opportunities from the Chinese consortium due to a lack of skilled manpower and inefficient management.
The Chinese consortium of the Shenzhen Stock Exchange (SZSE) and the Shanghai Stock Exchange (SSE) had offered to share its experience in market design, information disclosure, investor suitability management supervision, IPO promotion, and other areas of interest for the development of a Bangladesh SME market.
A DSE director requesting not to be named said, “We got nothing from the Chinese stock exchanges. On the other hand, they also invested and got nothing but small dividends. Their only job is to participate in the board meetings of DSE.”
DSE’s Chinese Director Xie Wenhai is unable to repatriate his honorarium received from the stock exchange’s board meeting as China’s local law does not permit it.
He becomes one of the strategic shareholders of the DSE after the Chinese consortium of the Shenzhen and Shanghai Stock Exchanges bought a 25 per cent stake in the DSE.
The Chinese director’s total board meeting fee so far stands at Tk 9.5 lakh. Of the figure, he has already been paid Tk 3 lakh, and the rest of the honorarium, worth Tk 6.5 lakh, is left unused.
The DSE pays Tk 10,000 in honorarium per board meeting. Normally, the Chinese director attends the meeting online.
In an email, Xie Wenhai said that he would not be able to take his honorarium back home as China’s local law does not permit it, according to a DSE director requesting not to be named.
Stakeholders and DSE board members had earlier hoped that the consortium would bring huge investments.
“We haven’t found any specific move from the consortium to bring investments to Bangladesh, other than raising the market depth,” said a shareholder of DSE.
The shareholders alleged that the director appointed by the consortium on the DSE board joined the board meeting through video conferencing, and the board hardly got any input from him.
SZSE has developed a financing supply chain for start-up companies, involving venture capital, investment banks, small-loan companies, commercial banks, and other financial intermediaries to help start-ups.