The capital market is a platform which is closely integrated with macroeconomic issues. If an economy shows resilience and stability, it also gives the stock market a boost. On the other hand, when an economy struggles, the stock market also becomes volatile what we widely have seen since the outbreak of the coronavirus pandemic and later the Russia-Ukraine war.
Bangladesh’s banking regulator Bangladesh Bank June 18 unveiled the monetary policy for the first half of the fiscal year 2023-24. The central bank in its monetary policy has allowed banks to maintain a general provision of 1 per cent instead of the existing 2 per cent against classified loans from brokerage houses, merchant banks, and stock dealers.
In an exclusive interview with The Business Post’s Anisur Rahman, Midway Securities Ltd’s Managing Director Md Ashequr Rahman talks about several stock market issues. He has also viewed whether the fresh monetary policy will invigorate the country’s capital market.
Will the new monetary policy rejuvenate the stock market?
I think the monetary policy unveiled for the first half of the fiscal year 2023-24 will be positive for the country’s capital market. But it would be a wiser decision if the lending and deposit rates have entirely been released to the market. Though the lending rate and the deposit rate ceilings have been increased in the new monetary policy, I think it will not hurt the stock market. It may put a slightly negative impact on corporate earnings, but it will not be a big issue from them.
Is the FY24 budget market-friendly in your view?
There is nothing for the stock market in the proposed budget for the fiscal year 2023–24. Though the Dhaka Stock Exchange (DSE), the Chittagong Stock Exchange (CSE) and other stakeholders had placed some key demands for the progress of the capital market, nothing was addressed in the budget. If the government gives importance to the capital market, it could contribute more to the economy and also helps the tax authority to generate more revenue from there.
Which policy should be taken to bring good companies to market?
After the listing of Grameenphone, we have not seen many more good companies in the market. Basically, the DSE and the CSE after the completion of their demutualisation, have almost lost their authority to bring initial public offerings (IPOs) into the market. The Bangladesh Securities and Exchange Commission (BSEC) is now the sole body to bring in IPOs into the market. If stock exchanges are given the authority to introduce IPOs, it would be a good step for the stock market development.
Besides, the loan receiving process for companies from banks is easier, which is another barrier to draw more companies to the capital market. Companies should only be allowed to borrow from banks a small part of their necessary funds. For long terms investments or financing, they should be forced to source capital from the stock market. If it happens, more companies will come to the market, and it will also ensure enough liquidity in the market.
Tell something about the impact of the floor price system
The floor price system has been impeding the progress of the capital market in Bangladesh. The capital market is the mirror of a country’s economy. And, it never should be controlled artificially. Due to the floor price mechanism, many stock investors have now been on the sidelines and are awaiting the withdrawal of this system. Besides, the system of buying shares from the block market at 10 per cent lower costs than that of main market is also inimical to the market progress. Due to the dual buy price system in the same market, the general investors are undeniably being affected.
