Capital Market Stabilisation Fund

The formal launch of the Capital Market Stabilisation Fund (CMSF), it seems, is not far away as the Bangladesh Securities and Exchange Commission (BSEC) has published a gazette notification detailing the relevant rules. The incumbent securities commission deserves appreciation for doing its job in this respect rather expeditiously. The very name of the fund suggests that its primary objective will be to intervene and stabilise the market should there be a reason to do so.

Some people may feel otherwise, but the truth is Bangladesh capital market is yet to attain the much-needed maturity, and this has been evident from the collapse of the market, at least, twice since 1996, primarily because of manipulative activities and the mad rush of a huge number of ignorant investors to become rich overnight. Even during normal times, the market shows unusual volatility and suffers from liquidity shortages. So, the need for market stabilisation efforts has been felt time and again.

The government, on occasions, tried to buoy up a dull market by injecting funds through the state investment institution---the Investment Corporation of Bangladesh (ICB). But, in most cases, such interventions failed to deliver results since those were neither planned properly nor executed efficiently. Under the CMSF, several management committees will operate a fund worth several billion, remaining accountable to the BSEC. The fund itself will do trading under a guideline and offer short-term loans to the market intermediaries as part of the market stabilisation efforts.

The proof of the pudding is in the eating. So, how far the BSEC move towards market stabilisation will achieve its goals will be known over time. The success of the fund will largely depend on its efficient operation. Since its board, besides members nominated by the BSEC, will have representation from the two bourses, the association of publicly listed companies and professional bodies of accountants, one can expect a positive outcome. The efficiency level of the five management committees will also be an important factor.

The CMSF will have its base capital formed with unclaimed/ unsettled cash dividends and stock dividends and bonus shares of the listed companies and IPO subscription money for the immediate past three years. However, the fund would make necessary disbursement against any claim made by investors, following verification by the issuer companies. Thus, the fund will also protect the interest of the investors. The value of the unclaimed/unsettled dividends until 2020 was estimated to be around Tk.200 billion. Besides, the CMSF will be free to accept funds as loans or grants, from the government and other organisations for the development of the capital market. 

Hopefully, the government and some donor agencies would make available financial help to the BSEC's good initiative. Had the institutional investors, banks, in particular, made investments in the capital market within the allowable limit, there would not be any scarcity of funds. Until that happens, there has to be a respectable daily turnover and the CMSF, when it comes into operation, might play a proactive role in the market.