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Deepening crisis in capital market  

Published: September 15, 2019 22:04:09 | Updated: September 17, 2019 21:47:32


The securities regulator that did see no evil, hear no evil and speak no evil of the country's stock market until recently has found 10 investors' involvement in manipulation of share prices of at least 12 companies. The Bangladesh Securities and Exchange Commission (BSEC) in a meeting late last week slapped certain 'soft' punitive measures against the parties involved in the manipulation. The BSEC move, however, came at a time when none but the finance minister, while talking to newsmen, expressed his deep frustration over the situation prevailing in the capital market.

The finance minister echoed the sentiment of many when he found the capital market 'not aligned with the mainstream' economy. But, at the same time, the minister admitted the fact that he was clueless about the behaviour of the capital market despite all the support the government was offering to it. The detection of a few 'manipulators' by the securities regulator, however, does provide at least one answer to the minister's quest for reasons behind the current state of the stock market.

It is quite apparent that manipulators, big or small, with the regulator and relevant others remaining mere onlookers, have brought the market to a deplorable state. The big and influential manipulators did engineer the bubble on two occasions, in 1996 and 2010, made windfall gains and left the market unscathed. The small-time ones have been in action all the time taking advantage of the loopholes, legal or otherwise, and none has ever bothered to take any major action against them.

Undeniably, the Bangladesh stock market is yet to become strong and stable. Well before attaining the much-desired maturity, it had got the first shock in 1996 and in a gap of 14 years the second one, primarily because of oversight by the regulatory body and lack of understanding on the part of the administration. Automation of stock trading has been a giant step forward, but there exists a lot of weakness as far as the oversight issues are concerned.

No stock market can attain stability and strength without adequate involvement of long-term investors who are, naturally, a choosy lot. They would want stable supply of quality issues, healthy return on their investment and a minimum level of manipulation. It is hard to say all those factors are in place in Bangladesh market. The policymakers may be wanting the long-term and informed investors to come to the market, but the latter, from both home and abroad, would prefer to stay away in such a situation.

Mere listing of a large number of issues would not also help much. The prospective investors would expect those to follow a good and healthy corporate culture which, unfortunately, is almost absent in Bangladesh. Given the current state of the banks that are taking short-term deposits and lending the same on the long-term basis, the country does need a vibrant stock market to help meet the resource gap. But that would not happen automatically or in isolation. The capital market is an important part of the overall financial sector. So, it would be foolhardy to expect the capital market to behave ideally with most other parts of the financial market encountering anomalies of all sorts. 

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