Neglected capital market

The brokers' outfit of the Dhaka Stock Exchange (DSE) known as the DSE Brokers Association (DBA) has rightly complained that with no representation from the secondary market at the last week's investment summit in Dhaka, the step-brotherly attitude of the government towards the country's capital market has once again been underlined. Capital markets the world over serve as a crucial part of an active modern economy because they channel money from those who have it to those who need it for productive purposes. Along with the financial market of a country, its capital market also ensures mobility of money, instead of leaving it idle, to speed up productivity and development. When it comes to the primary market, the news is even direr with no proposal for initial public offering (IPO) in the pipeline. Bangladesh's stock market is the only one to have experienced this ungainly development.

When small investors shy away from the secondary market with the door of the primary market closed to both this type of investors and large investors including stock brokers, the stock market is sure to wobble and there is no question of bond market generating any interest in investors. The sources of equities and debt securities drying up fast, leaves little scope for a turnaround of the capital market. In fact, the country's largest capital market, the Dhaka Stock Exchange (DSE) and the second largest market, the Chittagong Stock Exchange (CSE) were never allowed to rise up to their potential. The promise they showed in the 90s of the past century was strangulated by manipulation of the capital market first in 1996 and then in 2010-11, leaving both DSE and CSE to limp first and then become totally moribund. Those market crashes eroded investors' confidence in trade in existing securities let alone bond securities. But had the stock market been allowed to gradually develop as a guarantor of savings and investment, as is done all across the world, it could be a viable source of funding for industries, businesses, government's infrastructure development and even individuals' asset procurement such as construction of house and purchase of cars.

Stockbrokers have vented their frustration because as intermediaries in between investors and stock market, they find their business slumping because of the bearish DSE and CSE. Also they have reasons to complain against higher turnover taxes compared to the countries in the region. They are, moreover, required to pay advance income tax (AIT) no matter if they incur losses in business. Had the securities regulator been serious about bringing meaningful changes in the rules and regulations, it should have taken all the stakeholders into confidence to know about their views and opinions. It did not.

Without reviving the capital market, no economy can make firm strides. Even the financial market takes the opportunity of investing prudently the funds they receive as savings or products from households or individuals, pensions and retirement benefits from institutions, life insurance companies, charitable foundations and non-financial companies that generate excess cash. Stock market can be a viable option. But unless it is given the proper shape through reform for it to rise up to the challenges of a digital age, it cannot function as a reliable funding source for the businesses and other clients, including the government.