Brokers demand securities regrouping aligned with global standards

The DSE Brokers Association (DBA) has urged the securities regulator to reclassify securities listed on the prime bourse in line with global standards.

The association made the appeal in a letter to the chairman of the Bangladesh Securities and Exchange Commission (BSEC) on Wednesday.

Currently, a total of 651 securities are listed on the Dhaka Stock Exchange (DSE) under 22 categories, including banks, engineering, and pharmaceuticals & chemicals.

The DBA said there are significant inconsistencies in the categorisation of listed securities.

Talking to The FE, the DBA president said the market is a sum of all securities listed under different categories.

Proper classification of listed securities is very important for analysts and prudent investors at home and abroad, as they rely heavily on sectoral analysis.

"If any sector includes a company that does not match other securities in the same group, analyses of that sector will be inaccurate," Islam said.

For example, Marico Bangladesh Limited is classified under 'Pharmaceuticals and Chemicals', while British American Tobacco Bangladesh (BATBC) is categorised under 'Food and Allied'.

Under the Global Industry Classification Standard (GICS), both companies would fall under the 'Consumer Staples' sector.

Similarly, companies such as Walton, Singer, Bata, and Apex would be classified as Consumer Discretionary, reflecting their actual business exposure and sensitivity to consumer demand.

The DBA president said there is no globally recognised sector called 'miscellaneous' for listing securities.

"Such issues will have to be addressed to ensure proper classification of listed securities to help local and foreign investors make investment decisions based on sectoral analysis," Islam said.

He said many securities had not been properly classified at the time of listing due to the limited number of securities in the secondary market.

"But the number of listed securities has increased over the years, and it is urgent to reclassify the securities," Saiful said.

In its letter, the DBA also noted that the classification of securities under government bonds, corporate bonds, and mutual funds has remained unchanged since their introduction many years ago.

However, global capital markets now widely follow internationally recognised standards such as the GICS, jointly developed by MSCI and Standard & Poor's, or the Industry Classification Benchmark (ICB).

The GICS, for instance, consists of 11 sectors, 25 industry groups, 74 industries, and 163 sub-industries, offering a more consistent, analytical, and globally comparable framework.

"The limitations of the current DSE classification become evident when we examine specific examples," the DBA letter said.

This mismatch creates analytical distortions for investors, researchers, policymakers, and international stakeholders.

Sectoral performance analysis is a critical tool for understanding economic cycles, consumer behaviour, and income trends.

For instance, strong performance in consumer discretionary sectors often signals rising income levels and GDP growth.

In contrast, the outperformance of defensive sectors such as utilities relative to cyclical sectors may indicate greater economic caution among consumers.

An inconsistent or outdated sectoral framework undermines the usefulness of such insights.

The DBA also said aligning DSE's sector classification with internationally accepted standards such as GICS or ICB would significantly enhance market transparency, improve comparability with global markets, attract foreign investors, and strengthen the stock market's role as a leading economic indicator.

It urged the BSEC to initiate a review of the existing sector classification system and consider adopting an internationally aligned framework in consultation with relevant stakeholders.

"We remain confident that such a reform would be a progressive step towards strengthening the credibility, analytical depth, and global integration of Bangladesh's capital market," the DBA letter added.

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