Lack of IPOs, regulatory hurdles weigh on market rally prospects: Experts

Market analysts have expressed skepticism over a recent forecast by CAL Bangladesh that the country's equity benchmark index could soar to 10,000 points within the next 18 to 24 months.

Such target appears 'overly ambitious' without structural reforms of the capital market and fresh listings, they say.

CAL Bangladesh, a joint-venture foreign brokerage operating in the country, has based its projection on a combination of macroeconomic tailwinds, citing easing inflation, stable local currency, declining interest rates and a projected 40 per cent rebound in corporate earnings by 2026 as key drivers for the growth.

The firm also said that a potential GDP recovery to 5-6 per cent in FY26, up from the provisional estimate of 3.97 per cent in FY25, would have a positive impact on the equity market.

The Dhaka Stock Exchange's broad index (DSEX) closed at 5,379 points on Wednesday. To meet CAL's projection, it would need to gain 4,621 points more -- an 86 per cent increase -- in the next two years.

Several brokers, who declined to be named, said that the current market reality presents a significant challenge to these projections.

One broker said the market could see gains if national elections are held within the timeframe announced by the interim government, but noted that essential factors like new initial public offerings (IPOs) remain absent.

"The factors such as new IPOs required to make the prediction visible are still absent in our market," the broker said, adding that significant index gains would require listings of major companies.

The listing of a good number of large-cap companies, mutual funds along with introduction of some news products could propel the DSEX beyond 10,000 points, as CAL suggests, but the capital market has seen no IPOs in over a year, said another broker.

Market insiders noted that the regulator mainly focuses on imposing penalties on market intermediaries while good companies are unwilling to float shares as they are not happy with the current IPO valuation method.

Amendments to public issue rules, mutual fund regulations, and margin guidelines also remain pending. Efforts to bring state-owned enterprises (SoEs) to market are ongoing, but it remains uncertain whether significant listings can materialise within the two-year window, they said.

Some market operators also questioned CAL's comparison with regional peers. Sri Lanka's market is too small for a meaningful comparison with Bangladesh. On the other hand, Pakistan's market has some regulatory infrastructure, including clearing companies that facilitate settlement and onboarding of new clients. But Bangladesh lacks these mechanisms, they say.

"So, it's difficult to see the CAL's prediction visible within the next 24 months," a broker said.

Presently, the fundamentals of most listed companies are not up to the mark and a significant number of them are no longer in operation.

The market operators warned that under such conditions, the DSEX could still climb to 10,000 points within the next two years -- a level last seen before the 2010-11 market debacle -- if driven by abnormal rallies in junk stocks.

A rise to 10,000 points without new IPOs would not be rational and it would create a bubble bound to burst, one broker cautioned.

Responding to the concerns, Deshan Pushparajah, Country Head of CAL Bangladesh, said the forecast was based on improvements in macroeconomic indicators.

He noted that companies' fundamentals would strengthen in a more favourable financial environment.

"The companies will see significant bottom-line growth with lower interest rates and a suitably valued local currency," Mr Pushparajah said.

In its forecast, CAL Bangladesh also highlighted risks to its outlook, including political unrest or election delays, escalating global conflicts, and a potential US recession triggered by tariffs.

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