Market bearing scars of corrective punitive actions

Some regulatory actions, though mostly hailed as corrective measures, caused the market to take a U-turn to a persistent decline. Market experts say it is the doing of a handful of influential people who have been penalized.

In the last few sessions, the market's fall accelerated and on Tuesday the broad index of the Dhaka bourse, DSEX closed at 5,323 points, 11.52 per cent or 693 points less from where it was on August 11, days after the change of the political regime.

Meanwhile, on October 1, the Bangladesh Securities and Exchange Commission (BSEC) slammed a record fine of Tk 4.28 billion on four individuals and five firms for manipulating the stock price of Beximco Ltd.

The regulatory actions against the big market players led to the market volatility, said Md. Ashequr Rahman, managing director of Midway Securities. "The market, which is controlled by a group of people, would face an impact if the people feel aggrieved," he added.

BSEC officials said the individuals and companies punished had links with the Beximco Group.

According to experts, the fundamentally very weak market is bearing the scars of the major decisions.

Mr Ashequr Rahman, however, supported the punitive actions.

"The BSEC is right from the regulatory point of view and the actions should have been taken earlier by the previous commission."

The day after the imposition of the penalty, the DSEX experienced the biggest single-day fall in 31 months and a group of angry investors staged a demonstration.

According to some market operators, influential people might have been behind the demonstrations in the capital's Motijheel and in front of the office of the securities commission, demanding the removal of its chief.

Mr Rahman said the market faces negative impacts if investors become panicked.

Another regulatory decision regarding the transfer of 27 companies to 'Z' category also triggered the decline of the index.

On September 25, following a regulatory instruction the stock exchanges downgraded the companies for their failure to pay any dividend in the last two consecutive years and to complete the distribution of dividends recommended.

"The companies deserved such treatment. But the regulator could implement the decision in phases to avoid the heightened impact," Mr Rahman added.

After the change of the political regime on August 5, the broad index of the Dhaka Stock Exchange (DSE) registered a record gain of 15 per cent or 786 points in just four consecutive sessions due to investors' enthusiastic participation.

On August 8, the DSEX experienced the highest single-day gain of 306 points since the introduction of this index in 2013.

Experts and market operators described the rally as the outcome of investors' buoyancy amid the high hope for the restoration of democratic practices that would remove corruptions in the capital market and the economic sector.

On August 11, the broad index crossed the 6000 mark after five months and the turnover, a crucial indicator of the market, reached Tk 20.10 billion, highest in more than two years.

However, investors seem to have been rattled by the recent market volatility. The turnover plunged to Tk 3.53 billion on Tuesday.

Speaking of signs of optimism, Asif Khan, chairman of EDGE Asset Management, said dividend yields of Treasury bonds plummeted by 7-8 basis points in the last few auctions by the central bank.

"It's a good sign for the equity market. The positive impact of the reduced yields will be visible in the days to come," said Mr Khan, expressing all-out support for the regulatory actions.

"That was pending for years," he said.

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