China eyes long-term benefit from DSE

Top official of Shenzhen bourse tells the FE

Ismail Hossain, from Beijing | Published: June 25, 2018 10:35:07 | Updated: June 25, 2018 17:28:51

The China consortium faces no pressure for immediate return from their investment in Dhaka Stock Exchange (DSE), a top official of Shenzhen Stock Exchange said.

The consortium of Shenzhen-Shanghai bourses has recently acquired a 25 per cent share of the DSE.

They think they have a long-term view as a strategic investor in the DSE.

Capacity building, infrastructural development, cross-training, trust building for investors and transparency are the key areas they primarily want to work on.

"We believe we'll stay in Bangladesh for long. It'd be important for the Chinese consortium to have a long-term view," said Liu Fuzhong, director of International Department at SSE.

He, however, said a strategic investor in a stock market cannot make magic happen. They are manager and developer, they are not regulator.

Mr Liu was talking to the FE at Hilton Yuxi Fuxian Lake on the sidelines of the first China South Asia Cooperation Forum held in Yunnan.

He said there are multiple areas the two capital markets could work on together.

"We are not thinking exchange-to-exchange cooperation only… we need country-to-country and capital market-to-capital market cooperation," he said.

Mr Liu thinks a preliminary study on Dhaka's stock market is the first thing they want to do.

"Bangladesh capital market is a well-functioning and important South Asian market and we are quite far away from Bangladesh…," he said.

He said China has huge resources available and Bangladesh has a lot too in the financial markets.

"It is now critical for us to make that connected. The exchange is very important platform. If it's possible, we would like to have some cross-training at first."

He said Shenzhen stock market has developed a very sophisticated exchange market infrastructure and DSE will be benefited from that.

"We've cutting-edge trading system, surveillance system and infrastructure… The turnover at Shenzhen is one of the most active in the world."

"Our last year's trading turnover value was close to $10 trillion. In terms of size, it's much bigger. We have technology that supports very active trading. This is an area where we would like to work with DSE."

He said there are different characters in all the markets. Capital market is very much past dependent.

"There is one thing we can identify-it is capacity building," Mr Lie mentioned.

"As we'll be there for a long time, we believe this is important to develop such capacity…."

On May 14, the DSE signed an agreement with the consortium to sell a 25 per cent stake.

The price of the stake was $53 million which was sold at $125 million with premium.

The consortium will also provide technical support worth $37 million.

In 2016, Chinese consortium purchased 40 per cent of Pakistan Stock Exchange.

Mr Liu said a lot of positive changes happened. "We brought in our vnex platform into Pakistan. We've held seminars to promote investment into Pakistan."

Chinese investment in Pakistan has increased significantly after that.

"Actually, we helped open up the door for Chinese investments to enter Pakistan," he added.

Mr Liu said Pakistani market understands Chinese investors are bringing something new into its market.

Despite winning the bid clearly, it was not easy for China consortium to get award.

Chinese consortium had to encounter an Indian consortium, although the latter offered Tk 7 less each share than that of China in the bidding process.

Mr Liu said, "We are prepared to offer the kinds of fundamental support to Dhaka Stock Exchange needs."

He said long-term strategic investor has certain advantages. China consortium does not have pressure for immediate financial return.

He said the DSE has a very clear target for the next five years. They have objectives in product development, in revenue and profits.

"We would like to see now some improvements in the infrastructure so that exchange could process more trade to be more automated."

He said internal management would be improved to attract the investors.

Mr Liu said transparency is crucial both in the rules and regulations and in the management.

"We're working on enabling systems… We are not making rules, nut we are trying to make transparency easier with the technology."

Asked as to Chinese consortium's inclusion in DSE will prevent repetition of share market scams, he said the question is being asked all over the world.

"Can one prevent a market crash from happening? I think it's very important to understand: managing the market is not managing the market prices."

"If you want to try to manage price, you would gain a short term. But you would lose in the long term."

"I would say, for the china consortium, you would not expect a magic to happen."

He said capital market is only a part of the financial system. It is very hard to say or blame exchange for all the market crashes.

"That is true for the USA or other countries also. I think it's also true in Bangladesh. The people need to have a holistic view of the market," Mr Liu mentioned.

"There are few things to take care of like investor education, investor awareness, fair and true disclosure, information transparency are needed."


Share if you like