Not intervention but vigilance required in the share market
Share market has been bullish for the last few weeks. In case of buoyancy of the market all should be happy. But the memory of tsunami in the share market in 1996 and 2009-10 may create panic among many whenever there is any surge in the market. However, this time symptoms in the market seem to be positive and the concerned authorities are cautious and taking sensible steps.
It has been observed that trading has maintained a balance between the volume and value. It means that the total amount in taka has increased because there have been more trades. There has not been any meteoric rise in price of any particular issue. Moreover, market has been moving both upward and downward.
In the meantime, the Bangladesh Securities and Exchange Commission (BSEC) has advised the merchant banks not to grant margin loan against high-priced stocks. It is a very pragmatic decision. On the other hand, Dhaka Stock Exchange (DSE) authorities have told the investors not to sell personal properties for investing in share and securities because share market is always risky. It is an invaluable piece of advice. An investor can come to the share market if he has surplus money or savings. Even in that case he should not put all the eggs in a single basket, i.e., he should not spend the entire amount in buying shares. Very recently Mr. Shakil Rizvi, former president of DSE, has advised the investors not to invest with borrowed money. It is a highly laudable suggestion. We wonder whether it would have been possible for Mr. Rizvi to give this advice unless there had been demutualization of the stock exchange.
A large number of investors fell into miserable situations during the market crashes and could not recover thereafter. Unfortunately, on both the occasions when the market was witnessing unusual surge, a section of 'wise men' claiming to be share market experts raised demands for allocating more and more funds from the banks to facilitate participation of the investors in the eventual tsunamis and commit hara-kiri. This time they have not yet been active. We hope that good sense will prevail and they will not repeat the same mistake.
The BSEC has asked for the list of the authorized agents of the brokers of the stock exchange. They should also be kept under strict surveillance. Many of them try to run the business in MLM (multi-level marketing) style. They approach the prospective investors and request them to deposit a fixed amount on the assurance of certain amount of profit monthly which is totally an absurd proposition in case of share business.
No ominous sign is visible on the horizon of the share market at the moment. Some analysts think that the banks have reduced the interest rate on the deposits. Moreover, because of mega frauds in the banking sector people's faith has been shaken. Another section of analysts think that though there is a crisis in the country in the political front, yet the economic front has been doing well and it has earned fame globally. All these in unison might have attracted more investors.
In spite of the development of financial science people by and large consider the share market as a mysterious place and some think that huge amount of money can be earned jockeying on the speculation. In this connection we may quote the famous economist and diplomat John Kenneth Galbraith. Commenting on the great share market crash of the U.S.A of 1929 he said: "No one engineered the speculation that preceded it. Both were product of the free choice and decisions of thousands of individuals. The latter were not led to the slaughters. They were impelled to it by the seminal lunacy which has always seized people who are seized in turn with the notion that they can become very rich. There was money Wall-Streeters who helped to foster this insanity."
Both BSEC and DSE will have to remain cautious about these people who foster insanity. Before 2009-10 share market scam because of the camaraderie between the Ministry of Finance and a section of the DSE members an idea cropped up and spread among the investors that the government had been coddling the share market and in case of any adversary the government would come to its rescue. This time this kind of situation does not exist. The BSEC and stock exchange authorities - the former in particular - should state in unequivocal terms that the government has nothing to do with the share market movement and does not bear any responsibility. This will automatically act as a deterrent to the growth and rise of any euphoria among the investors.