That the country's stock market has remained non-reactive to the budget for the fiscal year (FY), 2018-19, placed before the Jatiya Sangsad (national parliament) on June 09 last by Finance Minister AMA Muhith, is quite natural.
In fact, there is nothing in the budget that could help the relevant stakeholders come out of a deep slumber and move forward.
The finance minister has proposed a sop for the banks, insurance companies and other financial institutions (FIs) in the form of reduced corporate tax rate.
The proposal has generated enough of heat - even within the ruling party. In the face of criticism from different quarters, Mr. Muhith has uncharacteristically refrained from making any angry response.
But, the reaction over corporate rate-cut might look rather unnatural. Businesses for long have been pushing for it. Then why are trade bodies not defending the cut and extending their support to the beleaguered finance minister?
It would have also been natural for the bourses to support the cut, for the cut in tax has the potential to help increase profit of banks and FIs and also the rates of their dividends.
The basic reason for most of the people not liking the tax incentive proposed in the budget for banks and FIs is that it is biased and performance of these institutions does not justify such an incentive for them.
Stock investors do also know that the fiscal benefits that have been offered to banks and FIs would in no way percolate to them. They are aware of the fact that the state of affairs with these financial entities is so bad that the sop proposed for them in the budget for the upcoming year would not be able to pull those out of the quagmire.
The banks, non-banking financial institutions (NBFIs) and insurance companies do occupy a substantial part of the stock market. If these issues are unable to offer attractive return on the money invested by individual as well as institutional investors, the market would naturally remain subdued.
There is no denying that the behaviour of the stock market for the last six to seven years has not been in sync with the economy's impressive growth performance. In an economy that grows at an annual rate between 6.0 per cent and 7.0 per cent or more, the stock market should be reasonably buoyant. But the situation in Bangladesh continues to remain just the opposite.
The 2010 market collapse can be cited as a reason for this behaviour of the bourses. But, the market should have come out of its moribund state when the economic growth rate is persistently good. So, it seems there are some deep-rooted problems somewhere. And none seems interested to address those.
The failure of the finance minister to mention the stock market issues in his budget speech does only strengthen such a notion.
Why are things moving from bad to worse in this all-important financial sector of the country?
One cannot be blamed if one feels tempted to conclude that most part of the sector is not in good hands. Looking at the unsavoury developments that have been taking place in the sector in recent years, one is truly left with no option other than believing so. But, should it go on like this for ever?
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