What impact will BSEC's 'Investment Management Summit' bring?

On July 31 in 2022, the regulatory body Bangladesh Securities and Exchange Commission (BSEC) imposed a floor price for the second time in the stock market to prevent continuous price decline. In the subsequent two months (August and September), the stock market witnessed an increase in indices alongside a resurgence in trading activities. This trend of dynamism culminated on September 20 of the same year, when Dhaka Stock Exchange (DSE) recorded a transaction worth BDT 2,832 crore, marking one of the top five highest-value trades in the history of DSE.

But since September 2022, along with the price decline, the transactions also started to decline. In the next two months, the transaction came down to 300 crores. And the main index of DSE fell from 6 thousand 600 points to 6 thousand 1 points. This situation led to a substantial portion of listed companies' shares being locked at the floor price in the stock market. Simultaneously, both small and large investors found their investments frozen. Despite several attempts to alleviate this scenario, involving efforts from merchant banks, portfolio managers, stock brokers, insurance companies, and commercial bank representatives, along with the participation of the Chairman and Commissioners of the regulatory authority, the outcomes of these initiatives did not yield immediate results. Although the stock market displayed a remarkable sentiment for a couple of days as a result of these endeavors, the entrenched trend remained unaltered.

On the one hand, various crises in the country's foreign currency reserves, inflation, and the economy have made the stock market more vulnerable. Alongside this, the imposition of floor prices, ostensibly to safeguard ordinary investors, has become a thorn in the side for investors in the stock market. Consequently, there has been mounting pressure from market stakeholders, including DSE, merchant banks, and fund managers, to lift the floor price and alleviate these concerns. But the regulatory body BSEC did not agree. Despite repeated assurances, even a slight recovery in the market could lead to the continuation of the floor price enforcement.

Amidst minor fluctuations and changes over an 11-month period, a specific segment continues to dominate transactions in the country's stock market. In this context, on September 16, an initiative has been undertaken by the Bangladesh Securities and Exchange Commission (BSEC) to convene an 'Investment Management Summit,' bringing together asset management companies, fund managers, trustees, custodians, auditors, and other relevant entities in the stock market. The event will be graced by the presence of the Chairman of the regulatory authority, Shibli Rubaiyat-ul-Islam, serving as the chief guest.

Interest and curiosity have been generated among investors around this summit. They are eager to know the topics that will be discussed during this event. What is the objective of the BSEC? Will there be any pressure on asset management companies and portfolio management company representatives regarding the withdrawal of the floor price enforcement? As a significant portion of the market, including institutional investors, has been urging for the removal of the floor price for several months, the question arises whether this effort will result in any substantial impact on the market.

Despite the various questions posed by ordinary investors, BSEC spokesperson Md. Rezaul Karim states that this conference will focus on compliance issues among asset management companies, fund managers, trustees, custodians, and auditors. The aim is to discuss how various market-related entities can enhance their operations with greater transparency. Discussions will also revolve around utilizing technology to address matters of transparency and cleanliness.

Meanwhile, ahead of the upcoming national elections, there may be multifaceted activity centered on the capital market. Before the previous national elections, various initiatives were taken for stability. The Investment Corporation of Bangladesh (ICB) has already asked the government for Tk 5,000 crore to speed up the market and increase its capacity. The managing director of the company Abul Hossain said that they have applied to the government for money. Alongside this, they are also exploring potential avenues for acquiring loans from various sources.

DSE and CSE have announced some steps to be taken around the upcoming national elections. Officials of two stock exchanges have decided to take proactive steps to counter social media rumours. Chairman of DSE said that they will appoint top 50 stock brokers soon. To stabilize the market ahead of the election, they intend to collaborate with all stakeholders to determine the necessary actions collectively.

Before the process of demutualization, the first initiative to address the stagnant state of the stock market was noticeable from the DSE authorities. During that time, the DSE President's Leadership Council engaged in running back and forth, advocating various demands to the Finance Minister, Bangladesh Bank, and BSEC. However, after demutualization, many of these initiatives have declined. Currently, a substantial portion of the initiatives taken primarily stems from the regulatory authority BSEC's side.

After the stock market crash in 1996, many people lost everything by investing again in 2010. However, despite this passage of time, the stock market in Bangladesh is yet to regain its dynamic momentum, particularly in the wake of the 2010 stock market crash. The question of when the stock market in Bangladesh will harmonize with the nation's economy, exerting a substantial influence on the country's business and trade, remains unanswered to many. The hope among market stakeholders is that the crisis in the country's stock market will eventually subside, and it will once again serve as the primary platform for investment, shaping the cornerstone of economic aspirations.