The government on Sunday asked the merchant banks to reinvest their profits made from the volatile share market in a bid to bring back normalcy to the capital market, trading on which had remained suspended for the past two days.
Trading on the capital market is scheduled to resume on Tuesday after the government decided to lift the circuit-breaker on index, temporarily suspend offloading of shares of two companies through book-building process, and form a body in the next 15 days to investigate into the market anomalies and submit its report within one month.
Finance minister Abul Maal Abdul Muhith, after a series of meetings with the stakeholders of the market, central bank representatives and government officials, disclosed the decisions at a briefing at the secretariat on Sunday evening.
He said the central bank would continue with its flexible stance on banks’ investment in the share market.
Muhith did not find the market free of risk yet but he also termed the market condition ‘not too bad’. He disagreed with the allegation that the Securities and Exchange Commission had failed to face the situation and that it required reconstitution.
‘We now have a tremendous ability to observe the market. We now have easy access to the information on who is transacting what. So, it is very much possible to stabilise the market. And I believe it will continue to be stable since we resume trading on Tuesday,’ he said.
He said the finance ministry was considering introducing a buy-back system for share issuers, amending the age-old company law.
‘The overall price-earning ratio in the market is 23:1 and the index now stands at around 6,300 points. I do not think it is too high. The market fundamentals are good. And the fundamentals of markets in neighbouring countries are also similar,’ he said.
‘Trading will resume on Tuesday and the institutional buyers will be active in the market,’ he said.
Muhith rejected the notion that a huge amount of money was smuggled out of the market.
‘A nominal amount went out of the market and we would take action in this regard,’ he said but did not divulge the amount.
The minister observed that there was a lack of coordination among the central bank, the Securities and Exchange Commission, and the Office of the Registrar of Joint Stock Companies and Firms and emphasised increasing the frequency of meetings among them as ‘the market needs to be remodelled and a reform package needs to be introduced.’
He considered that the SEC advisory board needed to be strengthened and made more proactive. The board would be reconstituted in a couple of weeks.
Muhith also laid stress on putting an end to taking frequent ad hoc decisions by the market regulators.
He said the circuit-breakers in place for individual companies would continue but the index circuit-breaker would go as there was no software required to implement it in Bangladesh.
The minister urged the investors to be a littler more cautious. ‘It is not likely that an investment of Tk 10 would yield a profit of Tk 50. Many of the investors do not know the issues related to the capital market. I am sure many investors even do not know the face values of the shares they own.’
Responding to a question whether there would be any measure to patronise the investors like many countries did during the global recession, Muhith said, ‘Our target is to protect the interests of investors. But it is tough to say right now what would be the measure.’ He however categorically ruled out any possibility of providing compensation.
Muhith said the cases filed after 1996 stock market scam could not be continued as no witness was found. ‘Next time, we will not require any witness. The records at the central depository of Bangladesh will be the witness.’
SEC chairman Ziaul Hoque Khandaker said the commission would not intervene in issuance of margin loans.
Earlier in the morning, Muhith had a breakfast meeting at the state guesthouse Padma with the stakeholders and experts to find a way out of the crisis. The meeting had continued till midday.
Prime minister’s advisers Mashiur Rahman and HT Imam, Bangladesh Bank governor Atiur Rahman, Bangladesh Publicly Listed Companies’ Association president and adviser to the AL president on private sector development Salman F Rahman, deputy governor of the central bank Ziaul Hasan Siddique, Bangladesh Krishi Bank chairman Khondker Ibrahim Khaled, Federation of Bangladesh Chambers of Commerce and Industry president AK Azad and its former chiefs Annisul Huq and Manjur Elahi, and former DSE chief Rakibur Rahman also took part in the meeting.
Later in the afternoon, Muhith held another round of meetings in his finance ministry office.
The minister held the series of meeting following the recent volatility in the capital market as panic-stricken investors went into heavy selling in a market suffering from a severe liquidity crisis.
The investors went for violent street protests last week after the general index of Dhaka Stock Exchange fell by 16 per cent over a week.
