FE Report (September 24, 2010)
Parliamentary Standing Committee on Finance has recommended stepping up efforts to increase supply of good shares to cool down the 'overvalued' market.
It has also recommended relaxing lock-in and share net periods and urged the Securities and Exchange Commission (SEC) to consult with Dhaka and Chittagong stock exchanges and association of listed companies before intervening the market.
The JS body Thursday held a meeting with stakeholders to discuss the situation of the market and put forward a set of short-and medium-term recommendations.
Former adviser Mirza Azizul Islam, SEC chairman and other officials, banking division secretary, additional secretary of energy ministry, vice-chairman of Dhaka Stock Exchange, chairman of Chittagong Stock Exchange, president of Bangladesh Association of Publicly Listed Companies, FBCCI vice-president and other officials were present at the meeting.
Influx of shares is needed for the correction of the overheated market, said chairman of the committee AHM Mostafa Kamal at a press conference.
"The committee has recommended that private placement and sponsor shares' lock-in system should be relaxed to increase the supply of the stocks," he said adding, "SEC can also consider relaxing share lock-in of any company."
Private placement lock-in period is one year while sponsor share lock-in period is three years.
The chairman said the committee was of the view that if share netting time is relaxed, it will increase the number of shares for trading in the market.
The share netting time under the current system is T+3, which means shares can be sold after three days of buying.
Mr Kamal said frequent intervention of the regulatory authority destabilises the market and it should consult with other stakeholders including the exchanges and association of listed companies before taking any action.
"SEC did not discuss the matter with anybody before taking margin loan or PR ratio decisions taken a few days back,' he said.
The government has introduced book-building method to ensure fair price of shares but it is yet to be fully exploited, he added.
"The concept is very good but we don't have the capacity to tap the full benefit of the system," Mr Kamal said.
The committee recommended that the state-owned TV channel should broadcast educational programmes on share market to make investors aware, he said.
Mr Kamal said it is not possible to increase the supply of shares overnight.
"The finance minister has repeatedly assured us that the shares of 26 state-owned enterprises will be offloaded but the ministries are reluctant to disinvest," he said.
Additional secretary of the energy ministry was present at the meeting and he informed that it did not have any expertise to deal with stock offloading, said Mr Kamal.
"The committee advised him to take the help of Investment Corporation of Bangladesh (ICB) or SEC to smoothen the disinvestment process," he said.
The finance minister in January announced to offload shares of the 26 SoEs and but energy and industries ministries expressed their reluctance to offload their companies.
Fifteen companies out of 26 belonged to the two ministries.
"If the ministries fail to disinvest, the standing committee will contact with the Prime Minister and will seek her intervention in this regard," Mr Kamal said.
The chairman said private sector is reluctant to raise capital from the market and Dhaka and Chittagong stock exchanges will form a committee to find out the reasons behind it.
"If any government or SEC policies are responsible, they will be rectified," he said.
Mr Kamal said the SEC should increase its human resources to regulate the exchanges as the market is growing.
"The finance ministry has assured the committee that it will take necessary action to increase the capacity of the regulator," he said.
The market grew from Tk 1.0 trillion in January 2009 to Tk 3.0 trillion now and the regulator needs more manpower to monitor the market, he added.
The committee has recommended setting up a separate court for handling share market-related cases. There are over 200 cases pending with different courts in the country.
The committee did not discuss demutualisation of stock exchanges and financial reporting council issues as the finance minister was not present in the meeting.
"These are policy matters and should be discussed in presence of the finance minister," Mr Kamal said.
Parliamentary Standing Committee on Finance has recommended stepping up efforts to increase supply of good shares to cool down the 'overvalued' market.
It has also recommended relaxing lock-in and share net periods and urged the Securities and Exchange Commission (SEC) to consult with Dhaka and Chittagong stock exchanges and association of listed companies before intervening the market.
The JS body Thursday held a meeting with stakeholders to discuss the situation of the market and put forward a set of short-and medium-term recommendations.
Former adviser Mirza Azizul Islam, SEC chairman and other officials, banking division secretary, additional secretary of energy ministry, vice-chairman of Dhaka Stock Exchange, chairman of Chittagong Stock Exchange, president of Bangladesh Association of Publicly Listed Companies, FBCCI vice-president and other officials were present at the meeting.
Influx of shares is needed for the correction of the overheated market, said chairman of the committee AHM Mostafa Kamal at a press conference.
"The committee has recommended that private placement and sponsor shares' lock-in system should be relaxed to increase the supply of the stocks," he said adding, "SEC can also consider relaxing share lock-in of any company."
Private placement lock-in period is one year while sponsor share lock-in period is three years.
The chairman said the committee was of the view that if share netting time is relaxed, it will increase the number of shares for trading in the market.
The share netting time under the current system is T+3, which means shares can be sold after three days of buying.
Mr Kamal said frequent intervention of the regulatory authority destabilises the market and it should consult with other stakeholders including the exchanges and association of listed companies before taking any action.
"SEC did not discuss the matter with anybody before taking margin loan or PR ratio decisions taken a few days back,' he said.
The government has introduced book-building method to ensure fair price of shares but it is yet to be fully exploited, he added.
"The concept is very good but we don't have the capacity to tap the full benefit of the system," Mr Kamal said.
The committee recommended that the state-owned TV channel should broadcast educational programmes on share market to make investors aware, he said.
Mr Kamal said it is not possible to increase the supply of shares overnight.
"The finance minister has repeatedly assured us that the shares of 26 state-owned enterprises will be offloaded but the ministries are reluctant to disinvest," he said.
Additional secretary of the energy ministry was present at the meeting and he informed that it did not have any expertise to deal with stock offloading, said Mr Kamal.
"The committee advised him to take the help of Investment Corporation of Bangladesh (ICB) or SEC to smoothen the disinvestment process," he said.
The finance minister in January announced to offload shares of the 26 SoEs and but energy and industries ministries expressed their reluctance to offload their companies.
Fifteen companies out of 26 belonged to the two ministries.
"If the ministries fail to disinvest, the standing committee will contact with the Prime Minister and will seek her intervention in this regard," Mr Kamal said.
The chairman said private sector is reluctant to raise capital from the market and Dhaka and Chittagong stock exchanges will form a committee to find out the reasons behind it.
"If any government or SEC policies are responsible, they will be rectified," he said.
Mr Kamal said the SEC should increase its human resources to regulate the exchanges as the market is growing.
"The finance ministry has assured the committee that it will take necessary action to increase the capacity of the regulator," he said.
The market grew from Tk 1.0 trillion in January 2009 to Tk 3.0 trillion now and the regulator needs more manpower to monitor the market, he added.
The committee has recommended setting up a separate court for handling share market-related cases. There are over 200 cases pending with different courts in the country.
The committee did not discuss demutualisation of stock exchanges and financial reporting council issues as the finance minister was not present in the meeting.
"These are policy matters and should be discussed in presence of the finance minister," Mr Kamal said.
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