FE Report (October 02, 2010)
The delay in stock market listing by state enterprises was due either to 'personal interest" or "myopic consideration', the head of a parliamentary watchdog said.
AHM Mostafa Kamal, who chairs the parliamentary standing committee on the Finance Ministry, said the capital market is not driven by market fundamentals and the only way-out is to address the gap in supply of good shares.
Finance minister AMA Muhith in January announced that shares of 26 state-owned enterprises would be offloaded by June but no company was yet to comply with the deadline.
"Dividend yield, price earning ratio and other indicators are not working in the market and it is an alarming sign," Mr Kamal said.
The Indian government offloaded shares of five SoEs and raised Rs 788 billion in 2005 and the current market price of the stocks is Rs 2.98 trillion, he said, adding, "India is doing but we can't."
He reiterated his suggestion that the Securities and Exchange Commission (SEC), as short-term measure, should immediately relax lock-in and share net periods to hike inflow of shares.
His comment came following a continuous uptrend in stock prices for more than a year. The SEC has intervened on several occasions to cool down an over-heated market but investors have defied those. The stock indices have been continuing their record-breaking upward journey with the market capitalization soaring.
"The SEC should also consult with Dhaka and Chittagong Stock Exchanges and associations of listed companies before the intervention into the market," the chairman said.
About the monetary policy, Mr Kamal said the central bank should immediately take steps to appreciate Taka to contain inflation and increase foreign direct investment (FDI).
"This is the right time to appreciate the local currency as all the macroeconomic fundamentals are positive or have upward trends," he pointed out.
The country is likely to import about $27 billion worth of products and the export target is about $18.5 billion and if taka is appreciated, impact of import inflation will be less on the economy, Mr Kamal said.
Citing example, he said during the last one year, India appreciated its currency by 4.5 per cent, Malaysia 11 per cent, Singapore 6.9 per cent Thailand 7 per cent, South Korea 6.5 per cent and Indonesia 11 per cent.
"The government should compensate the loss the export sector would incur after the currency appreciation," the chairman said adding, "The appreciation will also have positive impact on foreign debt servicing and remittance outflow."
Taka appreciation will also encourage more FDI to come into Bangladesh as no investors now feel comfortable under the regime of currency depreciation.
Mr Kamal said that the premium rate under Bank Deposit Insurance Act, 2000 should be increased to protect the interest of the deposit.
Citing the example of Oriental Bank, he said if the rate is increased at least at an individual level, depositors will be protected.
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