Express (August 07, 2011)
The central bank has suggested the authorities concerned for taking effective measures to increase the supply of securities for stabilising the country's stock market.
"When the capital market becomes stable, medium- and longer-term reform measures will need to be taken to augment supply of new issues of securities by facilitating new entrants to the capital market," the Bangladesh Bank (BB) said in its latest quarterly report.
The report also said attracting new companies into issuing equity in the capital market may be facilitated by reforms in the current tax structure that keeps borrowing more attractive rather than raising capital through issuing securities in the form of equity.
The Securities and Exchange Commission (SEC) has appreciated the BB's latest move to help stabilise the country's capital market.
"We're working continuously to give approval to the companies, which had earlier submitted applications, for floating their initial public offerings (IPOs)," an executive director of the SEC told the FE Saturday, preferring anonymity.
He also said the SEC has already asked the merchant banks for taking necessary measures to encourage good performing companies to go public and list themselves in the capital market.
"The commission is also working to amend the book building method in this connection," the SEC executive added.
The BB's latest observations came following the country's stock market debacle, leading to a sharp drop in its index, in past eight months. The market capitalisation of all the listed issues went down sharply because of this "debacle".
The benchmark index of Dhaka Stock Exchange (DSE), the country's prime bourse, generally known as DGEN, came down to 6259.90 points last Thursday from its highest 8918.51 point on December 05 last, the DSE data showed.
The number of listed securities increased by 15 to 274 in the third quarter (Q3) of fiscal year (FY) 2010-11 or FY11, while new companies listed in the capital market during the quarter numbered four, according to the Bangladesh Bank Quarterly (BBQ) for January-March 2011.
The capital market for quite some time was considered overheated, it underwent sharp price correction in December 2010 and January 2011, and the market was in recovery witnessing a stabilisation phase in Q3 FY11, the BBQ added.
Regarding liquidity situation, the BBQ said efforts for immediate improvements in market liquidity have also continued, including the initiative by the state-owned Investment Corporation of Bangladesh (ICB) for operationalising a new Bangladesh Fund.
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