CPD Research Director Dr Moazzem said the government’s measures would not help ultimately until transparency is ensured in IPO practices and investment accounts, and financial statements are audited properly
Amid growing concerns over the novel coronavirus pandemic in Bangladesh, the government may consider suspension of trading in stock exchanges, private economic think tank Centre for Policy Dialogue (CPD) has opined.
In a virtual media briefing yesterday, the local organisation said the two stock markets – Dhaka and Chattogram – may be shut down temporarily if bank investment and other measures taken up by the authorities to restrict downward price movement do not work.
The stock market in Bangladesh was falling before the coronavirus pandemic, and it fell too sharply in March when the Covid-19 cases were detected in the country.
The pandemic has already pushed the global economy to a risk of recession which might disrupt Bangladesh's exports and imports, alongside a slowdown in local economic activities.
To help the market, the central bank last month prescribed commercial banks to invest in stocks for a five-year concessional scheme, and the banks last week declared to opt in gradually.
But as the declaration and their concrete efforts could not stop the decline in stock indices, the securities regulator – Bangladesh Securities and Exchange Commission – set a floor on prices of individual scrips.
Following the restriction on the downward price movement, indices at Dhaka Stock Exchange (DSE) gained over 10 percent within half an hour of the Thursday's trading session.
Prior to that, the indices had fallen around 20 percent since the beginning of March.
But less than one-sixth of scrips managed to retain buyers up to the last moments on Thursday at the forcefully pushed-up prices and increased scepticism about recovery and even consolidating the present price-level.
CPD Research Director Dr Khondaker Golam Moazzem told journalists that the government and the regulator may think about shutting trading in the stock exchanges if these measures do not work.
The organisation has long been saying that the capital market in Bangladesh has weaknesses in governance and management and that it cannot help investors sustainably unless those issues are fixed.
Dr Moazzem said the government's measures and restriction on prices would not help ultimately until transparency is ensured in initial public offerings practices and investment accounts, and financial statements are audited properly.
He also underscored the need for improvement of market-related institutions such as the regulator, exchanges, auditors and institutional investors.