Stock market is in crisis of confidence

Gamblers increasing share prices

Mahfuz Emran : For the time being, some relief has returned to the stock market, which has been in disbelief for a long time. After the floor price (minimum) was lifted from most of the companies, trading, valuation and market capitalization increased. There is excitement among the concerned stakeholders. The regulatory body Bangladesh Securities and Exchange Commission (BSEC) is also counting itself as a success. But despite all this, investors are not fully regaining confidence.
Daily Industry spoke to several investors and market-savvy people about these issues. According to them, the companies leading the list of market transactions and price increases in the last 15 days are known as gamblers’ (manipulative) items. As a result, this upward trend is planned. How long is sustainable is the biggest question.
And the concerned regulatory bodies of the market, the stakeholders, and even the economists who speak, are all the beneficiaries of this market. At the end of the day the target is investors’ pockets. As a result, it is difficult to trust their words or decisions. Altogether, the stock market fluctuates with trust and distrust. However, the hope is that there is still room for the price of several shares to rise in this market. Which can push the price forward.
Analysts are also voicing confidence. If asked, the former caretaker government’s finance advisor AB Mirza Azizul Islam told that the main problem in the market is the crisis of confidence of investors. Initiatives should be taken to overcome this crisis. In this case, it is important to ensure good governance. Besides, the supply of good shares should be increased. Otherwise, it is difficult for the market to be sustainable in the long run.
But the regulatory agency says otherwise. When asked, Executive Director of BSEC Mohammad Rezaul Karim told that the market is positive. Values and transactions have increased. This means that investor confidence has increased. But no one can get through manipulation. He said, action will be taken according to law if anyone harms investors through manipulation. The commission is aware of this.
Analysis showed that the market was slightly negative last week. However, if we calculate the total of 15 days from the previous week, we will get a different picture. Compared to the last 15 days, the market was higher during the period under discussion than any other 15 days in the last 2 years.
The market was ahead in terms of transactions, valuation and market capitalization. Over Tk 15,914 crores were traded in DSE in two weeks. As such, the average daily transaction in 10 working days is Tk 1,591 crore. The same is the case with values. But looking at the companies that are on the growth list, savvy investors will breathe a sigh of relief.
As individual companies, Sikdar Insurance rose 60 per cent last week, Taufika Food and Levelo Ice Cream rose 28 per cent, Best Holdings 28 per cent, Mannu Ceramics 20 per cent and Khan Brothers PP Ovens 17 per cent. 1,914 crores were traded in the top ten companies on DSE last week. Which is 25.74 percent of the total transactions of the market.
Among them, Best Holdings, which is in the first position, traded Tk 294 crore, Orion Infusion Tk 276 crore, Orion Pharma Tk 226 crore and Fortune Suze Tk 196 crore. All of these are known as manipulation items in the market. In other words, the positive market is not giving complete relief to the investors.
Those concerned say that when the floor price is lifted, an unusual situation is created in the first week. BSEC, Merchant Banks, Brokerage Houses, CEO Forum and Capital Market Stabilization Fund were prepared to deal with the situation. They tried to support the market. But the market turned around in the second week. The third week was also fairly positive. However, it is difficult to maintain life support for long if investors do not regain confidence.
Meanwhile, the stock market is not in a very positive place for the government policy makers. For those who are not directly involved with government policy makers, the stock market is a source of irritation. Their thinking is like this, if there is no stock market, there will be no problem in the country. Because of this, as long as they were stuck with the floor price, they were at ease.
At present, a number of informally identified syndicates are responsible for raising and lowering the market. According to economists and market participants, there are two crises in the market. The crisis on the demand side is that investors lack confidence in this market. On the supply side, the problem is that there are fewer good companies. The result is a win-win situation for manipulation and syndicates. All in all, the stock market has been in a weak existence for a long time.
And gradually the situation is getting weaker. The long-term transition from here is very difficult. In this regard, Mirza Aziz thinks, first of all, steps should be taken to eliminate the crisis of trust. In this case, trust should be ensured by establishing good governance. In other words, investors should be assured that if someone steals their money through manipulation, they will be prosecuted.
Besides, the supply of good shares should be increased. Through these two steps it is possible to eliminate the market problem. But in present reality it is not very easy.
Those concerned say that 60 new TREKs (brokerage houses) were approved two years ago to increase liquidity in the market. Even if Tk 5 crores from each house comes to the market, liquidity is expected to increase by Tk 300 crores. But most of the transactions could not be initiated except for one or two institutions. As a result, the purpose for which the trek was sanctioned, did not succeed.
According to them, there are several areas of the current market that are similar to 2010. At that time margin lending in the market (share buying loan) was unlimited. The number of good companies was less. Investments were based on rumours, not company fundamentals. The index had abnormal fluctuations. Share prices of weaker companies rose abnormally.
The rise in capital markets was not matched by other indicators of the economy. All of these are currently available in the market. On the other hand, the financial situation of several companies has worsened due to the Corona, global situation and negative economic situation. As a result, those concerned say that the current situation of the market is not reassuring to the investors.
About Tk 7,440 crores were traded in DSE in 5 days last week. An average of Tk 1,488 crore was transacted daily. Tk 8,475 crores were traded in 5 days last week. An average of Tk 1,695 crore was transacted daily. According to this last week the transaction decreased by Tk 1,035 crores.
The average daily transaction has decreased by Tk 207 crore. As a percentage, which is 12.21 percent. The DSE Broad Index fell by 37 points to 6,336 points during the reporting period. Among them, the share prices of 73 companies increased, 309 companies decreased and 16 companies’ share prices remained unchanged. However, no shares of 11 companies were traded. At the beginning of last week, DSE’s market capitalization was Tk 7 lakh 72 thousand crore. By the end of the week, it had come down to Tk 7 lakh 66 thousand crores. According to this, the market capitalization has decreased by Tk 6 thousand crores.