Surely the odds will phase out but the even will stand out in Bangladesh capital market

Wall Street (NYSE) is the heart of Manhattan, NY, USA - we all know that, right? I believe that in the long run Dhaka Stock Exchange (DSE), only with proper regulations, has the same potential to be the heart of Bangladesh. The index and the dailies say different stories, I know. But the prospects of the Bangladesh Capital market are hard to deny. A country’s capital market usually consists of different financial instruments. To name a few, equity (stocks), debt instruments, fixed income securities, options, swaps and derivatives. In the context of Bangladesh, most of these instruments are still untapped. 

The lion’s portion of Bangladesh Capital Market is still consisting of Plain Vanilla Instrument- the basic or standard version of financial assets such as Securities. Even the number of equity products that are available at the market is quite limited. Almost 80% of the companies from the Financial Industry (Banks and NBFIs) are enlisted in the capital market but the other booming sectors do not display the same scenario. If we take a look at the growing FMCG sector, there are many companies yet to get enlisted. For instance, the hot cake ‘Unilever’ from FMCG or ‘Standard Chartered Bank’ from banking sector. If these kinds of exciting companies get listed with the regulatory changes, the scenario will be much better. Fixed Income Securities have a huge gap to bridge yet.  Undoubtedly, Bangladesh capital market has huge growth opportunities to date. By introducing derivative instruments or establishing a proper bond market, the opportunities can be tapped. However, the market has to be matured enough to embrace the changes. 

In effect, the 90% of Bangladesh debt market is covered by banks. Here, merchant banks, being the capital market institute, have much to contribute to this particular segments. Going forward, Bangladesh will witness mergers and acquisitions. In that case, merchant banks, fund managers, venture capitalists can contribute in a big way. Our capital market can significantly contribute to achieving the GDP growth rate of 8% if the institutional infrastructures can be preserved and promoted in the right way to the investors. Historically, the capital markets of the different countries have been witnessed to play a larger role in the capital formation of the economy. 

A century younger Dhaka bourse (compared to neighbor Bombay Stock Exchange) has much to adopt and change. The formal regulatory body formed in post 2000s and the prime bourse, itself, established in mid 1980s. At the early stage, market faces several kinds of anomalies and inefficiency.

Bangladesh’s investors’ knowledge depth and breadth is still thinner. Almost 55% of the total investors can be categorized as the financially illiterate. BSEC and DSE are organizing many financial literacy programs yet these are not suffice to the need.Bad corporate governance of the listed companies, market sentiment, irrational behavior of the investors and moreover the less liquidity of the instruments lead to market instability. Trading in bond market falls into unusual tax bracket. The regulatory body is working on it to reduce it. 

I believe, our youth has a huge role to play. With their fresh and dynamic mindsets along with talents, they can work to reduce the inefficiency and anomalies of the market. In fact, every individual has a direct or indirect role to play here. The wide spread prospects explored by the ethical and youthful mindset is the only ingredient to the make an efficient capital market. 

Young entreprenures and energertic executives are entering into the workforce. They are already contributing the development of the capital market sector and changing an institutional infrastructure. It is already seeing the transformation that young executives are pouring into it. Slowly but surely the odds will phase out but the even will stand out in Bangladesh capital market.  

Md. Tareq Ibrahim

CEO, CWT AMCL

(CWT AMCL. function as an Asset Management Company, focused and committed on delivering cutting edge asset and wealth management solutions to individual and institutional investors.)