Dhaka, Bangladesh (BBN) - The central bank of Bangladesh has suggested the authorities concerned for taking effective measures to increase the supply of securities for stabilizing the country’s stock market.
“As capital markets stabilize, medium and longer term reform measures will need to be taken to augment supply of new issues of securities by new entrants in 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 than raising equity by equity issues.
The Securities and Exchange Commission (SEC) has appreciated the BB’s latest move to stabilize the country’s capital market.
“The SEC is now working continuously to give approval to the companies, which had submitted applications earlier, for floating their initial public offering (IPO),” a SEC executive director said.
He also added the SEC has already asked the merchant banks for taking necessary measures to bring good performing companies for listing into the capital market.
“The commission is also working to amend the book building method in the connection,” the SEC executive added.
The BB’s latest observations came following the country’s stock market debacle, in terms of market capitalization of all the listed issues, leading to a sharp drop in its index, in past eight months.
The benchmark index of Dhaka Stock Exchange (DSE), the country's prime bourse, generally known as DGEN, came down to 6259.90 points on 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 quarters (Q3) of fiscal year 2010-11 (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 recognized as overheated, underwent sharp price correction in December 2010 and January 2011, and the market was in recovery and stabilization phase in Q3 FY11,” the BBQ added.
About liquidity situation, the BBQ said efforts for immediate improvements in market liquidity have also continued, including the Investment Corporation of Bangladesh (ICB) initiative of organizing a new Bangladesh Fund.
BBN/SSR/AD-07Aug11-6:45 pm (BST)
