Dhaka, Bangladesh
Stock market revival and NPL remedy seen interlinked

Stock market revival and NPL remedy seen interlinked

Banks for lending operating capital, bourses for long-term industrial funding, experts say

News Special: Offloading good shares and ensuring good governance in running the bourses are seen as a sine qua noon for resuscitating the shrinking stock market. And the health of the capital market is intertwined with that of the money market, which also seems in jitters under the weight of default loans. Such views are coming forth from economists and experts in the twin of capital market and money market amid flurries of discussions on the two sides of fund supply for trade and commerce and industry because of problems with both. Bangladesh's premier bourse-Dhaka Stock Exchange or DSE-has been on a seesaw-type volatility over the whole period of the current calendar year and on an unrelenting downturn in the new fiscal year so far. Chattogram Stock Exchange (CSE) is no or little exception, as trading patterns and turnovers show. Analysts worry that the DSE capitalization came down to little over Tk 300 crore, as of Thursday, from around Tk 4,000 crore in the early period of 2019. They say the stock market had shown signs of modest recovery from the shocks of crash twice-in 1996 and 2010-11-following the burst of bubble. Starting with a base of 350 points, reports say, the share-price index of the DSE rose as high as 3,648.75 points on November 5, 1996. The following day it started falling and came down crashing to 462 points in May 1999. There had been a craze created among investors of all sizes as share prices of listed companies soared abnormally even by several hundred times before the crash. And the burst rendered millions of investors paupers. Another scam and crash followed. The 2010-11 share-market brouhaha was a period of instability from 2009 to 2011. The market went up 62% in 2009, and 83% in 2010, but then went down 10% in January 2011, and a further 30% in February 2011, reports say. A trend of recover is again upended. Prime Minister Sheikh Hasina, few days back, stressed the need for binging good securities in the bourses for bolstering the market and thereby diverting the pressure on banks. But both the wings of the capital market suffer from "liquidity crisis", reports say. Sources of good securities are sound state-owned enterprises, profitable corporate entities and multi-national companies or MNCs. "But all three are mostly shying away from offloading shares on the stock market," says one bourse analyst. Some economists term the recurrent scams and crashes 'con-trick' that erodes confidence of both companies who supply shares and investors or stock traders. "Confidence is what matters most in the capital market. And good governance by the market-regulator is imperative to keep confidence unshaken," says economist Dr Mohammad Helal. Latest indicators of the DSE showed prices of both good and bad shares falling. And economists smell something wrong. They wonder why condition of the capital market is so shabby when the economy is growing. "I don't think common investors have made any gain in the last one year," Dr Helal said in a media interview Thursday as the losers outnumbered the gainers in stock trading on the last trading day. Losing out on their investments in stocks, investors have continued their protests outside the DSE. They demanded shakeup in the regulatory body, besides other remedies. "I think compromise is there on enforcement of BSEC (Bangladesh Securities and Exchange Commission) rules. So investors' confidence is getting shaken," the Economics teacher said. Such a capital market cannot help the economy anyway, the experts said, calling for reforms and strong regulation of the market. They observe because of the capital-market situation even industrial and corporate borrowers turn to banks for long-term funds at high interest and eventually they default on repayment of loans, affecting both the enterprises and the lending banks. Banks are not for long-term funding of sunk capital-operating capital and funds for BMRE can be taken from banking sector while stock and bond markets are for industrial capital. Loads of defaulted loans, which turn into non-performing loans or NPL, are weighing down the banks concerned, some of which reportedly feel the crunch of liquidity. Swelling NPLs amount to over Tk 1.0-lakh crore while total stressed loans (including rescheduled and written-off credits) would run into Tk 2.0-lakh crore. As such, a package programme is felt urgent for streamlining both the capital market and the money market.

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