Bangladesh Bank (BB) has said coordinated initiatives should be taken to enhance the market capitalisation through the listing of companies having good fundamentals.
The BB laid emphasis on listing of fundamentally good companies in its monetary policy statement (MPS) unveiled on Wednesday for the fiscal year (FY) 2020-21.
"To enhance the market capitalisation, listing of quality companies, especially profitable state-owned and multinational entities, is required," said the MPS.
It said the securities regulator, merchant banks and stock exchanges should take coordinated initiatives to ensure the listing of good companies for enhancing the market capitalisation.
The bourses' market cap to GDP ratio still remains insignificant compared to that of other countries including neighbouring ones.
Criticising the low market cap to GDP ratio, experts repeatedly said the country's capital markets are not expanding in tandem with the growth of the economy.
The DSE's market cap to GDP ratio is only 12 per cent while the ratios of the neighbouring countries are up to 74 per cent.
In its MPS, the central bank said bringing quality IPOs (initial public offering), ensuring good governance, upgrading information technology, and disseminating/disclosing standard industry information is the vital policy priority for market development in the medium to longer term.
The MPS said the central bank across the countries adopt unprecedented easy monetary and prudential financial policies following the outbreak of COVID-19.
"..and the global market started to recover during H2FY20. With these positive policy supports and gradual normalcy in the economic activities, it is expected that the two stock exchanges in Bangladesh are likely to rebound in the coming months," said the MPS.
The central bank said despite favorable policy support by the BB and related regulatory bodies, falling prices and trade volume with much volatility continued in the capital market during H2FY20 due to investors' disquiet stemmed mainly from the COVID-19 pandemic compared to H1FY20.
The DSE broad index dropped 26.4 per cent in FY20 from the level of FY19. Daily turnover reduced significantly to Tk 3.8 billion from Tk 6.1 billion observed in FY19. Accordingly, the market capitalisation of the listed securities in both the bourses also declined.
While speaking the BB's market supportive measures, the MPS said the central bank is always proactive in working with the capital market regulators and other stakeholders to offer supportive policy initiatives.
To improve the liquidity condition, the central bank took several initiatives including relaxing the bank's exposure to the market and the creation of special fund worth Tk 2.0 billion by each bank.
The MPS also said the central bank paved the way of distributing dividend by the listed bank amid the COVID-19 pandemic.
"Besides, the government has taken a series of initiatives to increase the flow funds and institutional participation in the capital market along with allowing the investment of undisclosed money in the market," the central bank said in its MPS.
mufazzal.fe@gmail.com