As of November 01, 2022, more than two hundred stocks were stuck at floor prices on the Dhaka Stock Exchange (DSE). The lack of investors’ confidence and other issues were cited by experts as the major reasons for this situation. Investors in the domestic share market lack confidence. But why?
Bangladesh Securities and Exchange Commission (BSEC) recently imposed the floor price restriction as the market was falling at a faster pace. That was a timely initiative taken by the securities regulator. That helped many investors avert heavy losses. When the share market collapsed in 2010, many investors turned paupers. Even one or two of them committed suicide. However, despite the elapse of a long time, many shares were still stuck at the floor prices. The brokerage houses were counting the cost, as they were not earning commission as expected, as the investors were not investing that much because of the lack of confidence. What can the authorities do in such a situation? They can enhance money flow into the market to restore the investor confidence. In doing so, they can involve the market makers. On the other hand, the companies concerned can buy back their shares stuck at the floor prices to get out of the woods.
Investing in the secondary market always involves risks. There are many investors who like to take the risks while others are risk-averse. A fair share of dividend can be a safe bet for the risk-averse investors. But there are many companies that come up with no dividend or even if they give the dividend, that is also a scanty amount. When the inflation rate is eight per cent, any dividend below that rate in no way is favourable for an investor. It has to be made clear that there are other good companies that are doling out good dividends.
It has been noticed that some companies have entered the market with good financial credentials. But after entering the market, they are not performing like before to the frustration of investors. They are reporting earnings per share (EPS) less than previously recorded. The authorities concerned should look into what ails these companies. How will the investors be benefited, if the companies do not grow? Why will investors take the risk, when only twenty per cent of them can gain?
The authorities should convince good companies to get listed on the stock exchanges. It has been reported that many companies do not want to go public, because in that case they will need to share information with the people, which raises their level of accountability. It cannot be any reason for not going public. If a company abides by the laws of the land, there cannot remain any question over its transparency and accountability. Rather, going public will add credence to quality of the company's products or services and earn it reputation.
A lot of improvement has taken place in the capital market over the years. Of late, an SME board has been launched, apart from introduction of the bond market. These have been done to diversify the market. The authorities should remain careful so that no vested interest group can do anything that erodes the confidence of the investors.
