Finance Minister AFM Mustafa Kamal on Wednesday last reminded people investing in the stock market of a normal factor---risk. The finance minister was responding when newsmen asked a question about the continuous erosion in stock prices for the past few days.
An investor invests in stocks to earn profit. He or she may get it or count losses. This has been the norm for decades. Then why did Mr Kamal remind the investors of a very common and natural happening? Are not investors in the Bangladesh stock market aware of such a possibility?
Going by the behaviour of a section of so-called investors, one has reasons to believe that some people have not taken lessons from the collapse of the market in 1996 and 2010. These investors see the market as a place to earn profit only. They are a greedy bunch of people who want to be rich overnight. They usually step into a trap laid out by some crafty market manipulators.
Since the finance minister has talked about the risks involved in investing in the capital market, it might appear pertinent to see whether investing in the Bangladesh stock market is now risky or not.
According to the estimate of the Bangladesh Securities and Exchange Commission (BSEC), the domestic stock market is still risk-free. In the middle part of August last, the securities regulator allowed the TREC (Trading Right Entitlement Certificate) holders to offer loans to their clients at a ratio of 80:20, with DSE main index remaining below 8,000---the safe limit. Earlier, the cutoff line was set at 7,000 points for similar loan benefits.
The market was going up without any major interruption until the middle of the current month when the DSE main index crossed the 7,400-point mark. But the rise could not be sustained any further. The market saw a continuous decline for 10 straight sessions and the biggest fall--- 120.41 points--- was recorded on October 25 last. The market analysts said a section of investors have dumped their holdings fearing that the market would go down further. On October 26, the market went up slightly. This is a usual scene.
Why has the market got a major jolt before reaching the BSEC's safe limit of 8,000 points? Was it because of the declaration of dividends by some major listed issues or something else?
In the Bangladesh market, most investors put their money in stocks for capital gain. Dividend rates hardly attract them. Barring a few major local and multi-national companies, most listed issues offer dividends at unattractive rates. Then again, the annual return from quality issues is also low since they are overpriced. Thus, the non-availability of enough quality stocks remains a major obstacle to the proper growth of the Bangladesh capital market.
The incumbent BSEC chairperson has taken measures and organised programmes to buoy up the market since his appointment in May last year. The number of new listings has gone up in recent months, but foreign portfolio investment has not increased. The BSEC also could not stop the unusual rise in prices of many issues for no reason.
Questions are being asked whether the market is being allowed to choose its course independently. Conscious investors and market insiders often talk about the omnipresence of some powerful quarters, who, allegedly, are manipulating the market operations to meet their financial objectives. This could be just wild imagination. How can such forces engage in such a foul game after the two thrashings that the investors had received in 1996 and 2010? This is a question that might agitate minds of many.
