The year 2015, especially the last few months of the year, was dull. Contrary to investors' expectation, the market behaved negatively.
The outgoing financial year of 2015 saw some positive steps taken by the government and the regulator. Corporate income tax for the listed companies was reduced, and rules for new public issue and also for the Mutual Funds were issued. The latter two steps were amendments of the existing rules in this respect. The amended rules are much improved over the old ones as far as the investors' interest is concerned. It was expected that the immediate effect of the amended rules would be a rise in stock prices but, to the dismay of investors, that did not happen. Neither the price of stocks, nor that of Mutual Funds went up. The investors now hope to get the results of these two amended regulatory orders in 2016.
The year 2015 was good for the stock market in some other ways. The short- and long-term interest rates came down in that year. The depositors' rates, which are deemed to be competitors of stocks' prices, were much below the double-digit figures that had been above double digits throughout the previous two years of 2013 and 2014.
As far as the tax structure for the stock market is concerned, it was already in place favouring the stock investors' interest. But additional steps in this case should be taken to help a continuous growth of the stock market.
There is no good explanation why the stock market was dull in 2015 in spite of incentives and a relatively better corporate governance. One reason may be that more stocks from the initial public offerings (IPOs) and bonus issuances, compared to the rise in the commensurate demand, were added to the market. One bad sign with the stock market in 2015 was that, of more than one and a half dozen IPOs the regulator permitted in this period, very few could meet investors' expectation as they were not quality stocks by any judgement. Most of the IPOs proved to be junk stocks within a few months of their floatation. They lost values beyond belief within a few months of their debuts on the secondary market.
The last multinational company that was listed with the Dhaka bourse was the GP (Grameenphone) in 2009. Since then, no other multinational company came on their own for listing, nor was any serious attempt made by the government to bring any of the multinational companies to the market. Many foreign-owned companies are doing big businesses in Bangladesh, but they are not coming for stock market listing. Stock market builds up not by the number of companies listed with it, but by the number of quality stocks the listed companies provide for investors' investment.
In Bangladesh, we take a deep sigh when we see a slide in stock prices, but we hardly ask the question how many good stocks we have in the market worth for long-term investment. Recently, high-ups in the government talked about bringing the foreign-owned multinational companies to stock market listing, but talking and getting it done are different things. In Bangladesh, we only talk but do not act accordingly. It is hoped that this time government functionaries, including concerned regulator, will be serious with their job of bringing quality stocks, including those from the multinational companies, to the market. The market situation cannot be improved in 2016 unless quality stocks are supplied to the market for long-term investment by the investors.
As far as the price level that is measured by Price-to-Earnings Ratio or p/e (x), the market is worth to have a look from the investors for investment purpose. The yield rate from the investment in this market is very much competitive with the same from the other areas of investments in the economy. The government has already reduced the interest on savings instruments. So, one good area the investors should take sincerely for investment consideration is the stock market. With the market's p/e (x) hovering around 16, this market, in spite of its other shortcomings, is worth consideration by the investors. The year 2016 should not be a worse year compared to the outgoing year. One may rather expect, it will be a better year with a regained confidence in the market and the investors staying there for a longer period. If some quality stocks come along in the market, the year 2016 will definitely be a bright, if not a defining, year for the Bangladesh stock market.
How much stock market glitters in 2016 will depend on what happens to the economy as a whole. If the macroeconomic indicators, like a better than expected GDP (gross domestic product) growth rate, expected increase in export and remittances and an uptrend in private investment rate happen, then the stock market will hopefully go investors' way in 2016.
The writer is Professor of Economics at the University of Dhaka.