BSEC: Doing well, more needs to be done

Country's stock market, much to the liking of the investors, is now bullish. Its performance, according to market analysts, was among the best in the world in August. Though the economy is still struggling to return to the pre-Covid pace, the key index of the Dhaka Stock Exchange (DSE) has recorded nearly 1000-point rise since the bourse resumed its operation on May 31 last. The uptrend of this key economic indicator is nothing surprising if it is seen in the context of developments in the global equity market.

Many south and southeast Asian markets are also witnessing a strong rally on the back of positive sentiment of the investors. The news about the arrival of vaccines against Covid-19 within a few months has raised hope among investors about an early start of the economic recovery. The pace of recovery of the equity market in Bangladesh might appear a little bit fast, but there are certain reasons behind it.

The prices of most stocks had hit the rock bottom in the absence of investors, both small and big. Even shares of companies with strong fundamentals went down to an unreasonably low level. Scams, unabated manipulation of share prices and lack of regulatory actions did largely contributed to the deep erosion in investors' confidence in the market. The market in the last two decades since its crash in 2010 could never come out of the woods. Its performance could never match with that of other major economic indicators during this period.

Among many plausible reasons for the ongoing bullish trend of the market, the reorganisation of the securities regulator and several initiatives taken by it and availability of sufficient investible liquidity could be considered the prime movers in this respect. Since its inception, the Bangladesh Securities and Exchange Commission (BSEC) has been more of a docile entity. Even two major crashes could not make it proactive. In a clear departure from the past, the present Commission, headed by a Dhaka University Professor, appears to be justifiably aggressive in its actions. Genuine stakeholders of the market have been appreciativeof its performance.

However, more needs to be done by the securities regulator to clear the Augean stable. The price movement of several non-performing issues in the ongoing bullish market does indicate the existence of some small-time manipulators. Undeniably, no stock market is fully perfect. Yet, the regulator and all concerned will have to put in their best efforts to discipline the market to the maximum possible extent. If that can be done, there will be no dearth of liquidity and investors under the prevailing circumstances.

The money market environment is very much favourable for greater flow of funds into the stock market. The highly unattractive deposit rates offered by banks and the cap on investment by individuals in the government's savings tools are enough to draw the people with investible funds towards the stock market. But, they will only feel confident to do so if they find that the stock market isbehaving rationally and the listed companies are strictly following the relevant rules and regulations faithfully. More importantly, the regulator must maintain hawkish attention to the quality of company financials.