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Gross irregularities in DSE cause depression in capital market
Experts in finance at a seminar yesterday blamed nonpayment of dividend and gross irregularities in stock exchange operations for erosion of investors' confidence, resulting in a chronic depression tn country's capital market, reports UNB.
All the efforts to develop the capital market might end up in futility unless the lost confidence is restored by bringing about transparency in stock market operations through overhauling and exhaustive reforms of regulatory mea-
sures. they cautioned.
Bangladesh Institute of Bank Management (BIBM) arranged the day-long seminar in its conference room for a deep look into the core of country's secondary market.
An exhaustive study on "Status of Capital Markel th Bangladesh" by three experts at BIBM, including its Director General AHM Nurul Islam Chowdhury, cited empirical evidences and said activeness and depth of Bangladesh's secondary market were at "very low level" compared to neigh-
bouring countries.
Turnover of stock as percentage of the market value of enlisted shares in Bangladesh is only 2.5 as on September 30 this year, revealing a low level of Investors' confidence in the capital market. The percentage is 86 in Korea and 63 in Bombay stock exchange.
According to the BIBM study, as many as 43 per cent of the companies listed with the Dhaka Stock Exchange (DSE) are not declaring dividends In 1992. And among the companies paying dividends.
62 per cent have declared dividends below 15 percent.
Dr Mozibur Rahman, a Deputy Secretary at the Ministry of Finance, said overcapitalisation of most investments In recent years had resulted In a dismal financial state of the companies. Quoting his reading of loan portfolio scena rio of banks and DFls, Rahman said at least 60 percent of the investments were overcapitalised.
The researchers also found frequent price manipulations and unreasonable speculation
as other major reasons for the loss of confidence.
Abu Ahmed, an eminent capital market specialist, said there were even incidents in DSE of companies vanishing avernight gobbling up investors' money altogether, and shareholders didn’t get justice from the authorities. He cited such a scandal when a company — Milon Tannery Limited — disappeared after selling stocks worth Tk 2 .17 crore.
Other paper writers were Controller of Capital Issues Mamun-ur-Rashid, Dhaka Uni-
versity Professor Dr Shamsul Haque, Deputy Secretary of the Finance Ministry Dr Moribur Rahman and former DSE Chairman Khurshid Alam.
Prof Abdullah Farouk conducted the seminar
Experts were unanimous In the view that there were enough demand of potential stocks but Investors, scared by dismal scenario In capital market, still prefer bank de posit for safety of their money
Many a bankers at the sent Inar said despite drastic re-
duction in interest rates in recent months, deposits in banks had not declined.
Many a speakers pointed out that apart from Ipw re sponsc from investors, meagre supply of potential securities had been another major reason retarding the growth of country’s stock market.
There arc about 2,000 public limited companies and 17,000 private limited ones registered with the Joint Stock Companies. But only 133 of them have been enlisted with DSE.
Dr Mozibur Rahman of Finance Ministry said equity ratio should be changed so that companies were discouraged to go to banks for finance. Speakers also suggested further cut In bank interest rates to push depositors Into risk-taking Investment.
Inefficient operations in the Dhaka Stock Exchange were vehemently criticised by many a speakers.
The seminar was told that out of 195 members, only 25-30 were active and. as a result, trading In the DSE had become Incompetitlve and manipulation of price become easier.
Abu Ahmed proposed a sec ond stock market In the coun try to make DSE accountable and transparent
Many a speakers accused Chartered Accountant (CA) firms of resorting to corrupt practice while performing audit, providing chances for price manipulation by companies.
The Controller of Capital Issues (CCI) said the proposed Securities Exchange Commission, a broad-baaed body to oversee the operations of capital market, was soon coming Into being. It. he hoped, would help faster reforms of the capital market