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Political will, media role key to boosting stock market

Speakers say as regional seminar on capital market concludes

Star Business Report
As the pace of stock market growth In Bangladesh is very slow compared to that of other countries in the region, political will, harmonisation of regulations and role of media are key to developing the market, speakers said at a high-profile regional seminar that concluded yesterdav in Dhaka.
The arkets in the region are conth g to improve such fundamenta. factors as shareholder protection and the standard of legal and regulatory framework to ensure transparent and efficient markets, they told the two-day seminar titled 'Capital Market Development: Asian Experiences'.
International Chamber of Commerce-Bangladesh (ICC-B) organised the seminar at Dhaka Sheraton Hotel.
The speakers made the observations at the seminar's third session titled 'Country Experiences, Foreign Investment, Share Pricing and Role of Media' with Mirza Azizul Islam, chairman of Securities and Exchange Commission (SEC) of Bangladesh, inthechair.
Presenting a paper tided- 'Price Behaviour and theSecurities Market of Bangladesh', Salahuddin Ahmed Khan, chief executive officer (CEO) of the Dhaka Stock Exchange, said Bangladesh's capital market vis-i-vis its securities market is still not properly developed.
Low volume of trade or thin market base. poor, market institu-tions and limited Investment options or instruments are the major setbacks in developing the
market, he observed.
He said the major financial market indicators show weak fundamentals in the country's securities market including 39 percent financial deepening rado, 5.8 percent market capitalisadon to GDP ratio. 7.98 percent market capitalisadon to turn over ratio and 17.7 percent private sector credit to market capitalisation rado.
"IPO flow in Bangladesh has no specific pattern. Number of inidal public offerings (IPOs) and rate of economic growth have no significant correlation. IPO price offer is still not based on market foundation and hence existence of flipping is high," he condnued.
The securides market is yet to forward significantly in terms of its price behaviour, which can significantly be improved if market attains dep th and resiliency, he added.
In his presentation titled 'Cross Border Listings and South Asian Markets', Wali-uI-Maroof Madn, CEO of Chittagong Stock Exchange, said for the Issuers, cross border listing increases liquidity, enlarges investor base and creates opportu-nityofraising new capital.
On the other hand, he said, compliance with the legal requirements of multiple regulators and increased cost through duplication of reporting are the disadvantages of cross border listing for the issuers.
For the investors, cross border listing creates greater investment opportunities and lowers transaction costs. It also helps the investors avoid the uncertainties of exchange rate fluctuations and diversify their portfolio to reduce risk, he said. "But, the interests of
investors may hot be adequately safeguarded in a cross border environment."
"Cross border listing has potential for greater inflow of capital, enhancing revenue generation and adding liquidity to secondary market. However, there is also a scope for outflow of capital and investment in the case of cross border listings," he added.
The market capitalisation of Bangladesh as percentage of GDP (gross domestic product) is only 5 percent while it is 50 percent in India, 30 percent in Pakistan and 20 percent in Sri Lanka, he told the seminar.
Presenting his paper titled ‘Capital Market and the Role of the Media', Mahfuz Anam. editor of The Daily Star, said if'free market' lies at the heart of capitalism then authentic information flow lies at the heart of the market, and authentic information can only be guaranteed by a free and independent media.
He said there are two types of role that n\edia can play in the development of the capital market -- 'information' and 'watchdog' roles.
Regarding 'information role', he said, media should report on how the capital market is generally performing and what the government's dny^o.day policies are. He also stressed the need for writing positive stories about good companies and exposing companies with bad performance record.
As a watchdog, medTa can constantly expose any malpractice within any company, report on the activities of the senior executives of the big players in the capital market
and report on overall performance ofinvestors.
If there are foreign investors in the domestic market then the global policies of those investors must be carefully studied to keep local investors fully informed about the formers' future plans, he suggested.
About 1996 stock market debacle. he said, the scam occurred right under the nose of the media. "Due to our lack of expertise we could not serve our readers and the domestic investors and reveal the 'bubble' nature of the situation. This can be termed as a major failure in giving timely warning to investors."
A country paper titled 'lapanese Economy and Securities Markets' was presented by Shunzo Kayanuma, head (Overseas Relations) of Global Business Development of Tokyo Stock Exchange Inc, at the seminar.
Besides, SweeTian, president of Singapore Exchange, presented a paper titled 'Foreign Private Investment through Capital Market' while Md Nor Ahmed, chief regulatory officer of Bursa Malaysia Berhad, presented another paper titled 'Market Consolidation and Demutualisation: Malaysia Experience'.
Mohammad Yasin Lakhani, chairman of Karachi Stock Exchange (Guarantee) Ltd, and Madhukar, member of Securities and Exchange Board of India, also presented two other papers titled 'Rules and Regulations of Valuation Methods: Buy-back of Shares' and 'IPOShare Pricing'.