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2014: LOOKING BACK

For stocks, it was the year of comeback

Sarwar A Chowdhury
In history, 2014 will go down as the year that the stockmarket shook off the after-effects of the price crash of 2011 and set off on a path to stability and progress.
“The market has stabilised at a positive level," said Faruq Ahmad Siddiqi, a market expert and a former chairman of the Bangladesh Securities and Exchange Commission (BSEC).
The indicators, too, suggest so, and not least, the returning investor confidence, which plunged to almost zero after the crash.
Between January 1 and December 28, DSEX, the benchmark index of the Dhaka Stock Exchange, rose 12 percent to close at 4,801 points. Market capitalisation stood at He 322,254 crore, a 21 percent rise from the previous year.
The daily turnover, an important gauge, stood at Tk 506 crore on average, up 26.5 percent year-on-year.
Foreign investment saw 23 per-
cent growth up to November, which indicates that the capital market is being viewed as a viable investment destination.
"This year we have learnt that investors are making more informed decisions than ever before, proven by the increase in market capitalisation of fundamentally strong stocks and are less speculative than before," Kh Asadul Islam, managing director of Alliance Capital Asset Management Company, said.
Siddiqi said investor confidence has not come back completely, as institutional investors such as merchant banks and asset management companies are yet to jump into the market wholeheartedly.
The reason is, the financial services sector is still suffering from the overleveraging and financial indiscipline caused by the 2011's stock market crash, according to Islam.
"The complete recovery of the market will not happen unless the institutional investors go all in,”
the former BSEC chairman added.
Akter Hossain Sannamat, managing director of Union Capital, said the year started on a good note but the momentum petered out towards the end.
He blamed too many initial public offerings and the banks'
readjustment of their stockmarket exposure for the year falling short of its potential. "There was too much supply, while the demand was lukewarm,” he added.
During the year, 17 new securities were listed on the DSE, which raised around Tk 1,000 crore. With the inclusion of the new securities, the total number of listed securities on the DSE stood at 547.
On the oversight level, the BSEC and Bangladesh Bank were seen to be strengthened, empowered and independent. The former regulated the capital market and the latter the money market, thus ensuring the development and smooth operation ofboth.
One of BSEC's main focuses was strengthening the enforcement activities, its Commissioner Arif Khan said.
In line with this, the regulator took actions against the issuer companies, the issue managers and the auditors for their wrong doings. A new trading system, replacing the 16-year-old one, was introduced toward the end of the year, opening a window for a paradigm shift and has enhanced efficiency, transparency and technological integration.
The surveillance and development of the market is a continuous process and the regulator will maintain it in the coming years too, so that the investors get back their confidence in the market, he added.
"We have seen successes in 2014, but there is still much to do. There is no room for complacency, " Islam said.
It is more important than ever before to emphasise better corporate governance to
overcome the indiscipline that has previously plagued the economy and resulted in so many scandals, he said.
With only 10 percent of the public limited companies listed on the stock exchanges and regulated by the BSEC, good governance must be enforced in non-listed companies as well.
"Furthermore, as an equities-based market, we desperately need to introduce options, derivatives and future markets to hedge riskiness and volatility as in our peer countries."
The financial services industry also needs more trained, young professionals who can change the existing, old-fashioned mindset, the Alliance Capital chief added.