Tax benefits can be increased for local big business groups to encourage them to come to the stock market, said the merchant bankers.
Currently, there is a general gap of 10 percentage points in corporate tax among listed and non-listed companies. However, there is no value-added tax (VAT) rebate for the listed ones.
The capital market requires strict compliance for ensuring transparency and accountability. And so businesses are reluctant to get listed, analysts have said.
Widening the corporate tax benefit alongside introducing a rebate in VAT for listed companies will help attract reputed large companies to the stock market, the Bangladesh Merchant Bankers Association (BMBA) has claimed.
At a press conference in the capital on Saturday, BMBA President Md Sayadur Rahman said, "We need to bring multinational and renowned local companies to the capital market to make it vibrant."
Talking to The Business Standard, the investment banker said successful and reputed business houses were offered the opportunity to be part of the listing process. But in most cases the response was negative.
The BMBA appreciated the central bank's policy to allow each bank to build a Tk200 crore special fund for capital market investment. The amount will not be included in a bank's capital market exposure limit.
The association also thanked policymakers, including the prime minister, for understanding the capital market situation.
"There has been a lack of money flow to the capital market. We hope the offered concessional loans to banks and market intermediaries will help overcome the problem," said Sayadur.
The DSEX, the key benchmark at the Dhaka Stock Exchange, lost over one-fourth in 2018 and 2019. In 2020, it is struggling to avert a further slide below the 4,000 level.
The Prime Minister's Office recently instructed the authorities concerned to take measures for strengthening institutional investors to make sure that better companies come to the market and the investors' confidence is restored.
There are serious allegations of listing poorly performing businesses that have caused harm to the market. The BMBA suggested increasing the supply of primary shares to prevent overpricing.
Unusually high prices at debut attract many investors into engaging in the initial public offering (IPO) hunting. Rational pricing will normalise their expectations and prevent irregularities in the market of new shares.
A company has to disclose and comply with many issues for coming to the stock market. So, the BMBA sought a specific opinion from experts and investors on how the process of listing can be improved.
To take the market to its desired destination, Sayadur called for the increased participation of institutional investors, including the Investment Corporation of Bangladesh.
The new leadership of the BMBA will work on improving governance, better disclosures, and financial reporting to enhance investors' confidence.
"We will work with the audit bodies, government offices, capital market stakeholders, potential issuers, and of course, investors regularly," said Sayadur.
The association plans to arrange at least one seminar with local stakeholders every six months and with international ones every year.