‘Absence of proper valuation discourages large companies to get listed with stock market’

There are many good companies in Bangladesh that are doing businesses with good reputation. However, these companies are not willing to get listed with the stock exchanges due to a lack of proper valuation.

Speakers said this in a discussion programme styled "Capital Market and Covid-19: Charting Impact and Path to Recovery" the Chittagong Stock Exchange (CSE) on Saturday.

Professor Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission attended the discussion as the chief guest, while Asif Ibrahim, chairman of the CSE, presided over it.

Mamun Ur Rashid, managing director of the CSE, presented the keynote paper at the event.

Nihad Kabir, president of Metropolitan Chamber of Commerce and Industry (MCCI) referred to a lack of proper valuation in pricing the shares in the stock market saying, "We observe that poor and loosing companies' share prices increase gradually, but the share prices of good companies having strong fundamentals do not see such moves."

Foreign investment institutions in their valuation statements mentioned that they found only seven to eight companies out of 321 listed with our stock exchanges suitable for long term investment, she mentioned, adding, "This is a great shame for us."

We should work jointly for listing good companies into the stock market. In this regard we can form a joint committee, she added.

Azam J Chowdhury, president of Bangladesh Association of Publicly Listed Companies, and CSE Chairman Asif Ibrahim also endorsed this opinion. They said listing of good companies will boost investors' confidence.

Other speakers also stressed the need for necessary measures to make sure that companies with poor fundamentals cannot get listed with the stock market. 

They also said that the stock exchanges have to form new investment instruments like bond, derivatives, SME and green field companies immediately.

Commenting on this issue, BSEC Chairman Shibli Rubayat Ul Islam said, "We are working to list good companies. Walton is in the process to get listed and Robi also is in the pipeline. Stock market investors will be benefited once these companies get listed with the market."

"To ease the public issue process we are going to introduce an online platform for submitting documents," he added.

Some speakers at the seminar claimed that regulatory interference on stock exchange trading is very harmful for long-term investment. The BSEC needs to stop this practice, they added.

Nihad Kabir said foreign investors have criticised the practice of regulatory interference.

Selim R Hossain said controlling the index is not the job of the regulator. "Now the floor price mechanism is going on, which should be removed. Otherwise, institutional investors are not willing to invest in floor price," added.
The BSEC chairman, however, said the regulator has never intervened in share transactions. "We just monitor daily trading. Action is taken only when there are any irregularities."

Liquidity crisis

Several speakers claimed that the stock market faces low transactions due to the liquidity crisis.

They said mutual funds must be increased in the market. 

Now, mutual funds' contribution is less than 1 percent of the market capital. It should be above 10 percent, said Md Abul Hossain, managing director of Investment Corporation of Bangladesh.

On the other hand, the CSE sought to turn on script knitting to enhance the institutional ability.

Selim R Hossain said stocks need to run by institutional investors. But, in our country they are inactive in the market, he added.

Nihad Kabir said, "Our stock market depends on retail and individual investors. But most of the country's stock exchange depends on institutional investors."

In this regard, BSEC chairman Shibli Rubayat Ul Islam said 13 banks are ready to invest from the Bangladesh Bank stimulus package. Other banks also should come forward. 
"But there are some conditions on using a stimulus package. The BSEC has sought relaxation of the conditions."

He further said that they are considering turning on script knitting urgently.

Enhancement IT support

Stock exchanges were closed for more than two months due to the coronavirus outbreak. But in most countries of the world stock exchanges did not close during the pandemic period.

Selim R Hossain said the stock market should not close in any situation, because it is very important for the country's economy.

Kazi Sanaul Haque, managing director of Dhaka Stock Exchange said, "We are working to upgrade our digital platform for share trading. Now we are working for opening beneficiary owners accounts through a digital platform."

The BSEC chairman said they are going to appoint a foreign firm to upgrade the digital platform.

Encouraging foreign investors

According to the CSE keynote paper, the stock market has $2.20 billion investment from foreign investors.

The CSE managing director said, "We should encourage foreign investors to make more investment in the stock market."

The BSEC chairman endorsed this opinion. He, however, said the commission will allow foreign investment only for long term.