The Bangladesh Securities and Exchange Commission (BSEC) plans on attracting more investment by foreigners and non-resident Bangladeshis (NRBs) in order to make the country's capital market more vibrant.
To materialise this, the securities regulator is set to hold Capital Markets Roadshows in the United Arab Emirates capital Dubai to showcase investment prospects in Bangladesh for foreign investors and expatriate Bangladeshis.
This is the very first time that the commission has embarked on such an initiative.
Meanwhile, the commission is going to launch more new products in the capital market to reduce equity dependence. It said four such products – derivatives, green bonds, sukuk and exchange traded funds (ETFs) – coming soon.
Through the roadshows entitled "Rising of the Bengal Tiger: Potentials of Bangladesh Capital Markets Investors" to be held on 9-12 February, the BSEC will inform foreigners and NRBs of the new products and investment potentials in Bangladesh's capital market.
The commission thinks the present level of investment made by NRBs and foreigners in the capital market is very low and that if this investment is increased now, the depth of the capital market will increase as well as become more dynamic.
Only 6% of beneficiary owners' accounts in the current stock market are owned by NRBs and foreigners and most of these are individual accounts.
The commission recently issued a policy on opening digital booths to ease foreign investment in the capital market. With the opening of digital booths abroad, foreigners and NRBs will be able to easily invest in the capital market of Bangladesh. This will increase the flow of foreign money in the capital.
The commission also wants to turn remittances sent home by NRBs into investments, in which case the capital market could be a good place.
An official of the commission said money remitted by expatriates is used to build houses in most cases. "But if it is converted into investment, their source of income will increase. The commission is emphasising that."
Explaining the purpose of holding roadshows in foreign countries, BSEC Chairman Shibli Rubaiyat Ul Islam told The Business Standard, "Many NRBs don't come to the capital market. They are not aware of the investment prospects of remittances in the capital market. For this reason, they will be encouraged to invest."
First initiative of its kind
Around 28 years into its establishment, the BSEC for the first time is taking an initiative to attract foreign and expatriate Bangladeshis to the capital market, highlighting the image of the country's capital market abroad.
Commission officials said the global investment climate has shrunk because of Covid-19 but, compared to other countries, the economic condition of Bangladesh is in a better position. In this situation, there is potential for
NRBs and foreign citizens to invest here, they believe.
China's Shanghai Stock Exchange and Shenzhen Stock Exchange invested in Dhaka Stock Exchange in 2019 as strategic partners. The DSE authorities visited the two stock exchanges in China after getting them as strategic partners.
Usually, a company organises roadshows to raise capital from the capital market. However, this time the stock regulator will hold such events to provide NRBs and foreigners with detailed ideas, possibilities and new products about the capital market in Bangladesh.
A roadshow is a sales pitch or promotion made by the underwriting firm and a company's management team to potential investors before going public.
When a company decides to go public, it presents investment opportunities to investors through roadshows.
According to BSEC Executive Director Mahbub Alam, "Investment has declined all over the world due to Covid-19, but investment opportunities have been created in Bangladesh. The roadshows will encourage foreigners and NRBs to make use of investment prospects here."
Four new products
At present, equity dependence is high in the capital market. There are also bonds and mutual products. Even though investments are being made in mutual funds considering them a safe investment, the bond market is not dynamic despite the fact that bonds are popular products in the capital markets of different countries of the world.
Even if various private entrepreneurs raise capital from the country's capital market through issuing bonds, they are not traded in the secondary market. The commission is making various efforts to mobilise bonds.
Last year, the commission also approved the issuance of bonds worth more than Tk6,000 crore, including that of a multinational company. There are more bonds in the pipeline.
In 2019, the BSEC formulated Sukuk Investment and Derivatives Rules. The commission is planning to introduce bond transactions in the Alternative Trading Board. The commission is also working on the formulation of Green Bond and Exchange Traded Fund (ETF) rules.
The commission thinks diversification of products in the capital market will increase the participation of investors. The amount of investment will also increase. Entrepreneurs in the industrial sector will also come to the capital market to raise long-term capital.