Regulatory initiatives and incentives will influence the stock market the most in 2021, according to the majority of respondents in a survey.
They also said market fraud and manipulation would remain the most critical ethical issue that the capital market would face in 2021.
But they believe the capital market regulator has capacity constraints and the market with average integrity level and below average corporate governance would see improvements in integrity this year.
Most are expecting a bullish market at the end of the year.
A total of 130 persons from different backgrounds participated in the Bangladesh Capital Market Sentiment Survey 2021, conducted between 13 December last year and 13 January this year by top brokerage firm LankaBangla Securities.
The survey sought inputs from respondents hailing from various backgrounds to derive opinions against queries on last year's market performance, macroeconomic performances and expectations, general issues about the capital market, and expectations for investment avenues in 2021, especially the capital market.
About the economy
The majority of participants having thoughts on the economy and the capital market believe that GDP growth will be above 6% this year while increased remittance inflow, improved money market liquidity, and better growth of cheaper credit would help the economy do better.
But they also expect that increased inflation and appreciation of taka against the US dollar might be the factors to keep an eye on.
The majority consider lockdowns, a weak global economy, and crisis in the banking sector as the biggest challenges for the Bangladesh economy in 2021.
Capital market in 2020
The market performed average last year, concluding the majority of survey respondents. 41% said they grabbed mid-term investment strategies and less than 5% said they were investing for the long term.
Also, 63.1% opined that the 2020 market was affected by the chain impacts of the Covid-19 pandemic.
Participants also mentioned a lack of alternative investment opportunities, poor profitability, poor corporate disclosures, low foreign investors' participation, and banking sector woes had impacts on the market in 2020.
But the new regulations in the market will have positive impacts on the capital market in 2021, they said.
Outlook of 2021
The majority expect that the market will be bullish at the end of 2021 and the average daily turnover at the bourses will be Tk800 crore.
Equities as an asset class will outperform bonds, savings instruments, real estate, and also gold in terms of return, believe 43% of respondents.
Low investors' confidence, low GDP due to the pandemic, decrease in liquidity, intervention through frequent policy changes by different regulators, weak regulatory framework, and poor earnings and economic slowdown are considered risk factors for the market in 2021, according to respondents.
The survey found that investors are more bullish on pharmaceuticals, IT, telecom, bank, energy, and insurance sectors.
Also, pharmaceuticals, engineering, IT, bank, and telecommunication are the most sought-after sectors for initial public offerings in 2021.
On market development
The majority believe that the demutualisation of stock exchanges, engagement of Chinese strategic investors in the Dhaka Stock Exchange, building the central clearing company, and digitalisation of market infrastructure are all positive developments.
A large number opined that the literacy level is still insufficient for a good capital market, which also includes bonds and derivatives.