The majority people are optimistic about the capital market in 2020 after two consecutive years of negative return and deterioration in investors' confidence, revealed a sentiment survey conducted by leading brokerage firm LankaBangla Securities.
A total of 47.8 percent of the 134 competent respondents of the "Bangladesh Capital Market Survey 2020" believe that the market may become moderately bullish this year.
Also, 57 percent are optimistic that the market will be better in 2020 than the previous year.
DSEX, the broad-based benchmark at the Dhaka Stock Exchange (DSE), fell more than by one-fourth over the years 2018 and 2019. It is in a recovery phase now.
Thirty-one percent of the respondents feel low interest rate policies will have a positive impact on the capital market.
The government is serious about limiting banks' lending rate within nine percent and deposit rate within six percent. Interest rate of post office savings tools has already been halved and is now limited within six percent.
The news – which came just after the central bank's policy support to increase banks' investment in the capital market – has already boosted market indices. DSEX jumped 175 points this week and closed at 4,740 on Tuesday.
The LankaBangla survey conducted in January also revealed that 39 percent of the respondents believe the DSEX will close above 5,000 on December 31 this year.
On the other hand, 58 percent believe market turnover will remain below 500 percent.
Twenty-nine percent hope that banking stocks will outperform other stocks in the secondary market. 17 percent are bullish on pharmaceuticals, 14 percent on fuel and power companies and 8.5 percent believe that textile stocks will return the most.
Forty-four percent of the respondents feel that the lack of investors' confidence, if not improved, will remain a major risk factor.
On the other hand, 41 percent said earnings performance of listed companies will influence the stock market in 2020.
A look back at 2019
In the survey, 67 percent opined that the capital market's performance in 2019 was really bad. 40 percent believe the market performance was bad because of decreased investors' confidence.
The most prominent feature of the market in 2019 was lack of investors' trust and confidence, said 64 percent of the respondents.
About foreign investment, 22 percent said currency risk is the main reason behind foreign investors' low participation in the market.
Also, 19 percent mentioned lack of corporate governance in listed companies while 14 percent said regulatory weakness is the main factor that foreigners do not like.
Over 52 percent of the respondents said they used midterm stock investment strategy in 2019.
Eighty percent believe competent equity research publications under strict regulatory supervision will help improve investment decision-making.
Seventy-nine percent said most traders working at brokerage firms lack financial education to make knowledge-based investment decisions.
Governance, integrity level
Sixty-one percent of the respondents said integrity level in the local market was poor in 2019, and 50 percent believe this will improve in 2020.
To improve investors' trust in 2020, the most necessary measure will be to improve the transparency of financial reporting and other corporate disclosures, said 42 percent of the respondents.
On the same issue, 20 percent mentioned enforcing existing laws and regulations properly and 19 percent stressed improved corporate governance practices.
Forty-one percent think that market fraud and manipulation will be the most critical ethical issue the capital market will face in 2020. 32 percent are worried about integrity of financial reporting while 15 percent are tense about unethical market trading practices.
Fifty-five percent said demutualisation failed to make the market more transparent and vibrant.
Forty-six percent of the respondents believe that the capital market of Bangladesh is too immature to absorb derivatives.
Sixty-four percent believe that Chinese strategic partnership with the DSE will help boost the market scenario, while 33 percent said the opposite.
SME Exchange will not encourage quality initial public offerings, said 41 percent of the respondents.
Seventy-seven percent said development of the secondary bond market will help boost the stock market as well.
Seventy-third percent said internet-based trading has boosted the market's transaction volume.
Forty-seven percent believe the Bangladesh Securities and Exchange Commission has capacity constrains as the market regulator.