Restoring Investor Confidence in the Stock Market: A Major Challenge.
The country’s stock market continues to face significant instability, marked by declining prices and reduced transaction volumes. Despite various initiatives to stabilize the market, restoring investor confidence remains a critical challenge.
Challenges in the Current Market
Recent government measures, including a reduction in the tax rate on capital gains and a Tk 3,000 crore government-backed loan to the Investment Corporation of Bangladesh (ICB), have not sparked the expected optimism. Market participants report widespread hesitation among small, medium, and large investors, with many exiting the market to cut losses rather than reinvesting.
The daily downturn has become a source of frustration for investors, many of whom had hoped for better market performance following political changes in August. Instead, a climate of uncertainty and withdrawal prevails.
Expert Opinions on Investor Confidence
- Economic Factors:
Professor Abu Ahmed, Chairman of ICB, points to high interest rates as a deterrent. “Investors are opting for safer alternatives like bank deposits and treasury bills, which yield 10–12% returns. Without lowering these rates, the stock market will struggle to regain momentum,” he explained. - Market Instability and Manipulation:
Financial advisor Dr. Salehuddin Ahmed cited regulatory weaknesses and market manipulation as key contributors to the crisis. “Investors often purchase shares of undervalued companies, only to see prices collapse. The lack of effective oversight amplifies these risks,” he noted. - Structural Weaknesses:
Saiful Islam, President of the DSE Brokers Association (DBA), highlighted the scarcity of quality shares in the market. “Introducing new, strong shares and increasing transparency are essential to rebuilding trust,” he emphasized.
Recent Market Performance
On Sunday, both the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) experienced declines:
- DSEX (Main Index): Dropped 25 points to 5,196.
- Transaction Volume: Decreased by Tk 22.68 crore from the previous day.
- CASPI (CSE Index): Fell by 54 points, with low trading activity reported.
The lack of market activity has further exacerbated concerns, with Orion Infusion, Robi, and Central Insurance being the few actively traded stocks.
The Road Ahead
Restoring investor confidence will require comprehensive reforms:
- Reducing Interest Rates: Lowering deposit rates to divert funds back into the stock market.
- Regulatory Strengthening: Enhancing oversight to prevent manipulation and improve transparency.
- Quality Stock Introduction: Bringing high-potential companies to the market to attract investors.
Neighboring countries like Sri Lanka and Pakistan have successfully revived their stock markets despite economic crises. Experts believe that with the right policies, Bangladesh can achieve similar outcomes.
Restoring trust will not happen overnight, but coordinated efforts between regulators, market participants, and the government can pave the way for a more stable and vibrant stock market.
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