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Saturday, June 4, 2016, Jaistha 21, 1423 BS, Shaban 27, 1437 Hijri

Share Market
Protecting the investors
Kaushik Ahmed
Published :Saturday, 4 June, 2016,  Time : 12:00 AM  View Count : 73
During early '90s, Bangladeshi citizens who were deprived of employment opportunity and wanted to do some sort of business received a huge opportunity in the form of Stock Market or commonly known as share market. Many people rushed to invest at Dhaka Stock Exchange and very soon the business of securities exchange became a very prominent sector. Thousands of investors were able to pull handsome amount of profit from this business as many were able to establish themselves in the society only working in the area. But the scenario did not sustained to be this much pleasant.
In mid '90s, specifically in 1996, investors first realized that the securities market was not only a bed of roses but it had many flaws which needed to be addressed. While understanding this fact, many investors were hit hard with major loss of capital investments. Most of them could not sustain the losses and left the market with an empty pocket as well as an empty heart. Later, the government had taken some steps to digitalize the stock market. And slowly, the market recovered. With the start of the new millennium, we observed a huge number of people rushing to the stock market business. Most of them belonged to middle or lower middle income group without almost any industry knowledge and in cases, no education at all. People had the concept that money flew in the stock market and they associated all their dreams with this business. Initially, they made a good profit. Rather than collecting the profit from the market, they made further and further investment even selling their ancestral properties. Moreover, the brokerage houses and merchant banks additionally provided margin loans, which later proved to be another destructive tool for the general investors. Everything was going fine but suddenly the market collapsed at the end of 2009 and continued with the declining trend throughout 2010 and 2011. A large number of investors were completely ruined and many were financially hit so badly that they could not recover till now.
Looking back at the history of stock exchange in Bangladesh, we will find that it has made negative impact on general investors time and again. Gamblers, listed companies and some influential institutions were benefited but the loss was completely on investors' end. The government took several steps but that did not help general investors that much. Rather, that closed the opportunity to draw significant profit for the company. But that is not the case for the companies who are listed or willing to be listed or even for the merchant banks.
There exist several regulatory authorities who monitor, control and regulate the stock exchange and its operations directly or indirectly. The main regulatory authority is Bangladesh Securities and Exchange Commission (BSEC). Other than that, Bangladesh Bank and Ministry of Finance also play an indirect regulatory role. These institutions are supposed to work for securing general investors' interests. In spite of their strong existence, it seems they play a very small role for general investors.
When we enter the website of Dhaka Stock Exchange (DSE) or Chittagong Stock Exchange (CSE) or BSEC, we find a notification addressing the investors regarding the risk associated with investment in securities market. It says something like; "Investing in share market is risky. Invest carefully." It is a way of saying "Look before you leap." This notification sounds like the cautionary note on the packet of cigarettes: "Smoking causes cancer" or "Smoking can cause death," whereas the manufacturer or the caution-provider tries to only offset their liabilities to the harm of the users? Will investors keep losing in the market?
A company gets enlisted in the market to generate funds for the expansion or development of their business. The funds are mostly generated from general investors, making them entitled to the profit or loss of the company in business. The regulatory authorities are liable to checking the background of these companies before they are enlisted. They need to check if the company is performing legitimate business, if the accounts and financial data of the company is accurate and maintained in a transparent way, if the company have enough assets or earnings to back up for the investment of new investors etc. After checking all these facts and figures a company is supposed to get the final permission to be listed.
For years, we have seen companies, with no actual financial strength, got enlisted in the market. A few of them were listed with very high premium and swept the investors' money away. The companies initially came to the market with a boom but could not sustain the hype and lost its value drastically in the market. The investors could not get a return from the market as the company did not declare dividend, could not draw profit and declared a negative Net Asset Value. The investors had no other way but to look at the dropping price of their company's shares.
Md Jamirul Hoque, a long-time investor at the securities market, has been the witness of several ups and downs at Dhaka Stock Exchange. He said, "Since 1990s, the stock market has faced 3-4 major storms which have taken the money away from the investors. Each time, after an analysis has been done, some policy faults of DSE or the regulators have been identified. Many investors were ruined; few even committed suicide losing everything and the authorities looked for excuses. Still there is fault in policy and the system still exists and the market in recent times is behaving like an economy at depression."
He also opined, "To improve the national economy, the government should put more focus on the welfare of the securities market. The market must be made more investment friendly and the investors should be provided with honest, transparent and hassle-free investment environment. Otherwise, it is very tough for the old investors, who are still in the market, to cover their losses and for the new investors to bring any meaningful return on their investments."
From the start of this year, we have observed an unusual depression in the market. The index kept declining to an alarming position, although for last few days it has performed slightly better. The market reacted a lot to the negative news and reacted low to the positive ones. Movements could not be anticipated with technical or financial analysis. And ultimately, the general investors were heart-broken. One noticeable thing was the enlistment of several companies during first five months of the year. IPO kept coming continuously and consumed huge fund from the investors. But none of these listed company initially performed even close to the anticipation of the investors. Now, with all our economic standards flying high, what is it holding the market down? The government should give attention here.
We could have spoken about different sectors but rather will put our focus on banking sector only. The banking sector is performing very low. There are several rumours of policy reform and government's scrutiny over the banks and anti-money laundering policies, which are several times mentioned as the reason behind poor performance of this sector. But what is the look and feel of these banks?
The top management of banks is still getting highest salary of the country (maybe the highest among many countries), bankers are also drawing a very handsome amount, banks are increasing their spending on CSR and branding, millions of taka is unpaid loans sanctioned mysteriously but the banks are still hiring and maintaining their standard. The owner directors are also having a lavish life if not linked with an exposed corruption. Everything is going fine and the general investors are the ones who are paying for whatever is not going fine. General investors are owners too but they do not have any decision making power. They have to count their profits after all misspending of the company. Moreover, they are never shared with the actual profit. If they had been, the dividend payout would have been much higher. After the adjustment of face value (a policy reform of stock market), the dividend provided by the banks this year does not put any significant value. For example, One Bank Ltd provided 25% dividend this year (12.5% Cash and 12.5% Bonus Shares), a gain value of Tk 2.5 against the face value of Tk 10. But the price was adjusted in the market as such that the investors lost Tk 2 after the adjustment. So, this sort of dividend is not helping the investors at all. Many companies are suddenly declaring no dividend like many insurance companies this year. But the reason behind it is not clear to the investors. On top of the dividend loss, the news of 'no dividend' brings the share price down drastically, leaving the investors ruined.
The regulators and authorities now seem to be more focused on the acts of investors or brokerage houses. They are keeping an eagle eye on them but that will not help to sustain the endangered species called general investors. The authorities and regulators should be more focused on the actions of the listed companies. They have to make sure the companies pay regular dividend reflecting the real performance. They have to make sure that the general investors are not the last priority to share profits and first priority to share loss. They also have to make sure that none is being lavish ruining the family of an investor.
We hope the regulatory authorities will be completely focused on protecting investors' interests because without the investors there will be no share market. We hope they will ensure the right of the investors over the listed companies. We hope the regulators will create feasible and prospective investment opportunity for the investors and will ensure an investment friendly environment.
Kaushik Ahmed is Chief News Editor,
Mohammadi News Agency

Editor : Iqbal Sobhan Chowdhury
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