Dealing In Sagging Bourses
Banks lose Tk43b market capitalisation in a year
Banks lost market capitalization of Tk43 billion in 2019 in share trading which is equivalent to 15.89 per cent value of total market capitalization as of last December.
Growing non performing loans, faulty and often discriminatory policies and the government's increased borrowing from banks have led many banks into serious trouble impacting their overall presence in the capital market.
Private commercial banks are biggest investment companies in the stocks having largest capital share in the market. But the rise in nonperforming loans has caused liquidity crisis in those banks reducing their capacity to give sufficient loans to clients.
This in turn has largely dried up funds in the stock market causing sharp fall in share prices and the volume of share trading in the bourse. This is how the stock market is sinking in recent time now threatening its very existence.
Banks have already lost too much in the stocks and their reluctance to make fresh loans for investment in stock market is only aggravating the situation.
As per market statistics banks' market capital exposure in December 2018 was Tk583 billion but the market share of 30 banks and financial institutions listed with DSE fell by Tk43 billion to Tk540 billion in December, 2019.
Former caretaker government's advisor Mirza ABM Azizul Islam told The Daily Observer that "Growing depletion of banks' investment in stocks is affecting the overall capital market. Banks usually invest huge money in the stocks but any amount of depletion directly affects the market."
The latest situation shows banks have lost huge capital in the market while it is suffering from shortage of fresh investment to pull it up from the brink. Despite offering various facilities to attract new investors fresh investments are not coming due to drastic fall in the flow of credit to private sector, Mirza Aziz said.
Meanwhile many foreign investors have pulled out their portfolio in the bourse adding to new credibility crisis for the market to win over new investors.
Lack of good governance and absence of accountability has made bank loans risky. The actual loan is even twice as much now from Bangladesh Bank estimated figures. This is because most loan cases are entangled in legal process with the court and not shown in the central bank figures, MIrza Aziz said.
Banks are most trustworthy sector for investment in shares but in the prevailing market situation investors are scared to put more fund when share prices are plunging on daily basis. Most banks are showing operating profits, but their actual profits not enough to overcome losses.
The country's portfolio market is on the downturn over the last few months when the DSEX fell by over 1000 points. On Thursday last the DSE broad index fell to 4149.83 points which on the previous Thursday was 4197.39. The market capitalization fell by Tk0.05 trillion to Tk3.19 trillion on Thursday. It was Tk3.24 trillion on January 9.