Corporates will be encouraged to enter stock market, says finance advisor

Interim govt will take initiatives to bring in different corporate companies, family-owned businesses and public and private corporates, Salehuddin Ahmed says

The government will not only encourage state-owned companies but also large foreign and family-owned corporate companies to enter the stock market, said Salehuddin Ahmed, finance advisor to the interim government.

“How will the base expand unless more good companies enter the market? Where will the investors invest?” he told the media following a meeting with stakeholders on Tuesday.

“We have initiatives to bring in different corporate companies across the country, family-owned businesses and public and private corporate companies. We’ll try to include the government ones,” he said.

In October, the finance advisor met officials from the Bangladesh Securities and Exchange Commission, or BSEC, to discuss the stock market circling around a long-term drop.

Following the meeting, it was decided to reduce the tax rate on capital income in the market. Salehuddin had announced plans to implement short-term, medium-term, and long-term measures to stabilise and strengthen the market at that time. However, he did not expand upon them.

The market began to recover gradually and the Dhaka Stock Exchange (DSE) saw improvements in indices and trading volumes.

However, a downturn was triggered by the classification of 27 companies in the "Z" category, leading to investor protests demanding the reversal of the decision.

Daily trading volume has fallen to Tk 3-3.5 billion.

The government has adopted different measures to regain the trust in the stock market, Salehuddin said. “Now we’re just doing the reform work and no new policies are being pursued. No one is being favoured, as they were in the past. You know how it was when some policies were made to increase the rate of some specific shares.”

“We’ve already taken a number of measures. Bangladesh Bank and ICB provided support, including liquidity support. We met the brokers’ houses, two stock exchanges and market authorities and heard their positives and negatives. We’re confident that the market will be good.”

BSEC Chairman Khondoker Rashed Maqsood, DSE Chairman Mominul Islam, Bangladesh Bank Executive Director Mohammad Mejbahuddin, DSE Brokers Association of Bangladesh, or DBA President Saiful Islam, ICB Chairman Abu Ahmed, and representatives from the National Board of revenue, or NBR, Chattogram Stock Exchange or CSE, Bangladesh Merchant Bankers Association, or BMBA, Central Depository Bangladesh Limited, or CDBL, Central Counterparty Bangladesh Limited, or CCBL, Investment Corporation of Bangladesh, and Financial Reporting Council, or FRC were present in the meeting.

During the stakeholders meeting, the finance advisor said that in addition encouragement, foreign companies operating in Bangladesh should be given some incentives to get listed in the market.

“We have recommended a fiscal incentive, that is, a tax rebate and other provisions in the budget. They [foreign companies] won’t come forward unless we provide some benefits. He [the finance advisor] felt that an incentive was needed. He said it should be given,” said ICB Chairman Abu.

He hoped that the next budget would include such incentives to ensure a long-term improvement of the market.

The representatives in the stakeholders meeting suggested the finance advisor discuss with the NBR and Bangladesh Bank officials to design tax rebates and policy changes to attract foreign companies and large corporates to the stock market.

Salehuddin said that dependence on long-term funding from the banks should be reduced to increase the liquidity flow and decrease the amounts of defaulted loans.

‘‘Everywhere across the world, long-term investment is done by the stock market and not by the banks. Businesses can’t get the entire amount from the banks. They must have 20 to 30 percent capital of their own. How will it work if the entire thing is debt-based?”