First News
Volume:7, Number:31
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Business & Finance 1

The Specter of 2010

| Monowar Hossain |

The capital market of the country started to heat up recently, but many are still haunted by the memories of an earlier time when millions of small investors had lost their money

Capital market watchers and analysts are bemused by a recent upsurge in the market as no reputed companies entered the stage of trading in recent times to offer initial public offerings (IPOs) in the market. So they are cautioning the investors, especially new entrants in the trade, to not be misled by alluring whisper campaign by the brokers to invest while making their decisions.

To the market watchers, the condition currently prevailing in the share market mirrors that of 2010. The difference is that in 2010 forced sale was not allowed, but now it is in effect. In 2010 the market bubbled with the price of shares on many non-transparent companies went up abnormally and then the market crashed. In the process hundreds of investors, who were lured to invest as much as they could, lost every taka of their investment. The investigation committee formed after the market crash found tricks of some big players behind the catastrophe, but no legal action was initiated against them.

In the opinion of analysts, investment for immediate gains (short-term investments), which is very common in the capital market of Bangladesh, plays a destabilizing role. The market would have been more stable with long-term investments. They said shooting up of the share prices of commercial banks has pushed up the market index as well as the transaction level, both highest since 2010. They said whisper campaign by the brokers throughout almost the whole of 2016 that the market would pick up at the end of the current year or in the beginning of 2017, pouring of billions of taka into the market by some political personalities, very low deposit rate in the banks, increase in foreign investment, and increased capacity of some merchant banks and brokerage houses are the apparent reasons behind the upsurge in the market. But, these do not rule out completely the "game plan" and tricks of the big players in the market. Indeed, their presence and activities have caused fear among others reminding them of the situation in 2010. They also held the view that demutualization would not yield desired results.

This time the regulatory body, Securities and Exchange Commission (SEC), has come up to the need of taking necessary actions when the market was turning very hot. It reminded all stake holders in the market to play within the boundary of rules, besides urging the investors not to be tempted to invest under the influence of rumors. It identified some tricks or manipulations which are generally applied by the "players" in the market to deceive innocent investors. But, markets said issuing warnings alone is not enough for the SEC to save the small or innocent investors. It should do more as permissible under the law. While announcing monetary policy for the second half of the current financial year (2017), the governor of the central bank said that it would strengthen monitoring and surveillance of the central bank over the activities of the commercial banks in order to enforce their capital market exposure within the limit.

The precaution sounded to the investors by the SEC and central bank, however, has not been liked by the big players of the bourses. They alleged that their warning has caused a slump in the market (referring to the recent decline in transaction). While commenting on this, a market watcher said perhaps the players wanted to play this time the same way they did in 2010.

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