In the beginning of January 2020, reports from China started coming out of a new virus infecting people at an alarming rate. Initially it was mostly touted as something similar to a new strain of influenza with very low mortality rates.

Fast forward to March 2020 and more than half the world has gone into an unprecedented lockdown. The general populous was forced to learn new terminologies such as social distancing, flatten the curve, pandemic, PPE, frontline workers etc.

​If there was ever a curiosity to see what the world would look like if everyone suddenly stopped on their tracks, this would be it. Global air travel fell over 80 percent, supply chains were decimated, basic medical protective units were suddenly in short supply, and unemployment hit historic levels in many countries.
The world stopped due to a virus and the effects will reverberate for years to come.
Before Covid-19, cracks started to show in the economy of Bangladesh in the form of a banking crisis. While our nation registered steady GDP Annual Growth over the last 10 years (an impressive 8.2 percent last year), bad banking practices could no longer be ignored and the tiring economy was starting to reveal the growing systematic weakness in the banking sector. And everyone knows, if the banking sector is weak then the stock market will be weaker.
Since the stock market crash of 2010, Dhaka Stock Exchange (I will refer mainly to the data from DSE as it accounts for over 90 percent of turnover between the two bourses in Bangladesh) has had a very challenging time in regaining a sustainable bull run. The period between May 2, 2016 and January 3, 2018 showed promise with the DSE General Index (DSEX) rising from 4,171 to 6,318 (a 2,147 point increase, up by 51.47 percent).
However, right after the 2018 Bangladesh general elections, the market started another bear run. Quite surprising since stock markets love stability and the re-election of this current government should have signaled a continued recovery.
But that was not the case as the DSEX fell from 6,318 on January 3, 2018 to 4,768 on February 17,, 2020, a decline of 1,550 points. Many in the industry always felt the divergence between the impressive GDP growth status of Bangladesh and the lackluster performance of the DSEX over the 10 year period.
Various explanations were provided- lack of good corporate governance in listed companies, under performing companies allowed for IPOs, placement shares, terrible policies regarding mutual funds, cumbersome listing procedures for good companies, high savings rate offered via Sanchayapatra/FDRs (discouraging relatively risky stock market investment), lack of an active bond market, stringent Bangladesh Bank capital market exposure limit policies (discouraging financial institutions from investing in the stock market), etc.
All these and now add Covid-19, the single greatest threat to mankind and the economy in our lifetime. So naturally the bourses, which were already in a bearish trend started to really pick up steam and crash again. From the middle of February (when the world started to grasp the severity of the coronavirus) the DSEX fell from 4,768 on February 17, 2020 to 4,008 on March 25, 2020 when, unfortunately, the stock market was shut down.
Covid-19 created a seismic sense of panic for the world (and still does) and in this panic two very important decisions came from the Bangladesh Securities and Exchange Commission (BSEC) and the Government of Bangladesh. Two decisions implemented in a span of seven days.
On March 19, 2020, a historic "floor price" was set for all the stocks in the stock market to stop the natural fall of stock prices. This historic decision by the BSEC ensured that every listed company's stock price was set at a certain rate and the prices could not be traded any lower than that. The calculation was simple – the average of the five preceding trading days' closing price for all stocks traded on March 19, 2020 (something similar was implemented in the Karachi Stock Exchange in August 2008).
In our inefficient stock market, this seemed to be the "only way" to stop the bleeding. The sudden implementation of this rule created massive confusion in the investment community as most couldn't quite grasp the calculation of this alien rule. Many investors and professionals thought of it as a moving average – where the floor price would change after every five days.
This confusion forced many active investors onto the sidelines looking for clarity in a situation of panic. And by the time they figured out this rule, Bangladesh entered lockdown on March 26, 2020.
The government declared a general holiday for 10 days starting on March 26, 2020 and only allowed certain essential services to operate. As a general holiday was declared, the Bangladesh Securities and Exchange Commission (BSEC), the regulator of the stock market decided to follow the government orders (arguments were later made that they could have officially stayed open).
And if your regulator goes on holiday, so must you, whether you like it or not. And so, since March 26, 2020, the Dhaka Stock Exchange Ltd., the 44th largest stock market in the world (by market capitalization) has remained closed as the government has extended the general holiday seven times.
In this pandemic, it is the stock exchanges of Bangladesh which have remained non-operational. No other significant stock exchanges in the world are closed. The DSE has a market capitalization of $33 billion, which contributes roughly to 14 percent of GDP. The other stock exchange that was closed for a month is the Colombo Stock Exchange with a market capitalization of $14 billion.

Most stock brokers have been incurring losses for many years owing to low turnover in the market and a lack of product diversity. This led many stock brokers to lay off many of their executives to cut cost during the years while the remuneration of the officials has not increased significantly. The top 100 brokers are logging profits whereas at least 150 stock brokers are incurring loss, according to a top official of a stock broker.

Rakibur Rahman, one of the directors of the Dhaka Stock Exchange (DSE), said many stock brokers are in a tight position and their condition would not improve until the turnover of the stock market rises.
Daily turnover on the DSE averaged Tk 534 crore so far this year, slightly down from Tk 552.03 crore from last year and much lower than Tk 874.83 crore in 2017, data from the bourse’s showed.
“If the stock brokers remain weak, the market will not be strong,” Rahman said, urging the regulator to keep alive the stock brokers by increasing turnover. Rahman, also the managing director of Midway Securities, recommends bringing good stocks to the market and following the rules and regulations strictly to boost the turnover. The stock brokers will face further competition as the regulator is set to open the licencing of brokerage houses after many years.

​The Bangladesh Securities and Exchange Commission (BSEC) is framing the BSEC (trading right entitlement certificate) Rules, 2019 to open the TREC holder licence regime. Market analysts welcomed the move as granting of licences had been postponed for the last couple of years. They say the brokers that failed to attract investors can merge to survive. However, the stock brokers, who are facing tough times because of continuous loss, fear that the situation will deteriorate further with the entry of new TREC-holders. Most of the stock brokers are struggling to stay afloat from the income from transaction fees, their prime source of income, said a top official of a stock broker. “The brokers hope there will be good days in the future, so they have kept their businesses open despite the losses,” said the official, also a leader of the DSE Brokers Association. A top official of another stock brokerage says the number of stock investors has fallen in the last few years and their investment dipped.

According to the Central Depository Bangladesh, the number of beneficiary owners’ account was 25.34 lakh on Thursday, down from 27.96 lakh in December 2013. Although the turnover has remained almost stagnant in the last few years, the cost of brokerage houses has been rising, the top official said. He said general investors are also moving away from individually owned stock brokerages to the ones run by financial institutions – a development that is hurting the small entities.

Among the stock brokers operated by financial institutions, PFI Securities incurred a loss of Tk 5.72 crore in 2018, which was Tk 21.59 crore a year ago. LankaBangla Securities, one of the leading stock brokers, clocked a profit of Tk 28.14 crore last year, down from Tk 82.61 crore in 2017. Brac EPL’s profit fell to Tk 2.42 crore from Tk 20.47 crore while IDLC Securities made a profit of Tk 36.55 crore in 2018, from Tk 38 crore the previous year. Unicap Securities posted a profit of Tk 43.97 lakh in 2018, way lower than the Tk 2.43 crore achieved the previous year.

The bourse itself is under pressure. The low turnover of the DSE is not generating enough income for the premier bourse, said a former top official of the DSE. He said the bourse is struggling to meet the cost from its main source of income. Still, it managed to declare profit in the last few years on the basis of the interest income from the fixed deposit with banks. “The DSE needs at least Tk 1,000 crore in daily turnover to make profit.”

Source: The Daily Star

Mr. Md. Rakibur Rahman, Chairman of Midway Securities Ltd., offering his views on the recent National Budget 2019-20.

"বোনাস ও রিজার্ভে করের সংশোধনী প্রস্তাবকে স্বাগত জানিয়েছেন ঢাকা স্টক এক্সচেঞ্জের (ডিএসই) পরিচালক ও সাবেক প্রেসিডেন্ট মো: রকিবুর রহমান। তিনি এই প্রস্তাবকে পুঁজিবাজারের জন্য যুগান্তকারী হিসেবে অভিহিত করে বলেছেন, এর ফলে বিনিয়োগকারীরা আবার বাজারমুখী হবেন।

রকিবুর রহমান বলেন, এতদিন যেসব অসাধু কোম্পানি বিনিয়োগকারীদেরকে বোনাসের নামে শুধু কাগজ ধরিয়ে দিত, সেগুলো এখন একটু চাপে পড়বে। তারা বিনিয়োগকারীদেরকে নগদ লভ্যাংশ দিতে বাধ্য হবে। কিন্তু ভালো কোম্পানিগুলোর উপর এর কোনো নেতিবাচক প্রভাব পড়বে না।

তিনি বলেন, রিজার্ভে করের নতুন প্রস্তাবের ফলে কোম্পানিগুলো বেশি করে লভ্যাংশ দিতে বাধ্য হবে। এতদিন অনেক কোম্পানি অকারণেই মুনাফার বড় অংশ রিজার্ভে সরিয়ে নিত। অনেক কোম্পানিতে শত শত কোটি টাকা রিজার্ভ আছে, কিন্তু তারা ব্যবসা সম্প্রসারণে যায়নি। তাহলে সাধারণ বিনিয়োগকারীদের বঞ্চিত করে এমন রিজার্ভ বাড়িয়ে কি লাভ?

রকিবুর রহমান বলেন, নতুন প্রস্তাব কার্যকর হলে পুঁজিবাজারে ইতিবাচক প্রভাব পড়বে। বাজার গতিশীল হবে।

তিনি বলেন, অনেকে বোনাস শেয়ারের সুযোগ রাখার যুক্তি হিসেবে গুগল, অ্যাপল এর উদাহরণ দিয়ে থাকেন। কিন্তু এই উদাহরণে বাস্তবতা প্রতিফলিত হয় না। অ্যাপল বোনাস দিলেও বোনাসের কারণে কখনো শেয়ারের দাম পড়ে যায়নি, বিনিয়োগকারীরা বোনাসের পরও ক্যাপিটাল গেইন পেয়েছেন। কিন্তু এখানে তো বোনাস দিলে শেয়ারের দাম কমে যায়। তাই বোনাস দিলে কোম্পানিগুলোকে এমনভাবে বোনাস দেওয়া উচিত, যাতে শেয়ারের দামে তার নেতিবাচক প্রভাব না পড়ে।"
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#NationalBudget #Budget2019-20 
Source: Arthosuchak