SEC 'serious' about bringing stability to stock market

Mohammad Mufazzal

The securities regulator has taken a series measures including the expansion of daily transaction volume and flotation of fresh shares in an effort to restore stability to the stock market, its chief said.

It also has started investigation into its officials' activities during the share market debacle as well as into the role of the persons allegedly active at that time after the ministry of finance issued directives in line with the recommendations of the share scam probe committee.

Professor Dr. M Khairul Hossain, chairman of Securities and Exchange Commission (SEC), Wednesday told this to the FE while speaking about the developments after the recast of SEC.

"The restoration of stability to the market is a big challenge for us, as thousands of investors are looking forward to the regulator," Mr. Hossain told the FE.

The SEC chief said the market would not return to a reasonable position unless the daily turnover touches the mark of Tk 15 billion a day.

"That's why we are trying to increase the trade volume in both the stock markets of the country," he said.

For more than two months, the average daily turnover of Dhaka Stock Exchange (DSE) can't exceed Tk 4 billion, whereas in last October-November the average turnover was about over Tk 20 billiom.

Mr Hossain said the regulator is also trying to increase the purchasing power of merchant banks in their own portfolios, so that the market can overcome its liquidity crisis.

"We are trying to increase the purchasing power of merchant banks through some ways including investment by non-resident Bangladeshis," he added.

Mr Hossain also stressed coordination between the central bank and the securities regulator.

"Before the coordination meeting, which was supposed to be held today (Wednesday) at the office of Bangladesh Bank, I will talk to its high-ups on how to ease the liquidity crisis," he said.

Coming to paving the way for offloading fresh shares, Mr Hossain suggested asking the companies, which already completed road-shows to go public under book building, to review their offer prices as it would take more time to rectify the method.

"It will take about six months to bring changes to the book building method as we will have to take opinions of different stakeholders and experts for the purpose," he said.

He added that in such a situation, the regulator would ask the companies, which have yet to go public under book building method, to revise their offer prices.

In January last, the government postponed the book building method following a road-show bonanza for fixing very high prices for their shares to go public. As a result, a huge amount of money was siphoned off from the stock market, creating a liquidity crisis.

However, the SEC chairman said they would stress reasonable prices, which would match with company fundamentals.

"Some quarters sold their ten Taka shares at Tk 185 through private placement. The absurd situation may be enacted again if the regulator allows the companies to sell shares at such high prices," Mr Hossain said.

He said it would not be positive for the market if the regulator waited for changes in book building method.

"However, a committee has been formed to find solutions to offloading the shares in the light of review and coordination," he said.

He also said the regulator would keep watch so that investors get facilities with the flotation of the shares of state-owned enterprises under direct listing method.

When asked about the compliance of the directives issued by the ministry of finance (MoF) regarding further investigation into alleged irregularities, he said, "by this time, we have formed committees to carry out further investigations into some alleged irregularities occurred during the recent stock market scam."

Mr Hossain said the regulator has also started investigation against all officials of SEC following a directive by the MoF.

On June 6, the government issued a directive to investigate into the alleged "irregularities and manipulation" by nearly 1000 high officials and employees of the securities regulator and the state-owned Investment Corporation of Bangladesh (ICB) through their involvement in the recent share market scam.

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