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Stock Market in Bangladesh: The Present Situation
A stock market is a market for securities, debt or equity where business enterprises, business companies and government can raise long-term funds. So the stock market is defined as a market in which money is provided for longer periods than a year. Stock is a security issued in the form of shares that represent ownership interests in a company. This market offers a great opportunity for the whole economy if we can grab it properly. Firstly, the companies can arrange their long term stock for business expansion from stock market within a minimum cost. Secondly, the companies listed in the stock market come under regulation of securities and exchange commission which ensures the corporate governance of the companies. Stock market can attract public or private investment. People with surplus fund can invest here and earn better in future. Stock market can finance huge fund for large projects. So this market is considered as the barometer of economy. An efficient stock market is the leading indicator of the economy.
Present scenario of Stock Market of Bangladesh: Inadequate supply of good fundamental securities is one of the main problems of stock market of Bangladesh but we know that it is very essential to ensure adequate supply of securities. Bond market has not developed yet. There are very few numbers of debentures and one perpetual bond are listed on the exchanges. For development of the secondary bond market BSEC along with different parties are working hardly. Still there is no complete separate regulation for bonds. But it is matter of hope that it will come within a very short time. Derivative market, future market, commodities market, options market and swap market have not come into existence yet. But these are very much crucial to have a comprehensive investment framework. Merchant Banking activities are not satisfactory but Commission has been working to improve the situation and has been improving day by day. There is a scope to introduce Exchange Traded Fund (ETF), index fund.
Traded Fund (ETF), index fund.
On other hand it is necessary to be cautious to utilize these opportunities because of recent risks associated in the stock market. Financial engineering can be promoted along with caution.
Recently our stock market has achieved a notable progress. The notable progress in the development of the stock market and enhanced transparency in securities transactions have been achieved with the active cooperation of the Government and all institutions and organizations related to stock market.
Reforms or measures to be made for improving stock market:
- Increase of supply of securities issued by companies having good fundamentals irrespective of Govt. and private sector;
- Introduction of attractive and effective alternative IPO pricing;
- Introduction of Bond, derivatives and Commodities market;
- Establishment of a clearing corporation to settle transactions electronically;
- Improvement of the Merchant Banking Operations;
- Increasing the number of mutual funds;
- Enhancing the investors' confidence;
- Strengthening of surveillance system of BSEC to prevent unethical practices;
- Capacity building of SEC
To conclude, the stock market of Bangladesh is now poised to play its due role as a conduit for financing investment and thereby making a notable contribution to economic growth, employment creation and poverty alleviation.