The decision by private banks to create a Tk 10 billion market stabilisation fund (MSF) may not be enough to shore up the country's flagging bourses as the MSF may take months to launch, experts said Sunday.
News of the fund being launched by the banks pushed the benchmark DGEN index five per cent up in the first hour of trading, but the gains were clipped in the closing hour as euphoria gave way to concern over the size and impact of the fund.
Bangladesh Association of Banks (BAB), a platform of bank owners, announced creation of the fund at an emergency meet, but the association kept its initial size at Tk 10 billion -- a fifth of the original plan put forward by the BAB president a day before.
Experts said with the stocks facing a crisis in confidence, they were not sure how effective the fund would be in propping up the market, which has lost more than 30 per cent this year -- the worst feat since 1997 when the Dhaka Stock Exchange dived 67 per cent.
Yawar Sayeed, the managing director of AIMS of Bangladesh, said since the MSF would operate like a mutual fund, it needs to go through a long drawn-out process for launching and necessary approval from the regulator.
"I appreciate the BAB
move. It is timely. But they should know that things don't happen overnight in Bangladesh. An open ended mutual fund needs a long time for clearance," he said.
The fund manager said if the recent experience of the Tk 50 billion Bangladesh Fund was any indication, the MSF could hardly make any difference in the market.
"The Bangladesh Fund is the country's largest open-ended mutual fund. It is set up and operated by Investment Corporation of Bangladesh, which is a very capable organisation. And yet the fund had a poor debut," he said
"In my opinion the BAB move will bring no positive outcome either in the long run or for the time being," Mr Sayeed said.
Dhaka University finance professor Salahuddin Ahmed Khan echoed Sayeed, saying the MSF won't bring any "immediate benefit" to the market as its launching may need at least two-three months.
"All the market needs right now is participation of banks in day-to-day trading. Their presence can lift investors' morale. The collective move by the BAB is fine, but the banks can start trading individually," he said
DSE President Shakil Rizvi is also skeptical about the BAB move, saying similar promises by other stakeholders bore no fruits.
"Many people make announcement and unveil plans for the stock market. So, the representatives of BAB will have to prove that they mean business. BAB should also make financial commitment for the fund," he told the FE.
Former Securities and Exchange Commission (SEC) Chairman AB Mirza Azizul Islam, however, welcomed the BAB move, saying the market needs pumping of new liquidity, no matter where it comes from.
"The bourses are facing a liquidity crisis. In such a situation, the latest decision by the BAB will ease some concerns," Mr. Aziz, also a former advisor of the caretaker government, said.
He said investors' shaky confidence will get a fillip riding on the BAB's announcement of operating the MSF and the public subscription of the Bangladesh Fund as well.
Chittagong Stock Exchange (CSE) President Fakhor Uddin Ali Ahmed said it's a high time for the banks to make investment in the capital market.
"The banks have realised that they should not miss the golden opportunity. Average P/E ration has come down to around 14. It is the best time to buy shares," Ahmed said.
Source: thedailystar.net
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