Lack of investors’ confidence, weak regulatory framework, poor earnings growth resulting from economic slowdown and frequent poor quality initial public offerings (IPOs) might create bottlenecks in the capital market in 2020, according to a recent survey conducted by a leading stockbroker.
A total of 134 persons from different backgrounds participated in the Bangladesh Capital Market Sentiment Survey 2020, conducted between January 1, 2019 and January 20, 2020 this year by LankaBangla Securities Limited.
The survey sought input from respondents from various backgrounds including service, independent business, retail stock trading, student, stock trading executive, MD/CEO of an organisation, foreign investor and other investment banker.
The majority of the participants felt that market fraud and manipulation and integrity of financial reporting would be the most critical ethical issues facing the capital markets in 2020.
However, around 57.3 per cent of respondents felt that the capital market would be better in 2020 than 2019, and the average daily market turnover would remain between Tk 350 and Tk 500 crore.
The majority 41.8 per cent considered that earnings performance of listed companies would influence the stock market in 2020 while 53.6 per cent opined that liquidity situation would deteriorate and borrowing would be more costly in 2020, the survey said.
Around 63.6 per cent of the respondents felt that lack of investors’ trust and confidence was the most prominent feature of the capital market in 2019 and was the prime reason for poor performance.
Some 54.9 per cent thought that demutualisation had not been able to make the market more transparent and vibrant.
The majority (78.5 per cent) felt most of the traders did not have minimum financial qualification to take knowledge-based investment decisions.
The majority 31.1 per cent of the respondents felt low interest rate policies would have a positive impact on the capital market of Bangladesh in 2020.
The majority of the respondents thought depreciation of the local currency against the US dollar and lack of corporate governance of listed companies were liable for low participation by foreign investors.
According to the opinion of the majority of respondents, the FDI volume would decrease and the local currency would depreciate against the US dollar in 2020.
According to the survey, structural reform in the National Board of Revenue is needed to improve the NBR’s tax collection and diversifying the export basket needed to
check the negative growth in exports.
About 57.6 per cent respondents felt that private credit growth would not improve in 2020 and 72.7 per cent of the respondents thought the current account balance would be negative in FY20.
The majority agreed that the establishment of the SME board and development of the secondary bond market would help boost the stock market.
Sixty-three per cent of the respondents believed that the involvement of the Chinese strategic investors would help boost the market scenario.
The majority of the participants opined that financial projection through equity research publication would improve the investment decision making in the market.
The majority of the respondents said that improved transparency of financial reporting and other corporate disclosures, improved enforcement of existing laws and regulations and improved corporate governance practices were most needed to help improve investors’ trust and market integrity in 2020.