'Floor price is helping none'
The floor price imposed against the basic concepts of market demand-supply is not helping anyone, believes stock market expert Abu Ahmed, a former professor of economics at the University of Dhaka.
"Price goes up and down – that is the beauty of the stock market as they create opportunities for investors," the professor said in a recent interview with The Business Standard.
As the market was lacking opportunities to sell stocks, it got stagnant, and fund managers would underperform and lack the strength to pay dividends to investors, he said.
The price restriction is not helping small investors ultimately, as the stock prices and portfolio value showing now are artificial.
The veteran, who has a four-decade connection to the local stock market as an academic, commentator, columnist, policy advocate, awareness creator, and retail investor himself, is proud of how the market infrastructure evolved over the decades in terms of having two stock exchanges where trading went electronic from the manual cry out environment, a separate securities regulator now overseeing market affairs, and many other factors.
However, the stock market itself is stuck in the condition it was in 17–20 years ago due to a lack of good stocks, weak regulations, and a lax approach to manipulation.
Some state-owned enterprises (SOEs) went public in the 1980s and again in the late 2000s, and this was the end, as even the finance minister's announcement and instructions went in vain.
The government is making mistakes by not offloading large stakes in underperforming SOEs to private investors who want directorship and management participation even if it costs them much more than the current market price of the company shares, he said.
For instance, he further said, two-wheeler maker Atlas Bangladesh, tubular pipe manufacturer National Tubes, and cable manufacturer Eastern Cables.
They have huge assets that are underperforming now; the assets are turning into dead assets and can perform much better if management changes. Onboarding private entrepreneurs within management might push the firms' share prices even five times higher, opined the expert.
The number of investors is declining in the bourses, he said in a frustrating note, adding that it has also been because of how the government is treating investors, whether they are local or foreign ones.
For instance, the leading telecom operator, Grameenphone, also the largest listed firm in the country, has 50,000 investors, and the telecom regulator barred its new connection sales last year without thinking about the shareholders, said Professor Ahmed.
"It seems there is no one to see the problems."
In his 70s, the professor invested 60% of his net worth in the stock market, and once aggressive investments in undervalued, high-quality stocks like Square Pharmaceuticals helped him build a decent fortune for his family.
He opined that, alongside improving the market environment, the government and regulators should rigorously work on how to publicly list the major companies in various sectors, including the multinational ones, which are listed in other jurisdictions, and avoid listing in Bangladesh.
"The government should compel large firms to go public," he added.