Analysts and market insiders level out lack of excellent firms out there as the first motive behind the falling market cap to GDP ratio
In 2014, the market capitalization to GDP ratio of Dhaka Stock Alternate (DSE) was 24%, which got here right down to below 10% in June this yr. The scale is the bottom among the many rising bourses within the Asia-Pacific area.The market capitalization was Tk 3,11,966 crore in June which was 9.41% of the nation’s gross home product (GDP), in line with the month-to-month assessment of Dhaka bourse.Analysts and market insiders level out lack of excellent firms out there as the first motive behind the falling market cap to GDP ratio. One other main motive cited by them was traders’ confidence disaster. To draw good firms, consultants recommend simplification of itemizing course of and bringing authorities firms to the market to change into examples for others.Market capitalization, or market cap, is calculated by multiplying the entire variety of an organization’s excellent shares with the present market price of shares.The ratio was at its highest at 50.67% in 2010, which got here right down to 33.23% inside a yr after the largest market crash within the nation’s historical past in 2010-11. The ratio was 12% in 2019, 17% in 2018, 21% in 2017, 20% in 2016 and 21% in 2015.The market cap to GDP ratio of the nation’s primer bourse Dhaka Stock Alternate is the bottom among the many rising Asian-Pacific nations.In June 2020, stock market capitalization to GDP ratio was 62.75% at BSE India, adopted by 97.19% at Bursa Malaysia, 35.83% at Indonesia Stock Alternate and 14.92% at Colombo Stock Alternate.In the identical time, the market capitalization to GDP ratio at Stock Alternate of Thailand was 89.29%, adopted by 205.15% at Taiwan Stock Alternate, 109.89% at Japan Alternate Group, 161.49% at Stock Alternate of Singapore, 61.95% at Philippine Stock Alternate, 37.23% at Shanghai Stock Alternate and 27.70% at Shenzhen Stock Alternate.Consultants and stakeholders recommend that stock market regulator Bangladesh Securities and Alternate Fee (BSEC) ought to put emphasis on high quality IPOs to recoup traders’ dented confidence.Former adviser to a caretaker authorities AB Mirza Azizul Islam advised Dhaka Tribune: “The stock market is a great source of funds, but its true potential is still untapped”.“To attract entrepreneurs, the government has to set an example by offloading shares of state-owned companies [to the stock market],” he stated.He, who was additionally a former BSEC chairman, added that the stock market regulator, stock exchanges, and subject managers additionally had a key function to play in attracting firms to get listed on the bourses. Stock market regulator, the Bangladesh Securities and Alternate Fee (BSEC) Chairman Prof Shibli Rubayat-Ul-Islam advised Dhaka Tribune, “We are trying to increase financing through the capital market. We will establish the concept that the capital market is the main source of funds for industrialization”.“We are working on approving the initial public offering (IPO) of good and established companies. We have already cancelled IPO proposals of some companies based on our negative observations and those of the stock exchanges themselves” he stated. The BSEC Chairman additionally stated that the fee would advocate for restoring and enhancing incentives for the stock market itemizing of well-governed and performing firms.