Bangladesh’s bourse is the only one on the globe in recess

23 May 2020 1:20 PM
Bangladesh is the only country on the globe where trading has remained closed due to the coronavirus pandemic. 

Until this week, Bangladesh, Sri Lanka and Jordan were the three countries where stock markets have been shut.

Sri Lanka started the trading yesterday and witnessed an enormous sale pressure. 

The Colombo stock market's index of the very most liquid shares, S&P SL 20, plunged a lot more than 10 % on the first day of the trading since March 20.

Jordan, where trading have been suspended since March 16, also experienced the same when it reopened on Sunday. The Amman Stock Exchange's ASE Index dropped a lot more than 15 per cent.

The Dhaka STOCK MARKET (DSE) and the Chittagong Stock Exchange (CSE) have already been closed since March 26 based on the government's general holiday aimed at stopping the spread of the virus. zThe longest closure of the stock market because the Liberation War would hurt the image of the markets, according to analysts.

"The impact of the shutdown would be clear in the long-run," said Mohammed Rahmat Pasha, ceo of UCB Capital Management.

"The setting of the ground price turned the markets into illiquid ones and it could be costlier to regain the image internationally."

Prior to the shutdown, the currency markets regulator fixed the floor price of all stocks by calculating the previous five days' average prices as a way to prevent fall.

But after the floor price was fixed, the majority of the stocks didn't find buyers. The shutdown further signifies that none can sell shares whether or not they need to.

"Many foreign investors are preparing to sell shares in large volume after the market reopens," said a high official of a stock brokerage house that deals foreign portfolios.

The currency markets has been suffering as a result of the COVID-19 around the world, nonetheless they would bounce back strongly when the economy makes a turnaround. However, there is absolutely no such hope in Bangladesh and it'll suffer more due to the wrong policy, he said.

The primary blow would come if the country's capital market is kicked out of your MSCI Index.

The index captures mid- and large caps across a lot more than two dozen emerging markets. This is a float-adjusted market capitalisation index. The MSCI Bangladesh Index was launched on Dec 1, 2009.

If the shutdown continues, it may be kicked out of your index within the next rearrangement, said an agent.

If Bangladesh is removed from the index, an enormous sell pressure would occur naturally, as many foreign index fund managers invest by looking at the index, said an institutional investor.

The ongoing market closure is the longest because the last shutdown in 1969 when the mass upsurge occurred. The marketplace resumed in 1976.

Trading was closed for four days at a stretch in 2004 because of massive floods. Apart from these, the marketplace was largely closed as a result of technical glitches.

"When all of the stock markets are open everywhere, the closure of our market would provide a negative signal to investors," said a merchant banker.

"The marketplace should resume operations as soon as possible," Pasha said.

A share trading has two parts: one is share transfer and another is transferring money. Central Depository Bangladesh Ltd (CDBL) carries out share transfer and a department of the DSE transfers the amount of money.

"We carry out the share transfer through online and it is possible to keep trading with our limited presence at work," said Shuvra Kanti Choudhury, managing director of CDBL.

The money transfer system of the bourse continues to be manual, so DSE officials have to go office and brokers also have to reopen, said the official of the bourse.

Recently, the Dhaka bourse sought permission from the regulator to open the market.

However, there is little possibility so you can get the consent as two commissioners left the Bangladesh Securities and Exchange Commission recently and the tenure of the chairman can be likely to expire this month, said the official of the commission.