The global coronavirus pandemic, which has led to economic stagnation all over the world, will likely see Bangladesh’s capital market undergo further correction.
Economists have recommended injecting more funds to revive the economy, waiving interests and slashing corporation taxes.
In the capital market, a correction is a 10 percent drop in stocks from their most recent peak, which often signals that investors have turned more pessimistic about the markets. But it does not necessarily mean that stocks are heading even lower. However, if prices drop by 20 percent or more, it is then called a bear market.
"I’m not very much optimistic [about the whole situation] with most of the listed companies are ‘bad’ ones,” Dhaka University’s Honorary Professor of economics Abu Ahmed told UNB.
He said textile and insurance companies would be the worst affected by the current situation and noted that revival of the capital market depends on the overall condition of the economy.
Prof Ahmed said the government might waive the interest of the small investors and could engage its institutions to support the market through buying.
Regarding how the capital market could assist country's economy to revive, he said that if the capital market remains functional, it would be helpful for the economy through providing capital for industrialisation.
"But for that to happen, the regulatory body (Bangladesh Securities and Exchange Commission) must approve some good IPOs," he added.
He also emphasised slashing the corporate tax for listed companies so that they can recover from the coronavirus effect and give dividend.
"Corporate tax here is one of the highest in the world. If it can be reduced, then many companies can consider taking capital from the market that would ultimately help the economy in this tough time," he said.
Professor Mohammad Musa, Faculty of the School of Business and Economics of the United International University, said that there is possibility that the share market will receive a big blow after its reopening.
He explained that artificial measures were taken before the market was shut down and it will slide down once the artificial embargo will be lifted.
He said the overall economy, like the rest of the world, will face a setback due to the COVID-19 outbreak.
Talking about the government’s stimulus packages, Professor Musa said these are for entrepreneurs and for food aid to the poor.
"I think that both are insufficient. To revive the economy, the government should inject more financial assistance in various sectors so that no sector is left behind. Otherwise, it’ll be very difficult," he said.
Responding to a query, he said the capital market never contributed in country's economy in bigger way, the size of this contribution is 12-15 percent which is very insignificant comparing to other countries.
"I’ve enough doubt whether the declining trend of the market will be stopped or not," he said.
Faculty of the Department of Economics of Dhaka University Professor Mohammed Helal Uddin said he is not expecting any upward movement in the capital market right now as the whole economy is bearing the brunt of coronavirus outbreak.
"But there might be some hope on mid-term basis if the entrepreneurs go to capital market for financing their industries," he said but pointed out that the market was already suffering before the shutdown to curb transmission of coronavirus.
Talking about the government stimulus packages, the Dhaka University Professor said due to the crisis, there might be fund crunch and the capital market can play a role in this connection.
"That will also depend on how much this market can be operated with confidence," he said.
NCCB Securities and Financial Services Ltd Chief Operating Officer (COO) Monzurul Alam says the market was showing bearish trend from the last year.
"Frightened investors have lost trust in the market because of the coronavirus outbreak, which caused further disruption for companies and the global economy that has impacted the country's bourses and the world's leading stock markets," he said.
He said the government has already taken some initiatives to overcome the situation and these have to be implemented as early as possible.
Alam said the government could allow investing black money in the capital market and waive interest of margin loans.
"Tax exemption on the invested money would increase the investment," he added.
Alam also emphasised strictly following rules and regulations like maintaining sponsors share portion, directorship share position and lock in share position.
"The government should buy shares by ICB which is undervalued to support the market," he said.