State-run Investment Corporation of Bangladesh has suggested that the finance ministry should introduce share buy-back by companies whose shares are trading at prices below their issue prices at the country’s stock market, allow investment of undisclosed money in the capital market and resume subscription of ICB unit fund to stabilise the market.
ICB on April 17 sent to the ministry a set of proposals that included the suggestions.
The Dhaka Stock Exchange’s key index, DSEX, lost 683 points in last 13 weeks that wiped out Tk 30,537 crore in market capitalisation, sending investors into a panic.
The state-run investment firm in the letter recommended that the listed companies (except mutual funds) whose shares were trading at prices below their issue prices be forced to buy back shares. It urged the government to make a way for the undisclosed money to invest in the capital market or bonds, the letter said.
ICB should be allowed to open branches of its subsidiaries in other districts outside Dhaka to strengthen capacity of the corporation, it said.
In the letter, ICB said that the government had disbursed Tk 900 crore for the investors affected by the 2010-11 debacle, and of the amount, Tk 800 crore was collected and reserved in Bangladesh Bank. ICB requested the ministry to provide the amount immediately with 2 per cent interest rate to inject in the sinking market.
ICB also sought a market support fund worth Tk 5,000 crore and suggested that the government should have fund allocation in the national budget for the regular fund flow to the market.
If the government allocates the market support fund, the capital market would react positively and investors’ confidence over the market can be restored, it said.
The subscription of ICB Unit Fund remained closed after the capital market development programme loan agreement between the government and Asian Development Bank.
If the fund could be made larger by selling the unit certificates, it would play a key role in developing the capital market, ICB said.
The single exposure rule of Bangladesh Bank limited the capacity of ICB as it has to adjust the additional amount collected from depositors. In 2017, BB directed banks to withdraw a large portion of investmens in the ICB’s closed-end deposit scheme. The rule should be relaxed for ICB, it said.
Despite the then finance minister’s request to reconsider the single exposure limit on June 18 last year, the central bank is yet to provide any directive regarding the matter.
In 2011, the government sent letters to the government offices to invest in ICB’s closed-end deposit scheme to resuscitate the market. ICB suggested that the government should take the same move again.
ICB has recently issued Tk 2,000 crore in bonds where bonds worth Tk 1,390 crore were subscribed.
ICB in its April 17 letter suggested that Sonali Bank and General Insurance Corporation should subscribe Tk 500 crore and Tk 110 crore respectively.
The insurance companies can invest indirectly their premium and life fund in the capital market through bonds issued by ICB. ICB can issue a special bond for the insurance companies.
The government should provide incentives to enlist the multinational and state-run companies in the capital market. To diversify the capital market, the bond market should be revived with a cut in registration fees.
The corporation also urged the government to bring down banks’ interest rate to single digit.
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