Good companies to enter capital market within three months: BSEC chairman

A number of fundamentally strong and quality companies are expected to enter Bangladesh’s capital market within the next three months as the Bangladesh Securities and Exchange Commission (BSEC) moves to overhaul the listing process, BSEC Chairman Masud Khan said on Thursday.

He said the regulator is taking a series of measures to bring good companies to the stock exchanges and improve the quality of listed securities, with the aim of reducing the market’s heavy dependence on retail investors.

“Good quality equities are scarce. Investors currently struggle to find even 15 to 20 fundamentally strong companies,” Masud Khan said while speaking at a workshop for capital market journalists organised by the Capital Market Journalists’ Forum (CMJF) at Suvarnagrama Amusement Park in Narayanganj.

He said the commission has already revamped the Direct Listing Regulations to facilitate the entry of high-quality flagship companies into the market.

“We are working to bring good companies to the market. Within the next three months, you will see good companies coming,” the BSEC chairman said, stressing that the regulator wants to make the capital market more attractive to fundamentally strong businesses.

According to him, the traditional initial public offering (IPO) process often takes too long because of repeated verification of information and documents. To address the problem, the BSEC is working on an Extended Audit mechanism under which auditors will verify a company’s assets before it submits its listing application.

The verification will cover physical assets such as machinery and inventory, as well as land titles and receivables, he said.

Once the extended audit is completed, the Dhaka Stock Exchange (DSE) would be able to process applications more efficiently instead of repeatedly checking information already verified by auditors.

The BSEC is also considering a Hybrid Listing model for multinational corporations (MNCs) and large local companies, combining capital raising and direct listing facilities.

Masud said the regulator is also working to increase institutional participation in the market. Bangladesh’s stock market remains roughly 90 per cent retail investor-driven, which he said is not sustainable for a mature market.

The commission is seeking changes to provisions of the Trust Act so that provident and gratuity funds can be encouraged, and eventually required under an appropriate framework, to invest a portion of their funds in equities and corporate bonds.

The BSEC chairman also highlighted plans to strengthen the bond market by reducing main-board listing fees by 80 per cent. The move is intended to encourage more corporate and social bonds to be listed and traded on the exchanges.

He said the commission is simultaneously working on introducing exchange-traded funds (ETFs), real estate investment trusts (REITs), derivatives and a T+1 settlement system.

The Central Counterparty Bangladesh Limited (CCBL) is also expected to become fully operational within a year, while standardised back-office software with API connectivity will be introduced across brokerage houses to improve transparency and protect investors’ funds.

Masud Khan said the BSEC has already removed the floor price and is decentralising regulatory functions by giving greater authority to the DSE.

He urged capital market journalists to play a constructive role by highlighting both the problems and reform initiatives in the market.

“A vibrant capital market cannot be built through short-term manipulation of the index. It requires long-term structural reforms,” he said.