Another stock market crash in the making?

Bangladesh is facing an acute investment crisis. Private sector credit growth has fallen to its lowest level in nearly three decades, businesses are reluctant to expand amid bleak growth prospects, unemployment is rising, and the persistent energy crisis is adding to economic woes.

The threat of El Niño could further hit future crop yields, putting additional pressure on economic growth. Listed companies are reflecting the same distress: 30 listed banks reported a combined accumulated loss of 40 billion taka in the first nine months of 2026.

As the economy struggles, no new fundamentally strong companies are coming to the stock market. Instead, the stock regulator appears to be dismantling safeguards designed to prevent market manipulation. The commission has recently decided to unfreeze nearly 90 BO accounts belonging to individuals accused of market manipulation, despite questions over the modernisation of its surveillance system. Without stronger monitoring and accountability, such decisions could fuel an artificial bubble in an already fragile market, experts warn.

In November 2026, the BSEC conditionally lifted freeze orders on 93 BO accounts linked to two individuals accused of stock-market irregularities – 77 accounts associated with government official Md Abul Khayer Hiru and 16 linked to former merchant banker Md Sayedur Rahman.

The accounts were among 748 frozen after the 2024 July Uprising by regulatory and law-enforcement authorities. The restrictions were relaxed following legal applications and requests from brokerage houses and merchant banks concerned about mounting losses on margin loans. Under the conditions, the account holders can trade only in the public market; they cannot withdraw sale proceeds or transfer shares to other brokerage accounts.

Sales are permitted to settle outstanding margin loans and accrued interest. The remaining frozen accounts, including those linked to other influential individuals and companies, remain restricted amid ongoing investigations and legal proceedings.

Experts have questioned the Bangladesh Securities and Exchange Commission’s (BSEC) preparedness to prevent market manipulation as it gradually lifts restrictions on frozen BO accounts.

Professor Al-Amin of the Department of Accounting told Daily Waadaa that Meghna Pet Industries Ltd, despite being a non-operational company, had repeatedly witnessed sharp surges in its share price without any fresh material information.

He questioned the effectiveness of the regulator’s surveillance system, arguing that such abnormal price movements raised serious concerns about possible manipulation.

“Meghna Pet Industries is a closed business, yet its share price has surged several times without any new information. This raises serious questions about possible market manipulation and the effectiveness of the commission’s surveillance system,” he said.

The BSEC appears to be encouraging a rise in secondary-market trading despite the limited supply of investable shares, the absence of new fundamentally strong companies entering the market and a lack of positive signals from the broader economy.

Bangladesh’s economic outlook remains subdued. The World Bank has projected GDP growth of 3.4 percent for FY27, while the International Monetary Fund (IMF) has forecast 3.2 percent growth. A government research agency has also projected growth below 5 percent, significantly lower than the government’s target of 6.5 percent for the fiscal year.

A senior BSEC official, speaking to Waadaa on condition of anonymity, indicated that the regulator wants to revive the secondary market by boosting trading activity.

“The underlying message is that the market must rise and trading must increase. That is the direction things are moving in,” the official said.

Market experts have expressed frustration over the lack of quality companies entering the stock market, despite the BSEC introducing several regulatory changes aimed at attracting fundamentally strong businesses. The regulator’s repeated commitment to expanding the supply of quality shares has yet to produce tangible results.

Professor Abu Ahmed, a stock market expert and former chairman of the Department of Economics at the University of Dhaka, who currently serves as chairman of the Investment Corporation of Bangladesh (ICB), expressed concern over the BSEC’s failure to bring quality companies, including state-owned enterprises, to the market.

“Several state-owned companies were identified for listing seven, eight, nine or even ten years ago. Successive governments have talked about them, but nothing has happened. They have failed to sell even one company, and not a single company has come through direct listing so far,” he said.

He added that the market's prolonged weakness cannot be reversed without bringing good companies to the bourse.

“The market is at rock bottom, and even that is not helping. Unless we can bring good companies to the market, investors will continue to lose interest. Many have already stopped investing and moved elsewhere,” he said.

Another stock market expert, Dr M Sadiqul Islam, Professor of Finance at the University of Dhaka, warned that lifting restrictions on accounts linked to alleged market manipulators could fuel an artificial rally and expose retail investors to further losses.

“The supply side of the market remains constrained, and the economy has limited prospects for strong growth in the near future. In such circumstances, unfreezing the accounts of alleged manipulators in a populist move could create further opportunities for manipulation and leave investors even more financially vulnerable,” he said.

He also questioned the BSEC’s capacity to detect and prevent market manipulation, saying its surveillance system still relies heavily on manual processes.

“Most of the surveillance process is still manual. We may talk about AI-based monitoring and other advanced systems, but the necessary skills and institutional capacity are not yet there. It will take time to develop them,” he added.

Another stock market expert, Dr Mohammad Musa, Professor at the School of Business and Economics at United International University (UIU), warned that the BSEC’s decision to unfreeze BO accounts could expose retail investors to further losses and potentially ruin them financially.

He questioned the rationale behind the move, saying the regulator appeared to be prioritising higher trading volumes over proper investigation and accountability.

“Instead of following the proper procedure, they have taken a shortcut. The objective appears to be increasing trading volume in the secondary market.”

He cautioned that allowing individuals accused of manipulation to resume trading without completing investigations could have serious consequences for ordinary investors.

“If those whose accounts were blacklisted resume the same activities for which they were penalised, what will be the consequence? Investors will be financially ruined.”

Dr Musa said the regulator should first establish whether the account holders were guilty before deciding whether to restore their trading privileges.

“The proper solution would have been to investigate the reasons for freezing their BO accounts. Those found guilty should be punished, while those found innocent should be allowed to resume trading.”