Present situation of capital market and the role of brokerage house: A study on IDLC Securities Limited

Abstract

The capital market plays various roles for strengthening the economy of a country. It acts as an intermediary between surplus units and deficit units of the economy and facilitates savings into investments. Also providing liquidity of these investments, the capital market ensures optimum allocation of resources. All these activities make it the engine for the growth of the economy. When asked about their expectation about GDP growth of Bangladesh in fiscal year 2012-2013, 69 percent of the participants believe that growth stays roughly same and 80 percent said local political instability is the biggest risk to Bangladesh economy in 2013. Majority answered that central bank will keep the monetary policy tools at current level but liquidity situation will improved in 2013 relative to that of 2012. When asked to identify the reason for bearish capital market in 2012, 47 percent attributed the reason to lack of investors trust and poor corporate governance of listed companies. Also highest 49 percent participants caution the local political instability is the biggest risk to local capital market in 2013 followed by the lack of confidence of investors. Despite that, 53 percent and 43 percent survey participants respectively show their optimism that market will remain moderately bullish or remain at current level. And the expectation about average market turnover is to hover around BDT 4000 to 5000 million (41 percent responses). When asked why big business conglomerates are not interested to raise funds from primary market, almost half of the participants believe that fear of sharing the true financials with public is the reason. A majority of those surveyed (57 percent) also attributes the lack of corporate governance of listed companies is the main reason of poor foreign portfolio investment in capital market. But in 2013, overwhelming (86 percent) consensus is that demutualization of stock exchanges will bring more transparency and increase confidence of investors. Survey participants are bullish for equity in 2013 and 43 percent has said that equity will outperform other asset classes. Real estate and saving instruments received both 18 percent answers respectively. 51 percent respondent said that their expectation about employment opportunities for professional in financial market remains about the same like 2012 and 41 percent is optimistic about relative improvement of employment situation.