The Dhaka Stock Exchange: poised for a brighter future

Frontera recently spoke with Majedur Rahman, Managing Director of the Dhaka Stock Exchange where he shared his insights on reforms that are currently being undertaken to ensure a better capitalized future for this frontier market (FM) (BBRC).

There are currently only 3 main indices for the Dhaka Stock Exchange. These are as follows:

  1. The Dhaka Stock Exchange Broad Index (DSEX) is a broad market index, designed to reflect the broad market performance of the Bangladesh stock market. The index has a base date of Jan 17, 2008, and base value of 2951.91. Financials and textile sector companies dominate the DSEX.
  2. The S&P Bangladesh BMI Shariah Index is a Shariah-compliant benchmark covering large-, mid- and small-cap stocks of companies domiciled in Bangladesh. The healthcare sector commands a 43.7% weight in the index, followed by telecommunication services at 15.9% (as of October 31). The index has a base date of Jan 17, 2008, and base value of 1000.
  3. The Dhaka Stock Exchange 30 Index (DSE 30) represents 30 leading companies from the Bangladesh stock market. Together, these 30 blue-chip stocks account for around 51% of the total market capitalization of the Dhaka stock exchange. The index has a base date of Jan 17, 2008, and a base value of 1000. Pharmaceuticals, chemicals, and banks dominate this index.

Stocks such as BRAC Bank Ltd (DSE: BRACBANK), City Bank Limited (DSE: CITYBANK), Beximco Pharmaceuticals Ltd. (DSE: BXPHARMA) (BXP.L), Grameenphone (DSE: GP), IDLC Finance Limited (DSE: IDLC), LankaBangla Finance Limited (DSE: LANKABAFIN) figure amongst the top Bangladeshi stocks.

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Two more offerings from the Dhaka Stock Exchange over the next 3 months

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Rahman told Frontera that the Dhaka stock exchange is already in the process of adding two more offerings over the next 3 months, a bulletin board and an OTC (over-the-counter). This means the Dhaka stock exchange could soon see market makers and short sellers added to the list of participants. There is also the SME index which would allow small and medium-term enterprises to list. Initially, only qualified institutions would be allowed to trade in these stocks.

Two key regulations to be passed over the next 6 months

Currently, short selling is prohibited on the Dhaka stock exchange. The exchange is in talks with an organization to serve as a central counterparty to such transactions. Once that is in place (expected within the next 6 months), short-selling and day-netting may come sooner to this Asian stock market (EEMA) (VPL), than expected. Consequently, the DSE would have 2 regulations to pass:

  1. a securities lending and borrowing scheme, and
  2. regulation relating to short-selling and market makers

With the 3-phased development plan (see chart above) in place, the Dhaka Stock Exchange is on a clear maturation path.

Frontera also spoke to Rahman about the share of foreign investment and the Buffett indicator as pertains to the Bangladeshi market, which are covered in Part 3 and 4 of this series.

 

 

The Frontera interview with Majedur Rahman, Managing Director of the Dhaka Stock Exchange was conducted by Abraham Sutherland.

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