Chairman of the Securities and Exchange Commission (SEC) Faruq Ahmed Siddiqi said Tuesday he will hold meetings with the Bangladesh Bank executives and other stakeholders to discuss the liquidity crisis in the stock market.
"I will take necessary steps to help improve the present condition of the stock market after getting feedback from all concerned," Siddiqi told reporters after holding a meeting with top executives of banks and financial institutions in his office.
He said the stock market has already shown some improvement as the DSE General Index or DGEN gained by 42.09 points in the last two days.
The SEC chairman will hold another meeting with the members of the Chittagong Stock Exchange (CSE), country's second bourse, today (Wednesday).
Deliberations in Tuesday's meeting pointed out that the institutional investors should play a more proactive role to develop the country's stock market.
Top executives of Investment Corporation of Bangladesh (ICB), AB Bank, Industrial Development Leasing Company of Bangladesh Ltd (IDLC), Prime Bank, Prime Finance, NCC Bank, LankaBangla Securities Ltd, Pubali Bank, Union Capital and Capital Market Services Ltd (CMSL) attended the meeting.
The institutional investors in the meeting placed several proposals for the sustainable growth of the stock market that included introduction of market-making system, introduction of book building system for initial public offering (IPO), allocation of more IPO shares (25 per cent to 35 per cent) to the institutions and mutual funds, provision for fiscal incentives to all listed companies and banks and financial institutions on investments in the secondary market.
Other suggestions made at the meeting were; waiving of tax on dividend earnings of portfolio accounts, tax incentive to the asset management companies and easing of mutual fund floatation procedure, implementation of the newly enacted 'direct listing rules' by involving the merchant bankers, reduction of interest rate on government saving instruments and mandatory listing of power, fuel and telecommunication companies.
On the proposal on introduction of market-making system, the SEC officials said a rule on the proposed system was prepared four years back.
"So we told them to take initiative in this connection to make the stock market trouble-free in the event of any liquidity problem or volatility through adoption of the market-making system," one SEC source told the FE.
Commenting on the market situation, the SEC chairman said the general investors need not to be panicky as the fundamentals of a good number of listed companies are strong.
"There might be some liquidity crisis due to tight monetary policy of the government but it cannot be solely responsible for the recent erosion in stock prices," he said.
Meanwhile, the SEC Monday amended the Securities and Exchange Commission (merchant banker and portfolio manager) regulations, 1996 allowing the merchant bankers to do portfolio management with the bankers' own funds.
Earlier merchant bankers were only allowed to do portfolio management with the clients' fund.
Many of the merchant banks now in operation in the country mostly remained inactive in their operations when they were barred from portfolio management with their own funds.
At present, there are 29 merchant banks, but only three -- AB Bank, ICB Capital Management Ltd and Prime Finance & Investment Company Ltd -- are active.
The SEC first issued registrations to some 25 merchant banks in early 1997. The paid-up capital of each full-fledged merchant bank is Tk 20 million.
The paid-up capital is Tk 10 million for merchant banks which perform underwriting and Tk 2.5 million for issue managers.