New year expectations from capital market

As stakeholders in Bangladesh's capital market drew the curtain on a personal. year, the dawn of 2024 brings with it a glimmer of hope and anticipation.

The year 2023 witnessed an average turnover of Tk 578 crore on the main bourse of the Dhaka Stock Exchange, a figure that fell short of market expectations and left investors yearning for a change.

In 2024, the fervent desire is to bid farewell to the prolonged imposition of the floor price, a measure enforced by the Bangladesh Securities and Exchange Commission (BSEC) on July 28, 2022, with hopes that this will pave the way for increased turnover on both stock exchanges.

As the stock market looks forward to the new year, several critical factors emerge as determinants of its trajectory. Investors, both local and foreign, are closely monitoring developments, with expectations hinging on key elements that are poised to shape the market's fate in 2024.

The eagerly awaited national election, which took place on Sunday, stands as a pivotal moment for the stock market. Investors keenly observed the election outcome, understanding its potential to influence market sentiment and stability. The correlation between political stability and economic performance is well-established, and a favourable election result is anticipated to instill confidence and optimism among market participants.

The stability of currency exchange rates and foreign reserves holds immense significance for the capital market. Healthy foreign reserves and stable currency exchange rates are essential ingredients for attracting foreign investors to the bourses.

As we step into 2024, the new government should focus on stabilising currency exchange rates as well as improving foreign reserves to foster an environment conducive to both local and international investors.

As of January 2, some 165 companies' shares out of 392 on the main board of the DSE were subjected to floor prices, prompting the BSEC to strategise a step-by-step withdrawal plan to assess the market's ability to absorb the impact. Investors believe that gradually removing the floor prices will help make it more flexible and responsive.

The allure of new investments is a cornerstone of market rejuvenation. With the possibility of lifting the floor price, investors anticipate renewed interest from both local and foreign entities.

A market without a price floor is more likely to minimise the liquidity crisis and attract fresh participants, thereby ultimately increasing market turnover. Investors who have remained on the sidelines due to the price floor are expected to inject new funds into the market, stimulating economic growth.

As Bangladesh kicked off a new year, the stakeholders in the capital market are hoping for a change. The anticipation surrounding the national election, stability in key macroeconomic indicators, the withdrawal of the floor price, and the injection of fresh funds collectively shape the narrative for 2024.

The author is head of operations and compliance at UniCap Securities Ltd. He can be reached at shahriar@unicap-securities.com. Views are personal