Monirul Alam :
The Chinese consortium funds-Tk. 1000 crore-is likely to enter the capital market this week as the revenue authority has completed formalities on issuing the Statutory Regulatory Order (SRO) with regard to tax exemption, officials say.
The capital market, which is persistently being affected by acute fund crisis and losing capital regularly, is expected to restore confidence of the small investors with the intervention of the Chinese funds.
Once the National Board of Revenue (NBR) issues the SRO on tax exemption, shareholders of Dhaka Stock Exchange (DSE) will be able to use the funds in trading of scripts prompting the market to rebuild confidence among investors.
“We are expecting that NBR will issue the SRO this week,” DSE Managing Director K.A.M. Majedur Rahman told The New Nation on Sunday.
Gaining investors’ confidence again is the main target of the Chinese consortium funds, he said.
Following the circulation of the SRO, the Chinese consortium funds forwarded jointly from Shenzhen and Shanghai stock exchanges to DSE accounts on third September this year under an agreement of purchase of shares will be disbursed among 250 brokerage houses.
According to existing taxation rates, the NBR is supposed to curtail 15 percent in taxes to make the funds useful. The DSE appealed before the government to reduce the tax rate to 5 percent. The government has agreed and therefore, the NBR needs to take care of the issue. The delay in use of the funds originated here.
Meanwhile, the country’s premier bourse, DSE lost around Tk. 6,000 crore in the third week of October compared with second week, and maintaining a declining trend continuously till the opening day of the current week.
On Sunday, the market capital declined to Tk. 3,84,607 crore from Tk. 3,88,096 crore on Thursday of last week and Tk. 3,90,882 crore on the opening day of the previous week.
The value of trade also fell down from Tk. 778 crore on 21st October to Tk. 439 crore on 7th October, according to DSE statistics. The capital market of Bangladesh comprised of two bourses – DSE and Chittagong Stock Exchange.
The market has battered by surprised a ballooning in 2010; and hence, deteriorating the capital status that resulted in hundreds of small investors to quite the market following loss of funds. The government has executed several bailout schemes to restore investors’ confidence, including one of giving away of Tk. 900 crore in loans aiming to bring them back in trade. But, all of those initiatives went in vain leaving the market in worse state.
Finally, the government has mobilized consortium funds from two of Chinese bourses with the objective of regaining confidence of the small investors by increasing strength of the brokerage houses, which also lost capital in the 2010 catastrophe and bears huge debt burden.
Following a series of discussions, an agreement has been signed on May 14 this year between DSE and two of Chinese bourses of purchase of shares. According to the agreement, the Chinese bourses will bring in Chinese companies and local partners in Bangladesh.
According to the Share Purchase Agreement (SPA), the consortium will hold 450,944,125 ordinary shares of DSE at Tk 21 each. In addition, the consortium will offer about Tk 3 billion for infrastructure and technological development.
