Many stock investors lose money for not understanding the business: ICB chairman

Many investors use margin loans to make quick profits in the stockmarket, but due to poor decisions made without understanding the business and the impact of the loan, they lose both investment and confidence in the market, said Abu Ahmed, chairman of the Investment Corporation of Bangladesh (ICB).

He made the comment at an event styled "Prospects and challenges of Bangladesh capital market" organised by the Bangladesh Merchant Bankers Association at Radisson Blu Water Garden Hotel, Dhaka on November 25.

The regulator should address the problem which arises when the retailers are forced to sale securities, he said.

Focus should also be given on the corporate tax gap between listed and private limited companies, which is very marginal, as good companies will not come to the capital market if they are not provided with any incentive, Ahmed said.

He suggested the National Board of Revenue introduce a tax rebate for companies that provide a higher dividend to the shareholders.

The ICB chairman highlighted the use of manipulated price-sensitive information to lure general traders.

The traders often receive low dividends and end up losing their capital, which they invested depending on the available price-sensitive information, he said.

A well-designed policy should be formed on initial public offerings to attract good companies to the capital market, said Faruq Ahmad Siddiqi, former chairman of the Bangladesh Security Exchange Commission (BSEC).

Nazma Mobarek, secretary of the finance division, said the capital market reform taskforce should identify and solve the problems.

Discussions should be held to encourage multinational and big companies to get enlisted with the capital market, she said.

The finance secretary said it is possible to detect manipulation during trading through digitalisation and take action against the manipulators.

Khondoker Rashed Maqsood, chairman of BSEC, said there is huge scope to reform the market, which was hit by irregularities in the last 15 years.

Now there is no pressure from the government, and the BSEC can work independently, he said.

"We are trying to bring the MNCs [multinational companies] to the capital market."

Even there is scope to bring investment from the money market at this moment, Maqsood noted.

He alleged that banks earlier lent money to the borrowers depending on the bilateral relations and taking advantage of the lack of governance in the sector.

He said that if banks opted for syndicated loans to reduce risk, there would not be an increase in default loans.