The New Nation - Internet Edition

BSS, Dhaka

The daily turnover at Dhaka Stock Exchange (DSE) may increase to Taka 3,000 crore by the year-end should the current trend of investors' confidence persists, DSE President Rakibur Rahman told a seminar on Saturday.

Participants of the seminar were also optimistic about a stronger and more stable capital market while they discussed a new system of raising capital through issuing primary shares.

DSE organised the seminar in the city, bringing in stock- market stakeholders, experts and potential issuers at a single platform to discuss the potentials and the problems of the Book Building Methodology, a new system for determining issue price of an initial public offering (IPO).

Most of the participants have seen the new system a supportive tool to ensure long term stability and transparency in the capital market.

The DSE president was seemingly upbeat while making his opening remark before a big gathering of capital market experts, stockbrokers, present and potential issuers, merchant bankers and high officials of the stock market watchdog.

He observed that the investors' confidence had got the stronger ground, shrugging off all confusion and fear.

"We used to be scared to see the index beyond 3000-mark or the daily turnover above Taka 1,000 crore. But the situation had been changed and the index remained stable over 3,000 points for a while when the October average of the daily turnover was Taka 1200 crore," he said.

Rakibur dismissed any confusion about the present bullish trend. "The market is on the right track," he said and suggested that the government increase inflow of good shares to keep the trend up by balancing demand and supply of shares.

"The government does not require doing business in hospitality, aviation and other services sectors, rather it can get more return by offloading shares from such public-run organisations," the DSE president observed.

Securities and Exchange Commission (SEC) Chairman Md Ziaul Haque Khondaker said the market needs more supply of good shares for persisting stability.

Like others, he also believes the Book Building system will facilitate companies offering shares through a simple, but a competitive process to get proper value of their shares.

Besides, he said that the new system would also benefit the investors as they could get an indication of probable market price of the shares from the bidding.

Under the system, price of an IPO is determined through open bidding by institutional buyers when individual buyers get the shares on the basis of the bidding price, but from their reserved quota, said SEC Executive Director Mohammad Adul Hannan Zoardar.

Making a multi-media presentation on the new system, he said the system would offer more shares to institutional investors and at the same time it would protect the individual investors' interests by keeping bigger quota for them.

"The quota for both the individual and institutional investors will be determined according to the size of the IPOs," he said.

Besides, institutional investors would not be allowed to offload their portions in 15 days from the offering, which will protect the individual investors' from profit-taking transactions.

The SEC has introduced the Book Building Method in March this year to allow companies with a minimum net worth of Taka 30 crore.

The company shall have also offer at least 10 per cent share of its paid up capital and shall be in the commercial operation for at least immediate past five years with a track record of three-year profitability and no accommodated loss.

The major difference between the present system and the new one is mainly defined in the pricing system. The present system allows companies to offer shares at pre-fixed prices. But the companies will have to put their offers before the institutional buyers first when they will bid for the shares through an integrated bidding system.

The closing price of the bidding will be the cut-off price of the particular issue and the individual buyers will get the shares at the cut-off price.

The integrated bidding system will be introduced at the stock exchanges by January 2010, when investors will be able to see the bidding online at broker houses.

The United States and Canada introduced the system in 1980 when India incorporated it in 1995. The system is now being followed in many countries with significant success.

Share market experts hope the system will bring positive impact on Bangladesh economy, facilitating bigger companies easy access to the capital market.

The companies, however, will also be allowed to issue shares through the present system of private placement, offering IPOs, right and bonus shares.