It is time for regulators to remain vigilant on the capital market (ex-president of the BSEC)

Faruq Ahmad Siddiqi, former chairman of the Bangladesh Securities and Exchange Commission, said there is no need to worry about the current index and the average price-to-earnings ratio in the capital market, but it is time to be careful.

Regulators have not been careful enough on these issues, he said Tuesday in an interview with The Business Standard’s “TBS Money” program. Business Standard editor-in-chief Sharier Khan conducted the interview via a virtual platform.

Faruq Ahmad Siddiqi also said that BSEC should maintain good cooperation with Bangladesh Bank on policy issues.

He said: “The market has been going up for various reasons for quite some time. It is not at all a bad thing. The market has been at its lowest for a long time. In this regard, the market situation is good. “

“The main weakness, however, is that good stock prices haven’t risen as much as undesirable stock prices. The price movement of undesirable stocks is usually higher in the market almost all the time. quality stock is generally lower than that., “he said.

Drawing on his own experience, he said, “We saw in 2010 or 2011 that the price of unwanted stocks increases dramatically when the market goes up. This is creating extreme turmoil in the market. The main reason for this is that most of the investors are traders. They don’t care about the quality of the business. They don’t even believe in dividends. They don’t believe in long-term capital gains either. They want to invest today, make a profit after seven days. Their resource-based knowledge is also low. “

“As a result, they invest in unwanted stocks. And there are probably unions to encourage it. There are manipulators who buy the stocks at a lower price and then get into the pump-and-dump process. people rush to buy these stocks, they (the manipulators) throw them away, “he continued.

Emphasizing the responsibilities of the regulator, he said: “It is the regulator’s responsibility to detect through surveillance whether there is manipulation in the market. Their main duty is to stop the manipulation and ensure the transparency of exchanges. “

He continued, “I don’t think there is a similar market situation to 1996 or 2010. However, indiscriminate investments have already created a risky atmosphere there.

“Second, there is now less profit taking or correction. If the market goes up and continues on this path, BSEC could lose control. We need to be aware of the problem before things get to this level. “

“There is no reason to worry about the market at this time,” he added.

When asked what the regulator should do in this situation, Faruq said, “I think the BSEC is encouraging the increase in the price of shares. Their policies seem to tend to complement market investments and lending on the market. margin.

“Those responsible for regulating the market should not participate in its strengthening, they should focus on the transparency of the process. If the market appears to be spiraling out of control, the regulator should make a political decision to maintain discipline. “

Discussing the issue of market manipulation, he said, “Detecting manipulation may not be difficult, but it is also not very easy. The main reason is that many stocks exist under different names.

“Sometimes a BO owner doesn’t even know there is a BO account in their name. There are a lot of investors who run BO 50/60 accounts.”

He added that it is very important to conduct a study on the stock market, but no serious study has been carried out so far. “I don’t think economists are very interested in this issue either,” he said.

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