DSE’s market cap-to-GDP ratio declines in FY22

The ratio of the Dhaka Stock Exchange’s market capitalization to the country’s gross domestic product fell to 13.02% at the end of the 2021-22 financial year, from 18.4% in the previous financial year.

According to DSE data, the ratio of DSE market capitalization to GDP was 12.3% in fiscal 2020, 15.76% in fiscal 2019, 17.19% in in FY18 and 19.43 in FY17.

Market capitalization is calculated by multiplying the total number of outstanding shares of a company by the current market price of the shares.

Market experts said the capital market continued to fail to keep pace with the country’s economic growth.

Over the past 13 years, GDP growth has averaged 6.6%, above 7% in fiscal years 2016-2017, 2017-2018 and 2018-2019, and exceeded 8% during the fiscal year 2018-2019.

However, only 360 companies are listed on the Dhaka Stock Exchange and most of them are small and fundamentally weak.

The most successful companies are reluctant to raise funds on the stock market.

In addition, investors are grappling with a crisis of confidence due to the poor performance of listed companies.

There are no other products on the market, indicating the inefficiency of market regulators, market operators said.

They said the market cap-to-GDP ratio skyrocketed in fiscal 2021 mainly due to an increase in market capitalization after 16 companies listed, including three banks.

Additionally, Beximco Green Sukuk raised Tk 3,000 crore in August 2021 and the Sukuk was listed on the DSE.

However, fundraising from the stock market through IPOs fell 57% in FY22 compared to the prior year.

Eight companies went public in FY22 and raised Tk 699.36 crore through IPOs, while 16 companies raised Tk 1,610.6 crore through IPOs in FY22. exercise 21.

The key index, DSEX, started fiscal 2022 with 6,047.66 points and ended the year at 6,376.94 points on June 30, gaining 329.28 points on the year.

The market capitalization of the DSE increased slightly by Tk 3,500 crore to Tk 5,17,781.69 crore in FY22.

The DSEX soared in the first half of FY22, but started falling from early February 2022.

The DSEX hit an all-time high of 7,367.99 on October 10, 2021.

Market traders said stock prices of large-cap companies, including Grameenphone, Square Pharmaceuticals, Beximco Pharmaceuticals, BEXIMCO and British American Tobacco Company, fell in the second half of FY22 and kept market capitalization stagnant.

They said investors were still grappling with the lack of diverse products and good companies, poor corporate governance and unscrupulous practices in the marketplace.

They suggested the listing and marketing of public companies to attract good companies and good investors.

The DSE’s market capitalization to GDP ratio was also the lowest among emerging Asia-Pacific countries.

The ratio was at its peak at 50.67% in 2010, but fell to 33.23% within a year after the country’s biggest stock market crash in 2010-11.

Sallie R. Loera