More than fifteen years after the 2010 stock market crash, Bangladesh’s capital market has yet to fully recover because the trust that collapsed then was never rebuilt in a structured and sustained manner.
Reforms followed, but they came in fragments rather than as part of a coherent long-term strategy to strengthen market institutions and restore investor confidence. We spent years managing symptoms instead of addressing the market’s structural weaknesses.
As a result, the capital market never evolved into a genuine source of long-term financing. Companies continued relying on banks for funding that equity and bond markets should have provided, while the market itself remained shallow. Corporate bonds account for only a small share of the market, and investment vehicles such as exchange-traded funds (ETFs), real estate investment trusts (REITs) and derivatives remain largely underdeveloped.
The investment culture also remained largely speculative, driven more by rumours than research and fundamentals. When a market runs on sentiment rather than value, every shock quickly erodes confidence.
The appointment of a new chairman and a fully reconstituted Bangladesh Securities and Exchange Commission (BSEC) presents an opportunity. But opportunities are only as good as their execution.
The commission has signalled a stronger focus on market surveillance, insider trading and market manipulation. Those are the right priorities. The regulator’s role, however, is not to lift the index or guarantee returns. A regulator should function like a referee in a football match, ensuring the rules are followed, information is disclosed fairly and every participant competes on a level playing field. The market itself should determine winners and losers.
Whether this leadership becomes a genuine turning point will depend on its ability to deliver consistently over the next two to three years while maintaining regulatory independence. Investors have seen reform announcements before. They will judge this commission by its actions rather than its intentions.
Tight monetary policy has also created headwinds for equities. With Bangladesh Bank’s policy rate at 10 per cent, bank deposits, treasury bills and government bonds have become more attractive, encouraging investors to keep funds in lower-risk assets. That has reduced liquidity, trading activity and overall market participation.
The nearly 18-month absence of initial public offerings (IPOs) has further weakened the market by limiting investment opportunities and slowing its expansion. But the core problem is not whether companies come through fixed-price or book-building methods. Those are pricing mechanisms, not safeguards.
The more fundamental issue is the integrity of the companies coming to market. A healthy IPO ecosystem requires strong corporate governance, transparent disclosures and reliable audited financial statements. Without those foundations, no pricing method can adequately protect investors.
At the same time, a prolonged IPO drought is unhealthy. Quality listings broaden market participation, improve liquidity and attract first-time investors. IPOs are not simply a fundraising mechanism; they are essential to deepening the capital market.
Low turnover has also strained the institutions that support the market. Brokerage houses, merchant banks, asset management companies and other intermediaries rely on market activity to invest in technology, research, compliance and client services. A prolonged weak market gradually weakens the very institutions essential to its long-term development. Turnover is not merely a trading statistic; it is an indicator of the overall health and sustainability of the capital market ecosystem.
The latest national budget sends an encouraging signal by recognising the need to reduce excessive reliance on bank financing and strengthen the capital market’s role in mobilising long-term funds.
However, removing the preferential tax treatment on corporate dividend income and reducing tax incentives for individual investors could weaken the relative attractiveness of equities while confidence is still recovering. Since dividends are distributed from profits already taxed at the corporate level, additional taxation raises concerns about double taxation and may discourage long-term investment.
Despite these challenges, I remain cautiously optimistic.
Bangladesh continues to enjoy steady economic growth, an expanding middle class and rising demand for long-term financing. Those fundamentals support the long-term case for a stronger capital market.
Recovery, however, will require a stable and predictable policy environment, better alignment between monetary policy and capital market development, stronger disclosures and accountability from listed companies and consistent regulatory enforcement.
Confidence is not rebuilt overnight, but durable recoveries are built on trust, discipline and consistency.
If we remain committed to those principles and start treating the capital market as a genuine engine of long-term financing and economic growth, I believe the years ahead can be significantly brighter than the years we leave behind.
The author is a capital market and economic policy analyst. Views expressed in the article are solely those of the author.
