Chinese consortium to reform capital market in BD

DSE feel urgency of uninterrupted fund flow and long-term investment in the market, and for this, Dhaka Stock Exchange is encouraging the eligible Chinese investors for investing in the capital market to attain win-win situation for both countries economy

Zahid Hossain Biplob: Dhaka Stock Exchange (DSE) is encouraging the eligible Chinese investors for investing in the capital market to attain win-win situation for both countries economy.
Considering of necessity of revamping the capital market of the country, the DSE members feel urgency of uninterrupted fund flow and long-term investment in the market.
Already, a Chinese consortium of Shenzhen Stock Exchange and Shanghai Stock Exchange on September 4 last year joined DSE as its strategic shareholder by purchasing 25 per cent shares of the Bangladesh’s premier bourse for Tk 947 crore.
Despite taking a number of initiatives in recent years, the capital market of the country is yet to be stable due to lack of professionalism and fund flow, DSE officials said.
DSE has already discussed with the Chinese consortium regarding the cross-boundary investors’ connectivity.
The bourse is assessing the V-Next Platform, a wholly-owned subsidiary of SZSE, to build an ecosystem across the China-Bangladesh to integrate financial intermediary services, institutional investors and projects, DSE officials said.
SZSE has offered to jointly operate the V-Next programme in Bangladesh.
The V-Next has achieved remarkable success in China with 12,000 institutional qualified investors registering, the officials said.
DSE intends to connect those 12,000 investors with the Bangladesh capital market, they said.
The bourse is not thinking about cross-border listing at this moment rather it is looking for foreign investments to keep the market stable, they said.
Besides, DSE is going to launch small-cap board, alternative trading board to facilitate derivatives, sukuk and open-end mutual fund that would need funds from high net worth investors.
Dhaka Stock Exchange Brokers’ Association president ShakilRizbi told New Age that the association had decided to visit China to bring investors to the country’s capital market.
‘We may visit China in July,’ he said.
DBA would also involve Bangladesh Bank in the process to address the foreign currency transection issues, he said.
He said that DBA would seek support from the Chinese consortium over DSE Mobile App as the app failed to attract investors for its poor connectivity.
DSE would also assess financial data exchange platform system for interoperability with Chinese market and building cross-border connectivity, DSE officials said.
The system will facilitate to link up the financial institutions in the two countries to forge a cross-border financial community, they said.
They said the prime issue would be how the investors could trade without physical presence and how brokerage houses of the countries could be connected.
The DSE members got Tk 947 crore from the Chinese consortium by selling 45,09,44,125 ordinary shares at Tk 21 each and fund is being invested in the market.
The sales of strategic shares came five years after the stock exchange was demutualised to separate the ownership from its management.
Under the demutualisation, 40 per cent shares of DSE were credited to the DSE members’ accounts, while the remaining 60 per cent were kept in a blocked account. The Chinese consortium bought 25 per cent shares from the blocked account and the bourse would float the remaining 35 per cent through an initial public offering.
On February 19, the Dhaka Stock Exchange (DSE) decided to pick the Chinese bidder as its strategic partner and holder of its 25 per cent ownership rather than an Indian bidder, as the bourse found the bid by the Chinese consortium to be clearly advantageous.
On February 27, the regulator asked the DSE to clarify what the BSEC termed as ‘violations of rules’ by the Chinese consortium of Shenzen Stock Exchange and Shanghai Stock Exchange.
On March 05, the Dhaka Stock Exchange (DSE) gave replies to the queries made by BSEC over the ‘violations of rules’ in its bid by a Chinese consortium, which the bourse had picked as its strategic partner though a tendering process.
The DSE is selling one-fourth of its stake to foreign bidders. The DSE has been demutualised meaning its ownership is divided between members and outsiders to remove conflicts of interest.
After the DSE floated tender for its 25 per cent stake, a Chinese consortium of the SSE and Shenzhen Stock Exchange (SZSE) submitted a tender, offering Tk 22 a share for 25 per cent or 45.09 crore shares (worth Tk 992 crore) of the DSE. The SZSE and SSE are among the top three bourses of China, other being the Hong Kong Stock Exchange.
The SZSE and SSE consortium is offering to share its experience in market design, information disclosure, supervision investor suitability management, IPO promotion and other areas of interest for development of an SME market in Bangladesh
SZSE is also offering to assist DSE in the development of index-based products, bonds and asset-backed securities (ABS), and in designing, promoting and showcasing Bangladeshi indices in China. Working with Chinese wealth management firms, SZSE is offering to promote bond Exchange Traded Fund (ETF) and other funds in China tracking Bangladesh indices. SZSE is also offering to promote bond issuance by China-invested projects at DSE and help in designing ABS products. The Chinese Consortium is also proposing to assist in developing a derivatives market at the DSE.
However, experts appreciated the initiative of DSE to engage Chinese investors to revamp the capital market of the country. Vibrant capital market is a must for the further advancement of country’s economy.
Source: http://www.dailyindustry.news

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