Readers’ Voice

Rumours a major word in capital market

Bangladesh’s capital market was initially established in 1954, although there was little activity on both the Dhaka Stock Exchange and the Chattogram Stock exchanges until the 1990s.

Nevertheless, up to that point, figures for the regional equivalents of the DSE and the CSE showed a considerable decrease in the quantity of stocks traded, average turnover, and market capitalization.

In the capital market, Rumours can originate from a variety of places, such as unauthorized forums, social media, and speculative conversations among market players.

The speed at which rumors may spread has increased in the era of instantaneous information distribution, making it more difficult to tell reality from fiction.

Alleged financial irregularities, upcoming regulatory reforms, and the financial stability of particular stock exchange-listed corporations have been the subject of several recent rumors.

Stock prices have fluctuated and market volatility has grown as a result of the rumors’ negative impact on investor confidence.

Institutional and individual investors alike are battling uncertainty as they try to make sense of a world tainted by rumors. Market participants’ hesitation as a result of this decline in confidence has an effect on trade volumes and overall market liquidity.

The market regulations were antiquated and not consistently applied, and the regulatory framework was insufficient.

In this environment of poor governance and a lackluster institutional framework, the market went through its first speculative bubble, which broke in 1996–1997. Affected investors avoided the market for a number of years following the boom and bust.

More precisely, the capital market attempted to behave appropriately after that and underwent significant corrective action, including the implementation of acceptable norms and regulations. Before 2010, the market stabilized to some extent.

However, the market’s rise in 2010 has exhibited behavior that is nearly identical to that of 1996.

In addition; there were several bubbles in the capital market, as well as a lot of exaggerated news, false claims, manipulation, exploitation, and unlawful meddling by the authorities of the firms in addition to the associated concerns.

Many investors lost their money, went bankrupt, and got insane. In 2020, the new Bangladesh Securities Exchange Commission authority has taken important and highly promising steps that were required to alter the mindset and trust of investors in the capital market.

It’s crucial for investors to assess information thoroughly, particularly if it comes from unreliable or dubious sources.

Regulators are essential in preserving the integrity of the market and mitigating the effect of rumors on investor mood.

Campaigns for awareness and education can also lessen the susceptibility of investors to untrue rumors and assist them in making more informed selections.

Farzana Arshi
Sr. Research Analyst
Doha Securities Limited