The sharp rise witnessed in the country’s capital market on the very first working day after the 13th National Parliamentary Election may aptly be described as an “optimism-driven surge”. After a prolonged period of stagnation and price decline, this renewed vibrancy among investors is rooted in expectations of a stable political environment and confidence in the incoming government. The performance of indices and turnover on the Dhaka Stock Exchange (DSE) indicates that the market had long remained undervalued. The prospect of a new government assuming office has generated significant hope among investors.
The relationship between the capital market and the broader economy is inseparable. Investors believe that with the return of political stability, the overall economy will regain momentum, and a stronger economy will inevitably have a positive impact on the stock market. However, sustaining the current momentum over the long term is now the principal challenge.
Electoral enthusiasm alone cannot support the market indefinitely; visible improvements in key macroeconomic indicators are essential.
First, attention must be given to reducing interest rates. Lower borrowing costs and increased credit flow stimulate business activity, which in turn benefits the capital market. Second, private sector investment must be expanded, with a target of raising GDP growth to at least 6.5 per cent.
To achieve this, the government may need to take certain “unpopular” yet bold decisions. In particular, better coordination between fiscal and monetary policy is crucial.
Deepening the capital market also requires an increased supply of quality shares. The interim government has already taken encouraging steps to list profitable state-owned enterprises and reputable multinational companies. The new government must ensure the full implementation of these initiatives. When the market is rich in fundamentally strong shares, the risk of manipulation or artificial crises diminishes.
The BNP’s electoral manifesto pledged reforms in the capital market, and these commitments must now be implemented without delay. To sustain the renewed confidence of both retail and institutional investors, there is no alternative to ensuring good governance. Transparency, accountability and policy support are the three pillars upon which a robust capital market can be built.
It is hoped that the current “spring breeze” will not prove to be a temporary warmth, but rather the beginning of a stable and sustainable market in the long term.
