The current market volatility is due to a generally low level of financial education among traders, herd instinct, and poor certification requirements for trading eligibility, according to 88% respondents in a recent sentiment survey.

The Bangladesh Capital Market Sentiment Survey 2024 by the top-tier brokerage firm LankaBangla Securities also found the impact of financial projections through equity research publications, where the majority believes it will improve investment decision-making in the market under strict supervision of the regulator.

The flagship annual survey at its 12th continuation had over a hundred participants from various backgrounds, including investment bankers, managing directors, chief executive officers (CEOs), brokerage executives, service holders, retail investors, businessmen and students.

According to the survey, 37% of respondents perceived the capital market’s performance in 2023 as bad, with factors such as floor price, declining investor confidence, and fear of manipulation contributing to this sentiment. Some blamed the lack of regulatory reforms, the taka’s depreciation and the liquidity crisis for the situation. However, 5% said 2023 was very good.

A weak regulatory framework and lack of confidence would pose the biggest risks in 2024, followed by high-interest rates, a lack of good stocks, increased foreign sell-off, decreased liquidity flow, and interventions through frequent policy changes by different regulatory stakeholders, survey respondents anticipated.

While determining the biggest risks to the Bangladesh economy in 2024, the respondents ranked inflation and the crisis in the banking sector higher than global economic conditions, the war in Ukraine, weak exports, low remittances, energy crisis, and currency depreciation. Nearly half of the respondents categorically asked for more supportive policies by the central bank.

Over 56% believed inflation will increase in 2024, while 50% fear that local currency will depreciate further.

Respondents also offered suggestions for economic improvement, including export diversification, trade treaties, rational tax structures, tax authority reform, and the use of technology to detect tax evasion. However, they cautioned regarding higher interest rates, slower private credit growth, current account deficit, and weaker credit rating.

The survey said majority respondents feel brokerage professionals are not qualified enough to recommend stocks to buy and sell, and equity research reports by analysts help make better investments.

Two-thirds of respondents expressed dissatisfaction with the level of corporate governance, and nearly one-third considered it average in Bangladesh. Fifty-eight percent of respondents agreed that the Bangladesh Securities and Exchange Commission faces capacity constraints.

According to the survey, at the end of 2024, the stock market may remain moderately bullish, except for a majority. Gold and equity are being perceived as the most lucrative asset classes, where investors are looking most for pharmaceuticals, IT, insurance, food and allied and bank stocks.

However, questions regarding how much of the existing capacity the regulator is using in the interest of a higher integrity market were not a part of the survey.