2022’s inventory market has two main headwinds: Professor Mahmood Osman Imam

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In a current interview with The Enterprise Commonplace, he mentioned the company earnings might be impacted if the omicron variant of the coronavirus bites deep

02 January, 2022, 09:55 pm

Final modified: 02 January, 2022, 10:13 pm

Sketch of Professor Mahmood Osman Imam/ TBS

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Sketch of Professor Mahmood Osman Imam/ TBS

Sketch of Professor Mahmood Osman Imam/ TBS

The brand new yr’s inventory market outlook will not be very clear, and it will face two headwinds — omicron, and the function of the central financial institution in 2022, mentioned Dr Mahmood Osman Imam, Professor of Finance on the College of Dhaka.

In a current interview with The Enterprise Commonplace, he mentioned the company earnings might be impacted if the omicron variant of the coronavirus bites deep.

If Bangladesh faces a dire scenario due to an outbreak of the brand new variant, the nation’s economic system can be severely impacted.

Alternatively, even when the nation manages to face up to any omicron wave, its overseas commerce can be disrupted if its main sources or export nations stay locked down, the professor mentioned.

“Textile and attire, and leather-based and footwear sectors are more likely to endure probably the most if the omicron wave widens. However after all, it is unsure,” Dr Imam mentioned. 

The opposite doubtless issue to affect the inventory market within the new yr is the function of the central financial institution, particularly its stance relating to the capital market, as it’s a sturdy sufficient issue to form traders’ confidence.

The capital market publicity calculation technique for banks needs to be cost-based, as it’s for different sectors, mentioned the monetary market knowledgeable.

Banks have been as soon as allowed to take a position as much as 10% of their deposits, which was a giant portion.

However following the 2010-11 inventory market crash, the Financial institution Firms Act was amended and the restrict was set at 25% of the banks’ solo fairness and 50% of the equities of their subsidiaries.

This modification decreased the banks’ inventory market funding restrict considerably, which Dr Osman Imam doesn’t oppose.

“However, the primary downside lies inside the publicity calculation technique,” he mentioned.

When the inventory costs went up within the second half of 2021, the identical funding of banks started to show over investments because the publicity is calculated based mostly available on the market value of securities and banks have been below stress to dump a part of their holdings.

“So far as depositors’ threat is anxious, it’s the buying value of shares, not the market worth,” he added.

Banking shares, a big a part of the bourses, don’t look too profitable proper now because the banking sector would possibly have to pay out fewer dividends amid provision or capital shortfall, regardless of the deferral facility in opposition to irregular loans, he opined.

“If there isn’t a omicron wave, the banking sector would possibly flip round within the second half,” he anticipated.

Nevertheless, traders’ responses to rising conditions and occasions at all times stay supreme available in the market.



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