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1 October, 2018 11:21:41 AM
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The Chinese consortium at DSE

Shenzhen Stock Exchange has developed as fast as the city where it is situated. This development can be cited as a perfect example of what Deng Xiaoping’s reform has brought to China
Kazi Mostaque Ahmed
The Chinese consortium at DSE

Tap fully the presence of the Chinese consortium at DSE as its strategic partner. Here is a great opportunity for DSE to take forward the bourse to its desired goal. The Chinese consortium comprised of Shenzhen Stock Exchange (SZSE) and Shanghai Stock Exchange (SSE), the two stock exchanges that operate independently in socialist China, is ready to help DSE in several fields including capacity building, infrastructural development, cross-training, trust building for investors and transparency in the bourse.
Recently to a group of visiting journalists from Bangladesh—this writer was also in the team— Liu Fuzhong, director of International Department at SZSE, said that their consortium wants to be with DSE for a long time and assured that they would help  bring qualitative change to DSE.
Bangladeshi journalists were invited by the foreign ministry of China to showcase developments China has achieved over the last 40 years after the reform. This year China is jubilantly celebrating the reform’s 40 years.  From the simple cashless grocery shops in Hangzhou where Jack Ma has built the multinational e-commerce giant Alibaba, within a span of just 19 years, to the tall towers of Guangzhou, more specifically China’s two capital markets, everywhere these developments are spectacular.        

Shenzhen Stock Exchange

The Chinese people have a great experience to develop their two bourses that use the state-of-art technology in the trading system. Take, for example, Shenzhen Stock Exchange. It was founded only in 1990, but now according to the size of the market capital it occupies the 8th position in the world. The stock exchange developed as fast as the city where it is situated. Shenzhen as a city was established in the year 1979, a year after Deng Xiaoping, whom the Chinese people revere as their greatest leader, initiated his programme of reform and opening up to the world in 1978.

Situated beside the Pearl river in Guangdong province, Shenzhen was just a market town of about 30,000 inhabitants on the Kowloon-Canton Railway before it was given the city-status in 1979 and the following year it was designated as China's first Special Economic Zone. Now one of the fastest growing cities in the world, Shenzhen has a population of over 13 million with an area of 2050 square kilometer. It is the third largest city in China by GDP. The richest people of China live in this industrialized city which has grown so much in importance that it is believed in China the day is not far when the city will be directly governed by the central government as a province.   The development of Shenzhen as well the bourse it has is a pertinent example what China has achieved since Deng initiated reform and opening up to China’s austere socialist system. He is the leader who taught the Chinese the mantra – “To be rich is glorious”. With this mantra China marched forward with its socialist market economy that is, however, in the west is critically called state capitalism. But China defines their economy as a socialist one with Chinese characteristics, their own model of socialism. Following this model, modern China has become an economically successful China.  A sense of contentment is in the faces of its people in general. Deng’s words come to mind again: “It does not matter if a cat is black or white, so long as it catches mice.”

Shanghai Stock Exchange

The development of Shanghai Stock Exchange was not altogether a different story, though this bourse was founded more than a century ago in 1866 but after the Communist revolution in 1949 it was shut down. After the reform initiated in 1978, it was again reopened a dozen years later in 1990 the year when SZSE launched its operation. In that sense it is as young a market as Shenzhen’s. This stock exchange has also developed so fast. In tandem with the unstoppable economic development of China as a whole, this bourse now occupies the 4th position in the world in term of market capitalization which is now well above US$ 5.5 trillion. With world class trading system garnered by comprehensive functionality, advanced technology, high efficiency and sound security, SSE’s daily processing capacity averages 180 million orders and 180 million trades, and the peak load performance reaches 100 thousand trades per second.

Bangladesh wins morally

The consortium made up of these SZSE and SSE has now become DSE’s strategic partner. As part of its demutualization scheme, DSE floated tender and the Chinese consortium offered to buy 45 crore shares at Tk 22 each with a proposal of technical support worth about Tk 300 crore. In exchange, the consortium has sought a seat on the DSE board and said that it would not ask for any return on its investment for 10 years.

Chinese consortium’s far superior bid placed it in a secured position from where it watched quietly India’s lobbying for becoming DSE’s strategic partner even though DSE declared the Chinese consortium as the winner.

The consortium led by the National Stock Exchange of India had offered to purchase the same number of shares but for Tk 15 each. It also offered technical support but it did not give a monetary value. It was really a positive thing that DSE as well as Bangladesh Security Exchange Commission did not bend down to India’s pressure and finally declared the Chinese consortium winner.

I asked Liu Fuzhong, the director of International Department at the Shenzhen stock whether they were in a competition with India’s consortium, he replied that they had not been in any such competition, they had offered their bid and had waited. By giving China the role of strategic partnership, DSE appeared winner morally.

Now ethical guidance has to be ensured at the DSE. Here qualitative change has to be brought as soon as possible. Share markets everywhere in the world are abused, but in Bangladesh this seems to be a normal thing.

There is a widespread allegation that many companies listed in DSE do not provide statistics transparently and the market is manipulated easily. How do you view this side of DSE, when I posed this question to Liu Fuzhong what he said can be briefly stated as this: markets are abused everywhere, and to overcome this would be a long-term struggle. They can help DSE with superior technology which is important, but it is not the ultimate solution. They will take here a consultative approach and, in this regard, their understanding of the market is going on. Improving liquidity will improve the market. And as they are in the DSE, he is expecting that a kind of chemistry would take place between China’s and Bangladesh’s companies.

Though DSE started its journey in 1956, much before SZSE or reopening of SSE, the former is far behind the two latter in all respect. It is sad but true that DSE has failed to contribute to the development of Bangladesh’s economy as expected. Now that the Chinese consortium is at DSE, comparison and contrast between these bourses will come into sharp focus and management at DSE will gain insights how better they should handle problems as they are and as they arise.

The writer is a senior staffer of The Independent and can be contacted at kazi.mostaque@theindependentbd.com

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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