There is growing optimism in the secondary market that the Dhaka Stock Exchange (DSE) will recover following the upcoming national election, with hopes pinned on the return of political stability. However, market experts caution that superficial gains are unlikely without fundamental reforms.

Analysts emphasize that the banking sector overhaul must continue under the next elected government to ensure long-term sustainability. Addressing macroeconomic challenges is also crucial to support overall market progress.

The DSEX, the broad index of the DSE, gained 3.42 per cent (169 points) from January 11, closing at 5,108 points on Tuesday, before experiencing marginal corrections in the following sessions.

Last week, representatives of the Dhaka bourse and the DSE Brokers Association (DBA) met with BNP Chairman Tarique Rahman to discuss capital market issues. Tarique assured the delegation that he would engage with market intermediaries again if his party comes to power, according to Minhaz Mannan Emon, a shareholder director of the DSE.

During the meeting, market operators highlighted challenges such as the scarcity of quality IPOs, lack of accountability, and the ongoing liquidity crisis, which has made investors with idle funds reluctant to invest in equities.

“The revival of the capital market is crucial for the salvation of the national economy,” Emon said. Market representatives also urged that the securities regulator be headed by a qualified professional with knowledge of both local and international markets.

Despite hopes surrounding the national election, experts warn that market rallies would be short-lived unless fundamental value is restored. Md Ashequr Rahman, managing director of Midway Securities, noted that the equity market remains shallow due to the lack of quality securities and is tightly linked to a strained money market, where many banks face liquidity crises due to financial mismanagement and scams.

“The banking sector has been undergoing reforms, and this process must continue after the national election,” Rahman said. He added that resolving crises in scam-hit banks and financial institutions is essential to sustain any recovery in the equity market.

Currently, five merged banks and nine financial institutions are under liquidation, while several others are on the verge of collapse. Many banks are surviving primarily through investments in Treasury bonds, rather than lending to businesses. Experts argue that reviving banks’ lending activities is critical, as it would boost economic activity and, in turn, strengthen the capital market.