The battle for the Dhaka Stock Exchange

Mishel Khan
Thursday, March 8th, 2018
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After a long and protracted tussle between the Chinese consortium of the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE), and the Indian National Stock Exchange (NSE), the Dhaka Stock Exchange (DSE) has finally put forward and recommended the higher Chinese consortiums bid to the Bangladesh Securities and Exchange Commission (BSEC). The bourses from both countries are bidding for a 25% share of the Dhaka Stock Exchange, which is courting foreign investment as part of its demutualization process.


Earlier, the Chinese consortium’s proposed to buy 450 million or 25% shares of the DSE at a rate of Tk22 each, which is significantly higher than that of NSE of India, which offered Tk15 per share for the same number of shares. The Chinese consortium also offered technical support of Tk307 crore and asked for a seat on the board, adding that it would not seek any return on its investment for a period of 10 years, whereas the Indian consortium demanded two seats on the DSE board. The Indian NSE did offer technical support, but it did not clarify its investment amounts.


One of the reasons of selling a stake in the DSE, can be put down to demutualization when it normally turns into a for-profit entity from a nonprofit one. According to the demutualisation scheme, 25 percent of the DSE shares would be sold to strategic partners, 35 percent to small investors, and 40 percent would be with the Trading Right Entitlement Certificate or TREC holders. The DSE’s demutualization plan included selling of one-fourth of its stakes to strategic partners, mainly foreign entities, in a bid to receive their technical and technological support to further modernize the exchange.


However, due to the lobbying by the NSE and the subsequent visit of Vikram Limaye, Managing Director and Chief Executive of the NSE, for a meeting with BSEC officials, the DSE decision to accept the Chinese consortium’s proposal had been delayed. Soon after the meeting with Vikram Limaye, BSEC called the DSE’s Chairman Abul Hashem and Managing Director KAM Majedur Rahman to further scrutinize both the proposals, ultimately leading to the delay.


Now, after DSE had recommended the Chinese proposal, the BSEC commission has identified a number of issues with the Chinese proposal, and has sought clarifications from the DSE, according to sources in DSE. The BSEC commission had asked the DSE to explain the conditions put forward by the Chinese consortium in their proposal. According to sources in DSE, the conditions raised by the BSEC are not major ones, and include differences in proposed arbritation laws and countries amongst other points.


It now remains to be seen which strategic partner is given the go ahead for the 25% stake in the DSE, although both the DSE and BSEC shall have to take the final approval from the Government of Bangladesh, since there is a foreign investor involved. However it remains to be seen whether there are more twists in the tale in the future over the demutualization of the DSE.

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