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Investors have been reluctant to invest in mutual funds despite a bullish trend on the market in recent weeks as they lacked confidence in the ailing sector.
Market operators said that the mutual funds appeared to be the most unwanted instruments on the country’s stock market.
Regulators’ failure to discipline the sector has resulted in the situation, they said.
DSEX, the key index of Dhaka Stock Exchange, shot up by around 1,100 points in the last two months that lifted share prices of almost all companies.
Most of the companies witnessed more than 40 per cent rise in share prices amid the bullish trend.
However, mutual funds remained indifferent as there were before the bullish trend.
Of the 37 funds, 33 funds were still trading below the face value of Tk 10.
The asset management companies of the mutual funds failed to provide dividends to the unit holders.
In 2018, the AMCs gave Tk 163.37 crore in cash dividends to the unit holders, a 28.3-per cent less than what was given in 2017.
Most of the AMCs provided re-investment units to the unit holders.
The situation has continued since the listing of the mutual funds on the country’s stock exchanges.
In 2015, the Bangladesh Securities and Exchange Commission moved to amend the mutual fund rules to revive the sector.
But the commission is yet to finalise the draft rules for mutual funds.
Against the backdrop, the sector failed to thrive on the market as investors were continuously rejecting the MFs.
After a spate of flak, the regulator has recently directed that the MFs could provide only cash dividend and they could not give stock dividend.
But, the asset managers found loopholes in the rules as well and declared no dividend or just minimal cash dividend for the unitholders that worsened the situation further, market operators said.
Six mutual funds declared no dividend for the year ended on June 30, 2020.
It was observed in the last six years that only 5-7 MFs provided double-digit dividend that turned the investors away from the MF sector, market experts said.
The asset management companies, which manage mutual funds, are bound to invest at least 50 per cent of their funds in the capital market.
However, the regulator detected that some mutual funds breached the rules and invested funds in non-performing entities for their own interest.
After observing the situation, the current commission has recently ordered the MFs to disclose their investment quarterly on their web sites.
Market experts said that investors expected that the AMCs would play a key role in reviving the market during the downward trend, but they failed to play the role.
They said that the BSEC allowed the AMCs to extend tenure of the MFs by another 10 years that also hit the investors’ confidence in the sector.
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