Covid-19 impact on stock markets: Massive job losses feared

Long closure to cause huge losses to bourses, government

Amid the closure of two bourses until April 25, its stakeholders and the government are depriving from huge revenue earnings, while some 12,000 brokerage house employees risk losing their jobs should the coronavirus pandemic persist.

The stock market was closed as part of its efforts to contain the coronavirus pandemic, but the decision deprived bourses, brokerage houses and the government of huge revenue income.

The main income of brokerage houses come from share transactions. Stockbrokers says they are incurring losses for the past several years due to lower turnover, but now as the markets are closed until the end of the month, staffers of brokerage houses are fearing their job losses.

Market insiders have said if the current trend continues, at least 40-50% of total staff employed at brokerage houses may lose their jobs, while the branch offices of leading houses are likely to be closed down soon.

Dhaka Stock Exchange (DSE) director Rakibur Rahman has told that brokerage houses will be most affected due to the long shutdown.

“But no one should be fired on humanitarian grounds, although some houses have started sacking their staff,” he added.

Rakibur Rahman, also Chairman of Midway Securities Limited urged the government to include indebted stock investors and stock brokerage houses under the Tk72,000 crore rescue program of the government.

Negative impact on DSE’s income

In 238 working days of the 2018-19 fiscal year, the average daily trade of Dhaka Stock Exchange (DSE) was Tk614.26 crore.

The DSE’s major income comes from transaction fees, which was Tk72.32 crore in the last fiscal year.

As per the figure, stock exchange faces loss of Tk 30.38 lakh for a single day closure.

Shakil Rizvi, a director of DSE, has said stock market has been suffering from a lack of confidence for the last few years. So, its turnover is still very low. This shut down has compounded the already battered bourses’ miseries.

“In the current fiscal year, our income may decline drastically. The DSE needs at least Tk700 crore in daily turnover to avoid loss,” Rizvi added.

Rizvi, also a former president of DBA, has urged the authorities to keep the stock market open for the sake of stock market’s stakeholders.

Sufferings of brokerage houses

There are 338 active brokerage houses under the DSE and CSE, where at least 12,000 officials and trader representatives are employed. The brokers are heavily dependent on the income generated from stock transaction fees.

A top brokerage house CEO, requesting anonymity, told, “If the current trend continues, at least 40-50% staff will be losing their jobs, while the branch offices would shut down their operations.”

A top executive at a brokerage firm says that a large number of brokerage houses has already counted huge  losses so far for continued dull business.

As a result, brokerage house owners can’t run their houses any longer. They will be forced to reduce their management costs through cutting jobs.

Huge tax lost for trading closure

In case of revenue earning of the government, the role of bourses is worth mentioning. But the government is losing tax from the stock market due to the closure of stock market.

The prime bourse DSE deposited Tk320.15 crore in tax in the last the fiscal year. The deducted tax at source on transactions of brokerage companies was Tk145.95 crore during the period.

As per the data, if stock market is closed for a single day, the government deprives from Tk6.13 lakh in tax.

Typically, stockbrokers charge clients between 0.020 and 0.035 % (average 0.025%).

Of the amount, bourses get 0.002%, CDBL gets 0.002% and the NBR gets 0.005%.

Source: Dhakatribune