Sector classification of listed companies needs to be realigned, as the existing system is not aligned with international standards, according to the DSE Brokers Association of Bangladesh (DBA).

In a letter sent to the chairman of the Bangladesh Securities and Exchange Commission, the association urged the commission to undertake reforms in line with international best practices.

Global capital markets now widely follow internationally recognised standards such as the Global Industry Classification Standard (GICS), jointly developed by MSCI and Standard & Poor's, or the Industry Classification Benchmark (ICB).

GICS, for instance, consists of 11 sectors, 25 industry groups, 74 industries, and 163 sub-industries, offering a more consistent, analytical, and globally comparable framework.

At present, the Dhaka Stock Exchange (DSE) follows a sector classification system comprising 22 sectors, including government bonds, corporate bonds, and mutual funds.

This classification has remained essentially unchanged since its introduction.

To highlight the limitations of the existing classification, the DBA noted that the premier bourse has placed companies like Marico Bangladesh under the pharmaceuticals and chemicals sector, while British American Tobacco Bangladesh is categorised under the food and allied sector.

Under global standards, both companies would appropriately fall under the consumer staples sector.

Similarly, companies such as Walton, Singer, Bata, and Apex would be classified as consumer discretionary, reflecting their actual business exposure and sensitivity to consumer demand, it said.

“This mismatch creates analytical distortions for investors, researchers, policymakers, and international stakeholders.”

Sectoral performance analysis is a critical tool for understanding economic cycles, consumer behaviour, and income trends.

For instance, strong performance in the consumer discretionary sector often signals rising income levels and growth in gross domestic product.

In contrast, the outperformance of defensive sectors like utilities relative to cyclical sectors may indicate greater economic caution among consumers.

An inconsistent or outdated sector framework undermines the usefulness of such insights.

Aligning DSE's sector classification with internationally accepted standards would significantly enhance market transparency, improve comparability with global markets, attract foreign investors, and strengthen the stock market's role as a leading economic indicator, the DBA said.