stock market in bangladesh

8/18/2019 Stock Market in Bangladesh

1/18

Stock Market in Bangladesh& Other Countries

Prepared by:

SOMI FARIHA PURBA

Roll No : 4100

Honours 2nd Year

Department of Economics

Begum Badrunnessa Govt. Girs !oege" #$a%a

#epartment o& '(onomi(s

Begum Badrunnessa Govt. Girs !oege" #$a%a#ate o& Submission: )*t$ #e(ember )*+)

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2/18

Stock Market in Bangladesh&

Other Countries

Prepared &or:



Prepared by:

SOMI FARIHA PURBA

Roll No.: 4100

Honours 2nd Year



#epartment o& '(onomi(s


#ate o& Submission: )*t$ #e(ember )*+)

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3/18

Seria ,o. #es(ription Page ,o.

!$apter + Introdu(tion -

!$apter ) Sto(% Mar%et History

).+ /ondon Sto(% '0($ange).) ,e1 2or% '0($ange).3 Ameri(an Sto(% '0($ange).4 Bombay Sto(% '0($ange

!$apter 3 Bangades$ Sto(% Mar%et +*5+)

3.+ History o& Bangades$ sto(% mar%et3.) #$a%a Sto(% '0($ange 6#S'73.3 Chittagong Sto(% '0($ange 6!S'7

3.4 Stru(ture o& Bangades$ Sto(% Mar%et

!$apter 4 Sto(% Mar%et !ras$ o& Bangades$ +35+8

4.+ + #e(ember )*+*4.) ) 9anuary )*++

!$apter 8 Importan(e o& Sto(% Mar%et +

8.+ Reation o& t$e sto(% mar%et to t$e modern &inan(ia

system!$apter !on(usion +;

ABBR'


4/18

BO = Beneficiar O!ners

D"E = D#a$a stoc$ e%c#an&e

'"E = '#itta&on& stoc$ e%c#an&e

"E' = "ecurit and e%c#an&e commission

'DB(= 'entral depositor Ban&lades# limited

BB = Ban&lades# Ban$

)*+ = )nnual &eneral meetin&

D,- = delier ersus pament

'EO = '#ief E%ecutie Officer

/-O = /nitial pulic offerin&s

D*EN = D"E &eneral inde%

')"-/ = '"E all s#are price inde%

'"' = '"E selectie cate&ories inde%

/'B = /nestment 'orporation of Ban&lades#

N), = Net asset alue

'-D = 'entre for -olic Dialo&ue

"(R = "tatutor (iuidit Ratio

'RR = 'as# Resere Ratio

+' = +ar$et 'apitali3ation

E-" = Earnin&s per s#are

D/ = orei&n direct inestment

/etter o& =ransmitta

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5/18


Be&um Badrunnessa *ot. *irls 'olle&e5

D#a$a.

"u6ect: Submission o& term paper on >Sto(% Mar%et in Bangades$ ? Ot$er !ountries@

Dear "ir5

)ssalamu )lai$um.

7it# reference to t#e aoe8mentioned su6ect / !ould li$e to inform ou t#at5 / #ae een studin& in

#onours 2nd ear5 department of economics of Be&um Badrunnessa *ot. *irls 'olle&e.

/ #ae een assi&ned to prepare an analtical report on "toc$ mar$et in Ban&lades# 9 ot#er countries. /

#ae completed t#is 6o !it# due sincerit and #ard laour.

Here5 / !ould li$e to sumit t#e report as a part of m #onours pro&ram.

"incerel Yours5

"omi ari#a -ura

Roll No: 4100

Honours 2nd Year

Department of Economics.

Be&um Badrunnessa *ot. *irls 'olle&e5D#a$a.

/etter o& A((eptan(e

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6/18

"omi ari#a -ura5 Roll No:41005 Honours 2 nd Year5 Department of Economics #as sumitted t#e report on

"toc$ mar$et in Ban&lades# 9 ot#er countries;. "#e #as completed #is term paper under m superision. /

#ae &one t#rou t#e term paper and found t#at s#e #as coered almost all ideal and practical parts of t#e

stud in t#is term paper . / recommend t#e acceptance of t#e term paper.

"uperisor5


Be&um Badrunnessa *ot. *irls 'olle&e5

D#a$a.

A!,O/'#G'M',=

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7/18

/ !ould li$e to e%press m &ratitude to m superisor teac#ers for #is continues effort and &uidance

t#rouout last couple of mont#s in m !or$.

/ !ould also li$e to t#an$ m friends and relaties for t#eir supports in m !or$.

D#a$a

20 Decemer 2012

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8/18

+.+ Introdu(tion

"toc$ mar$et is one of t#e most important financial institutions of an econom as !ell as Ban&lades#. /topens door for companies to raise #u&e amount of capital from a lot of indiidual inestors inside 9 outsideof a countr. Hafer and Hein pointed t#at &ro!t# of ne! usinesses or our econom !ould not epossile !it#out aailailit of stoc$s and deelopment of financial mar$ets.

Here inestors participate oluntar to u o!ners#ip of a compan in t#e pulic mar$et. /t is said t#at stoc$mar$et is an intermediar institution to ad6ust a &ap et!een surplus units and deficit units of an econom./n t#ese das for millions of middle class educated people in Ban&lades# inestin& in stoc$s is more

popular t#an inestin& in an ot#er inestment sectors. or an inestor5 stoc$s are more liuid t#an anot#er inestment sources as it &ies ailit to sell and u o!ners#ip antime !it#out an #assle.

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!$apter +


9/18

Sto(% Mar%et History

/n t#e 12t# centur5 courratiers de c#an&e of rance mana&ed and re&ulated t#e dets of a&riculturalcommunities on e#alf of t#e an$s. "ince t#ese men traded !it# dets5 t#e !ere also $no!as;ro$ers;entian an$ers traded in &oernment securities in t#e ?1st centur. /n t#e 14 t# centur5 t#eDutc# started 6oint stoc$ companies !#ic# encoura&ed t#e s#are#olders to inest in usiness entures. /n1@025 Dutc# East /ndia 'ompan estalis#ed )msterdam "toc$ E%c#an&e and t#e !ere t#e first companto issue stoc$s and ond. A#e Dutc# pioneered in option tradin&;5 s#ort8sellin&;5;det8euit s!aps; andin ot#er speculatie finical instruments.

).+ /ondon Sto(% '0($angeA#is is one of t#e oldest stoc$ e%c#an&es in t#e !orld and estalis#ed in 1@C. A#e founder of (ondon"toc$ E%c#an&e !as o#n 'astin&. Aoda5 (ondon "toc$ E%c#an&e lists ?500 companies5 representin& C4countries.

).) ,e1 2or% '0($ange

A#e Ne! Yor$ E%c#an&e is t#e oldest and t#e most !ell8$no!n of all )merican stoc$ mar$ets. A#is !asestalis#ed in 12.

).3 Ameri(an Sto(% '0($angeA#e )merican "toc$ E%c#an&e is also $no!n as )me% .A#is stoc$ e%c#an&e !as estalis#ed in 1C4durin& t#e 'alifornia *old Rus# and t#e 'ur E%c#an&e. /n 1215 )merican "toc$ E%c#an&e enlistedcompanies5 !#ic# did not meet t#e standards of t#e Ne! Yor$ "toc$ E%c#an&e.

).4Bombay Sto(% '0($ange

One of t#e oldest stoc$ e%c#an&e mar$ets in )sia is Boma "toc$ E%c#an&e and it !as estalis#ed in1C.Aoda5 around 250005000 s#ares of stoc$ are traded dail.

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!$apter )


10/18

BA,G/A#'SH S=O! MAR'=

A#is part of t#e stud e%plains #istor of t#e Ban&lades# stoc$ mar$et !it# role and functions of D#a$a and'#itta&on& stoc$ e%c#an&es.

3.+ History o& Bangades$ sto(% mar%et

A#e 6ourne of Ban&lades# stoc$ mar$et started on )pril 2C5 14 as East -a$istan "toc$ E%c#an&e)ssociation (td. )t t#at time Ban&lades# used to e ruled -a$istan and t#e name of t#e countr !asEast -a$istan.

But tradin& on t#is mar$et started in 1@ !it# a total paid up capital of Aa$a 4 illion and 1@ securities !ere listed on t#is mar$et. A#e e%c#an&e !as renamed on une 2?5 1@2 as D#a$a "toc$ E%c#an&e is re&istered as a -ulic (imited 'ompan and its actiities are re&ulated its )rticles of )ssociation rules 9 re&ulations and e8la!s alon& !it# t#e "ecurities and E%c#an&eOrdinance 8 1@5 'ompanies )ct 8 14 9 "ecurities 9 E%c#an&e 'ommission )ct 8 1?.

/n t#e e&innin& D"E !as a p#sical stoc$ e%c#an&e and used to trade in t#e open outcr sstem. )ftert#at to secure smoot#5 timeliness 9 effectie operation on t#e mar$et5 D"E uses automated tradin& sstem.A#e sstem !as installed on 10t# )u&ust5 1C and !as up&raded time to time. A#e latest up&radin& !as

done on 21st Decemer5 200C. A#ere are 2?C memers and total 0 listed securities in D#a$a "toc$E%c#an&e. A#e !or$in& das of D"E is das in a !ee$ !it#out "aturda5 "unda pulic #olidas 9 ot#er&oernment #olidas. A#e tradin& time is from 11:00 am to 1:00 pm . /nestment options for aninestor in t#is mar$et are ordinar s#are5 Deenture5 Bond 9 +utual funds.

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!$apter 3


11/18

)s mentioned ello!es 5 Eer stoc$ mar$et #as its indices to s#o! moements in t#e mar$et asa !#ole;. /n t#e e&innin& D"E #ad onl one inde%. Ho!eer5 no! t#ere are t#ree different indices !#ic#are D"/ 5 D*EN and D"E 20.

.

•

*iftin& of s#are F &rantin& approal to t#e transactionFtransfer of s#are outside t#e tradin& sstemof t#e e%c#an&e .

• +ar$et "ureillance.

• -ulication of +ont#l Reie!.

• +onitorin& t#e actiities of listed companies .

• /nestorGs &rieance 'ell .

• /nestors -rotection und .


12/18

'"E maintained onl one inde% t#at !as )ll "#are -rice /nde% until 10t# Octoer5 1. No! '"E #as ?indices in t#e stoc$ e%c#an&e. /ndices are )ll "#are -rice /nde%

3.4 Stru(ture o& Bangades$ Sto(% Mar%et

Primary Mar%et : /nitial -ulic Offerin&s 5 ne! s#are issuance of a compan comes t#rouprimar mar$et. 'ompanies can issue ne! securities after &ettin& permission from t#e mar$et re&ulators.

Se(ondary Mar%et : "econdar mar$et deals !it# e%istin& securities or preiousl issued securities.

"ecurities can e sold or out from t#is mar$et. /n a stoc$ e%c#an&e most of t#e tradin& fi&ures comesfrom t#e secondar mar$et. A#is mar$et is also diided accordin& to its different tradin& c#aracteristics. /. -ulic +ar$et: /nstruments are traded on t#is mar$et in normal olume !#ic# is called lot s#are.

//. "pot +ar$et: Aradin& is done in normal olume under corporate actions and must e settled in 24 #ours.

///. Bloc$ +ar$et: /n t#is mar$et ul$ olume of instruments are trades t#rou pic$ 9 fill asis.

/,. Odd lot +ar$et: Odd lot refers to a uantit of s#ares t#at is less t#an mar$et lot. Odd lots of allinstruments are traded t#rou pic$ 9 fills in t#is mar$et. Basicall odd lots &enerated from onus and

rits issues.


13/18

!$apter 4

S=O! MAR'= !RASH OF BA,G/A#'SH

Histor of t#e stoc$ mar$et cras#es s#o! t#at JBull RunG efore a stoc$ mar$et cras# is $ind of normalp#enomenon.

=ime o& $istori(a &a

Aimeline of #istorical fall of t#e cras# #as een diided into t!o sections !#ic# are Decemer 2010 andanuar 2011.

4.+ #e(ember )*+*

/t #as een stated B#uian t#at t# Decemer5 2010 as t#e last &lorious da of t#e ear for t#einestors of Ban&lades# stoc$ mar$et. On t#is da D"E *eneral /nde% &ained its all8time #iestC5 1C.1 point 9 ro$e all old records of D"E turnoer Aa$a ?2.0 illion.

"ecurit 9 E%c#an&e 'ommissions and Ban&lades# Ban$ applied a lot of directies to $eep t#e mar$etunder control in 2010. But in Decemer ot# BB 9 "E' c#an&ed man of t#eir preious directies andapplied ne! more. On @t# Decemer5 2010 "E' introduced a directie sain& t#at u orders !ill eperformed after encas#ment of /nestorGs c#eue. On t#e follo!in& da anot#er directie called nettin&

facilities; !as applied. A#is indicates t#at no inestor !ill e ale to purc#ase securities a&ainst t#e saleproceedin&s of an ot#er securities durin& t#e settlement 9 clearance period. But ot# directies of @t# 9t# Decemer !ere cancelled on Ct# Decemer. A#e reason of cancelin& t#ese directies !as a si&nificantfall of s#are prices on Ct# Decemer.

"E' c#an&ed directie of mar&in loan ratio increasin& it from 1:0. to 1:1 on 1? t# Decemer and later it !as a&ain #i$ed to 1:1. 9 1:2 ecause of free fall of s#are prices.


14/18

!as !it#dra!al of ille&all inested industrial loans Decemer ?15 2010. )s a lot of t#e resered mone !as inested in capital mar$et5 an$s started sellin& s#ares and !it#dra!in& t#at mone from t#e mar$et.

B t#e time inestors ecame panic$ed. Ao #andle t#e disastrous 9 assure t#e panic$ed inestors BBe%tended its deadline for sumittin& and ad6ustin& loans. or t#e merc#ant an$s t#e deadline !as anuar15 2011 and for t#e commercial an$ eruar 15 2011. /nstitutional inestors includin& financialinstitutions started sellin& s#ares from t#e e&innin& of Decemer to s#o! #i return on inestment att#eir alance s#eet. )s t#e /nstitutions 9 an$s started sellin& t#eir s#ares from t#e e&innin& of Decemert#e turnoer of D"E !as t#e #iest eer in its #istor on t# Decemer.

1t# Decemer !as a #istorical da of t#e financial ear 2010811 in Ban&lades# stoc$ mar$et. On t#is daD"E !itnessed its i&&est one da fall in ears #istor until t#e date !it# losin& 1.@ points or @.1percent. A#e losin& inde% !as een #ier t#an 2C4.C points or ?.?2 percent of 12t# Decemer. -rices

started to nosedie in an #our after t#e tradin& started and aout 200 points !ere !iped off. /n t#e middle oft#e session it recoered little it and ended up t#e session at @4 point.

Ao meet 'RR 9 "(R reuirements of BB t#e deadline created liuidit crisis in an$in& sector and callmone rate made a ne! record of 1C0K 20t# Decemer. /nestment 'orporation of Ban&lades# 5 re&ulators and &oernment rout some $ind of stailit in t#emar$et after t#e i& fall of 1t# Decemer 9 liuidit crisis. )s a result5 s#are prices increased from 20t# tountil ?0t# Decemer and inde% stood at C20 point at t#e end of t#e financial ear 2010811.

Figure 2: DSE daily DGEN index ! De"e#$er% 2010

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15/18

Figure 3: &SE daily &'SP( index ! De"e#$er% 2010

4.) 9anuary )*++

"#are prices started to fall from ?rd anuar5 2011 as inestor #ad t#e information of on &oin& liuidit crisisof financial 9 non8financial institutions t#at limitin& mar&in loan. A#e do!n slope of inde% is noticeale fromanuar 2nd to 10t#. )s '#airman of proe committee +r. /ra#im L#aled mentioned5 Due totri&&er sale of s#ares from 2nd to t# anuar5 mar$et e%perienced its i&&est decline in s#are prices andmar$et cras# from @t# to 10t# anuar.

On t# anuar D"E *eneral /nde% declined @00 points and all indices declined nearl .percent. On 10t# anuar D#a$a "toc$ E%c#an&e *eneral /nde% lost @@0 points or percent 9'#itta&on& "toc$ E%c#an&e "electie


16/18

Importan(e o& Sto(% Mar%et

A#e stoc$ mar$et is one of t#e most important sources for companies to raise mone. A#is allo!susinesses to e pulicl traded5 or raise additional financial capital for e%pansion sellin& of o!ners#ipof t#e compan in a pulic mar$et. A#e liuidit t#at an e%c#an&e affords t#e inestors &ies t#em t#eailit to uic$l and easil sell securities. A#is is an attractie feature of inestin& in stoc$s5 compared toot#er less liuid inestments suc# as real estate. "ome companies actiel increase liuidit tradin& int#eir o!n s#ares.

8.+ Reation o& t$e so(% mar%et to t$e modern &inan(ia system

A#e financial sstem in most !estern countries #as under&one a remar$ale transformation. One feature oft#is deelopment is disintermediation. ) portion of t#e funds inoled in sain& and financin&5 flo!s directlto t#e financial mar$ets instead of ein& routed ia t#e traditional an$ lendin& and deposit operations. A#e&eneral pulic interest in inestin& in t#e stoc$ mar$et5 eit#er directl or t#rou mutual funds5 #as een animportant component of t#is process.

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!$apter 8


17/18

!O,!/USIO,

)s opposed to ot#er usiness t#at reuire #u&e capital outla5 inestin& in s#ares is open to ot# t#e lar&eand small stoc$ inestors ecause a person us t#e numer of s#ares t#e can afford. A#erefore t#e"toc$ E%c#an&e proides t#e opportunit for small inestors to o!n s#ares of t#e same companies as lar&einestors.

But stoc$ mar$et cras# is a &reat prolem. A#e causes of stoc$ mar$et cras# includes oer e%posure ofan$s and financial institutions5 poor monitorin& of re&ulators5 corrupted emploees of re&ulator

or&ani3ations5 mar&in loan5 direct listin&5 insider tradin&5 oo$ uildin&5 lac$ of &eneral inestorMs$no!led&e5 imalance of s#are and interention of Ban&lades# Ban$. Ot#er reasons5 mentioned indiscussion section !ere also liale for t#e cras#.

A#e re&ulators and &oernment #ae deeloped role and functions since t#e cras#. But t#e need todeelop more and introduce ne! tools5 strate&ies5 directies5 rules and re&ulations for mar$et deelopmentand to preent t#is $ind of stoc$ mar$et cras# in future. Deelopin& fault accountin& practices andmet#ods5 recruitin& #onest officials5 proidin& education on t#e stoc$ mar$et to t#e &eneral inestors andta$in& strict actions a&ainst manipulators can improe t#e situation and preent t#is $ind of cras#.

/IS= OF R'F'R',!'S

Boo%s

1. ello!es5 R.5 200C. A#e complete &uide to inestin& in t#e stoc$ mar$et. Eas!a &uides.

2. Hafer5 R. 7. and Hein5 ". E.5 200 A#e stoc$ mar$et. *reen!ood -ress.

?. +ers5 +. D.5 200. ualitatie Researc# in Business 9 +ana&ement. ")*E -ulications (td.

4. 7alliman5 N.5 2011. Researc# +et#ods t#e asics. Routled&e.

ebsites

. 'entral Depositor Ban&lades# (imited5 !!!.cdl.com

@. '#itta&on& "toc$ E%c#an&es5 !!!.cse.com.d

. D#a$a "toc$ E%c#an&es5 !!!.dsed.or&

C. "ecurit and e%c#an&e commission5 !!!.secd.or&

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!$apter


18/18

. "toc$ +ar$et Histor5 !!!.u33le.com

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