Progress and Prospect of Bangladesh Money Market and Capital Market

Security In Bangladesh
Prepared for:
Mr. Md. Mahbubul Haque Khan
Lecturer
Department of Business Administration
East West Universit
Prepared By:
!.M. Ba"i Billah
#$$%&#&'$&$('
An)er Hossan
#$$%&'&'$&$*$
!a+ia ,houdhur
#$$%&#&'$&$-%
.eda .amia A"bar
#$$*&'&'$&$#-
Amatul /ous
#$$(&'&'$&$*#
Date of Submission:
#' April0 #$''
Letter of Transmittal
#'April0 #$''
Mr. Md. Mahbubul Haque Khan
Lecturer
Department of Business Administration
East West Universit
Dear .ir
1t is a pleasure to submit the term paper on Progress and Prospect of Bangladesh Money
Market and Capital Market Security! b toda.
1t is a fantastic opportunit for us to prepare the individual term paper under our 2uidance0
)hich reall is a 2reat e3perience.
We have )or"ed hard and tried our best0 in order to prepare the term paper. We believe that it is
encoura2ement for us to 2et involved )ith such process of reportin2 and a )a to enrich
financial "no)led2e. 1t )ill be a privile2e for us to provide further clarification on this report
)henever it is necessar.
4han" ou.
Sincerely"
An)er Hossan
#$$%&'&'$&$*$
!. M. Ba"i Billah
#$$%&#&'$&$('
!a+ia ,houdhur
#$$%&#&'$&$-%
.eda .amia A"bar
#$$*&'&'$&$#-
Amatul /ous
#$$(&'&'$&$*#
## #ckno$ledgement #
1t reall )as a 2reat challen2e for us to prepare the term paper. 5irst of all0 )e present our due
re2ards to the Almi2ht0 )ho has provided us the brilliant opportunit to build and complete this
report successfull )ith 2ood health 6 sound mind.
7ur course instructor0 Mr" Md" Mahbubul %a&ue 'han( Lecturer0 Department of Business
Administration0 East West Universit helped us all the )a throu2h. He also 2ave
proper 2uideline about this term paper and also b not 2ettin2 irritated )ith our
unlimited questions. We reall )ant to e3press our 2ratitude to him for 2ivin2 valuable
advice and time0 )hich helped immensel in preparin2 this term paper.
We also li"e to than" .ho"il Alam ,ha"lader and !aimul Ehasan0 t)o of our friends )ho helped
us immensel in this term paper.
Table of Contents
,ontent 8a2e number
1ntroduction '
Mone Mar"et .ecurities '
4&Bill pro2ress in Ban2ladesh #
1ssuer #
4pes 9
8articipants 9
Who and Ho) ,an 1nvest 9
.chedule for 1ssuance 9
.ellin2 .stem :
.econdar Mar"et for 4&Bill :
8rocedure to Allot 4&bills ;
4&bill <ield ;
,all Mone =ate (
=epo (
=everse =epo %
,apital mar"et in Ban2ladesh Histor of ,apital Mar"et *
4he ,apital mar"et0 an important in2redient of the financial sstem0 plas a
si2nificant role in the econom of the countr 6 =e2ulator Bodies
*
#. 8articipants in the ,apital Mar"et
i> .toc" E3chan2es
4he Dha"a .toc" E3chan2e ?D.E>
'$
4he ,hitta2on2 .toc" E3chan2e ?,.E> ''
,ompliance 7fficer ''
Boo" Buildin2 Method ''
4radin2 of .ecurities in the E3chan2es ''
7&4&, Mar"et ''
.ettlement of .ecurities 4ransaction in the E3chan2es '#
.ecurities 4radin2 in the E3chan2e throu2h Borro)in2 '#
.ecurities 1ssue throu2h 8rivate 8lacement '#
=i2hts 1ssue01,B0.peciali+ed Ban"08roducts08laers08arameters '9
,apital Mar"et Development
':
Measures .upportin2 ,apital Mar"et Development@
';&'-
1ndicators of capital mar"et development
'(
,apital Mar"et .ecurities
'(
Bond Mar"et in Ban2ladesh
'(
Ban2ladesh /overnment 4reasur Bonds '%
?B/4Bs> Auctions
'%
Ban2ladesh /overnment 1slamic 1nvestment Bond ?1slamic Bond> '*
,orporate bond
'*
A,1 Bond
'*
Mudaraba 8erpetual Bond ?M8B> of 1slami Ban" Ban2ladesh Limited.
#$&#'
8urpose of the 1ssue ##
.alient 5eatures 7f Mudaraba 8erpetual Bond of 1slami Ban" Ban2ladesh
Ltd. ?1BBL>
##&#9
8rofit Distribution 5eatures of M8B #9
=is" 5actors #:
B=A, Ban" #;A .ubordinated ,onvertible Bonds 24-25
Mutual 5unds #;
Debentures
#-
,apital mar"et securities ?D.E>
#(
.ectorial performance ?D.E>
#%&9$
,apital mar"et securities ?,.E>
9$
8roblems
9'&9:
8rospect
9:&9;
7vervie) of .AA=, Mar"ets
9;
=ecommendations
9-&9%
,onclusion
9*
Introduction
4he Ban2ladesh econom is )ithin the mainstream of the continuousl chan2in2 2lobal financial
sstem. Domestic as )ell as international trade also characteri+es Ban2ladesh econom. Hence a
financial sstem has developed here consistin2 mainl of the capital and the mone mar"et. 5or
an underdevelopment countr the e3istence of a )ell functionin2 mone mar"et is of
paramount importance. 4he mone mar"et currentl e3istin2 has also developed due to certain
needs. 1n 2eneral0 these needs can be termed as need for short term liquidit )ithin our financial
sstem0 to carr out the da to da economic activities and obviousl to meet and match need for
short term lendin2 and borro)in2 of the participants )ithin the financial sstem. 4&bill mar"et is
b far the lar2est component of the mone mar"et in Ban2ladesh.
,apital mar"ets are essentiall about matchin2 the needs of investors )ith those that need capital
for development. Ban2ladesh has no shorta2e of both such parties0 a oun2 and dnamic
population that increasin2l )ants0 and is able to0 ma"e provision for lifetime events0 to save for
childrenBs education0 for the possibilit of ill health and ultimatel for old a2e and retirement. 7n
the other side of the equation0 Ban2ladesh has a pressin2 need for investment resources to bolster
its stretched infrastructure resources0 to build more po)er stations0 brid2es0 ports and 2as&
pipelines to empo)er the people in the development of enterprise and the creation of Cobs. Debt
mar"ets are an e3tremel effective mechanism for matchin2 the lon2 term needs of savers )ith
those of entrepreneurs. Li"e emer2in2)mar"et countries around the )orld0 Ban2ladesh could
benefit from havin2 a local&currenc0 fi3ed)income securities mar"et. At present0 its main fi3ed
income financial products are ban" deposits0 ban" loans0 2overnment savin2s certificates0 term
loans0 treasur bills0 and 2overnment bonds and corporate debt ?sndicated loans0 private
placement0 and debentures>. But in 2eneral the corporate debt mar"et is still ver small compared
)ith the equit mar"et.
Money market securities
are the debt securities that have a maturit one ear or less. 4he 2enerall have a relativel hi2h
de2ree of liquidit. Mone mar"et securities tend to have a lo) e3pected return but also a lo)
de2ree of ris". Darious tpes of mone mar"et securities are listed belo).
Money Market
Securities
Issued by Common
In*estors
Common
Maturities
Secondary
Market #cti*ity
Treasury bills 5ederal
/overnment
Households0 firms
and financial
institutions
'9 )ee"s0 #-
)ee"s. ' ear
Hi2h
+etail
certificates of
deposit ,CDs-
Ban"s and savin2
institutions
Households ( das to ; ears
or lon2er
!one3istent
.egotiable
certificates of
deposit ,.CDs-
Lar2e ban"s and
savin2 1nstitutions
5irms # )ee"s to ' ear Moderate
Commercial
paper
Ban" holdin2
companies0 finance
companies and
other companies
5irms ' das to #($ das Lo)
/urodollar
Deposit
Ban"s located
outside the countr
5irms and
2overnment
' da to ' ear !one3istent
Banker0s
acceptances
Ban"s ? e3portin2
firm can sell the
acceptance at a
discount obtain
funds>
5irms 9$ das to #($
das
Hi2h
1ederal 1unds Depositor
institutions
Depositor
institutions
' da to ( das !one3istent
+epurchase 5irms and
financial
5irms and
financial
' da to '; das !one3istent
agreements institutions institutions
T)Bill Progress in Bangladesh
Issuer
Ban2ladesh Ban" ?BB>0 the central ban" of Ban2ladesh0 operates throu2hout the countr )ith its
nine branches. /overnment receipts and paments are overseen and mana2ed b
BA!/LADE.H BA!K. Where there is no BA!/LADE.H BA!K branch but transactions of
2overnment occur0 different branches of .onali Ban" ?.B> are assi2ned to ta"e part in these
transactions on behalf of BA!/LADE.H BA!K. 4hese branches are "no)n as E,hest
BranchesE. 1n a district0 there ma be one chest and some sub&chests. BA!/LADE.H BA!K
directl monitors ,hest branches. 4his function is "no)n as E5eedE. 4he Ban2ladesh 2overnment
finances its e3penditures in e3cess of ta3 receipts throu2h the sale of debt obli2ations. ,urrentl0
the total par value of outstandin2 4reasur bills stood at about 4a"a ##$$$ crore.
Types
4reasur bills are desi2nated b the number of das to their maturit. 4here are si3 tpes of 4&
bills that prevail in Ban2ladesh. 4hese are
a> #% das 4&bill
b> *' das 4&bill
c> '%# das 4&bill0
d> 9-: das 4&bill
e> # ears 4&bill
f> ; ears 4&bill
Participants
4he mar"et for Ban2ladesh 4reasur bills has a comple3 structure and involves numerous
participants&&Ministr of 5inance0 Ban2ladesh Ban"0 2overnment securities dealers and bro"ers0
and other holders of 4reasur securities.
Who and How Can Invest
Until #$$90 there )as no secondar mar"et for treasur securities. An investor ?institution or
individual>0 )ho maintains a current account )ith Ban2ladesh Ban"0 can invest in 4&bills throu2h
primar mar"et auctions. Auction is held on ever .unda at '' a.m. at the MotiCheel Branch of
BB. 1f .unda is a holida0 then the last )or"in2 da before .unda is used. All the investors
submit their bid unless other)ise pension or provident fund. After receivin2 the bid0 the auction
committee decides ho) much 4&bills )ill be offloaded. 4here is a hi2h&po)ered committee to
oversee the treasur functionsF )hich includes seven members.
Schedule for Issuance
Mar"etable 4reasur securities are issued throu2h re2ularl scheduled auctions in )hat is called
the primar mar"et. 4he process importantl involves the Ban2ladesh Ban"0 )hich serve as
conduits for the auctions.
Selling System
4reasur bills are sold on a discount basis0 )hich in simple terms means that )e have to pa for
the bills less the interest receivable durin2 the term of the bill and receive the face value of the
bill at the end of the period. 4reasur bills are not listed at the .toc" E3chan2e. 1f one )anted to
e3it before maturit0 rediscountin2 isnEt possible at the ,entral Ban"0 rather he or she ma ta"e
part in the =epo auction.
Secondary Market for T-ill
Until #$$90 there )as no secondar mar"et for 4&bills transaction in Ban2ladesh. /overnment
had decided to introduce the secondar 4&bill mar"et )ith a vision of broadenin2 the 2overnment
securities mar"et. WorldEs leadin2 financial institution ,iti2roupEs subsidiar ,itiban"0 !.A. and
local 8rime Ban" Limited had ta"en part in the first secondar transaction of 4&bills in
Ban2ladesh that ear. ,itiban"0 !.A. had sold a 4&bill of # ears maturit bearin2 4a"a 9 crore of
face value to 8rime ban". BA!/LADE.H BA!K had ta"en necessar steps to assist this
transaction. 4his )as re2arded the first secondar 4&bill transaction in the countr. a. 8rimar
Dealers@ Ban2ladesh Ban" has selected ei2ht ban"s and one non&ban" financial institution as
primar dealers ?8Ds> to handle secondar transactions of 4&bills and other 2overnment bonds.
4he ei2ht ban"s are .onali Ban"0 Ganata Ban"0 A2rani Ban"0 8rime Ban" Ltd0 Uttara Ban" Ltd0
.outh&East Ban" Ltd0 Gamuna Ban" Ltd0 and !,,BL0 and the onl !B51 is 1nternational
Leasin2 and 5inancial .ervices Ltd. 4he inter&ban" =epo is one "ind of secondar mar"et for 4&
bills and 2overnment securities0 )hich )as introduced from Gul #(0 #$$9. 4he selected ban"s
and the !B51 have alread ended all procedural eli2ibilit requirements for bein2 appointed and
start operatin2 as secondar bond mar"et dealers. 4he BA!/LADE.H BA!K earlier invited
applications from all scheduled ban"s and financial institutions and directed interested parties to
drop applications to the 57=EH =eserve and 4reasur Mana2ement Department of the central
ban" latest b Au2ust #'0 #$$9. A total of '% commercial ban"s and ' non&ban" financial
institution filed their applications for receivin2 8D licenses durin2 the stipulated time. 4he
central ban" earlier issued a 2uideline for the 8Ds )ith a vie) to activatin2 and streamlinin2 the
countrEs secondar bond mar"et. Under the 2uideline0 the 8Ds )ill subscribe and under)rite
primar issues and ma"e secondar tradin2 deals )ith #&)a price quotes. A 8D )onEt short sell
an particular issue and )onEt carr a short position in secondar dealin2s. 4he 8Ds )onEt act as
inter&ban" or inter&dealer bro"ersF it )as specified in the 2uidelines.
Procedure to allot T-!ills
4o foster liquidit in the mar"et0 the 4reasur issues securities consistentl and predictabl
throu2h a re2ular schedule of auctions. 1n Ban2ladesh0 Multiple)units #uction Model is
follo)ed. 4)o tpes of bids ma be submitted at the auction@
a> ,ompetitive bids
b> !on&competitive bids
,ompetitive bids specif both the quantit of the securit sou2ht and a ield. 1f the specified
ield is )ithin the ran2e accepted at the auction0 the bidder is a)arded the entire quantit sou2ht
?unless the specified ield is the hi2hest rate accepted0 in )hich case the bidder is a)arded a
prorated portion of the bid. !oncompetitive bids specif onl the quantit of the securit sou2ht.
Let us discuss the procedure that BA!/LADE.H BA!K follo)s to allot 4&bills to competitive
and non&competitive bidders throu2h 4&bill auctions. 1n Ban2ladesh0 4&bills are quoted on a 9-:&
da discount basis. We define the ban" discount rate ?BD=> as BD= I DJM K 9-:Jt0 )here t is
the number of das from settlement to maturit0 and D is the discount from par0 D I M & 80 M
bein2 the par or maturit value0 and 8 bein2 the price. Hence the discount from par is 2iven b D
I BD= 3 M 3 tJ9-:0 )hile 8 I M & D. E3ample@ 4he W.G on Monda0 5eb (0 '**: 2ives the as"
quote on the Ma $;0 E*: 4&bill as 9.#'A. ?1f )e )ere to bu the bill0 )e )ould bu at the as">.
4he quote is for 5rida0 5ebruar :. 4he mar"et convention used in the W.G is that t)o das are
needed for settlementF under this convention settlement )ould ta"e place on 4uesda0 5eb %.
4here are %- das bet)een 5eb % and Ma ;. 4he discount on a L'$0$$$ par bill is D I 9.#'A 3
'$0 $$$ 3%-J9-: I (;.%:0 and the price is 8 I '$0 $$$ & (;.%: I **#:.'-. ,onversel0 assume the
price of the 4&bill )ere L*0*$$. 4he discount amounts to D I '$0 $$$ & *0 *$$ I '$$0 and the
ban"&discount rate equals BD= I'$$J'$$$$ K 9-:J%- I :.#9A.
T-I""#eild
4he values of 4reasur securities are often summari+ed b the ield curve0 )hich plots the ields
of all non&callable securities a2ainst their maturities. An e3ample of the ield curve on Au2ust
#(0 #$$* ?Auction no M#;;> is 2iven belo). 4his curve has an up)ard&slopin20 concave shape.
.ecurities havin2 maturities of less than five ears are hi2hl concentrated0 because shorter&term
securities are auctioned more frequentl and because man previousl issued lon2er&term
securities fall in that maturit ran2e.
<ield Dolatilit of 4&bills in Ban2ladesh
?As of #(&$(&#$'$ Auction no.#;;>
T)Bill 2ield 34 days 56 days 643 days 789 days 3 years : years
34 days -.%:A &&
56 days %.;#A '.-%A &&
643 days *.';A $.-9A $.-9A &&
789 days *.(-A $.-'A $.-'A $.-'A &&
3 years '$.-#A $.%-A $.%-A $.%-A $.%-A &&
: years '$.-*A $.$(A $.$(A $.$(A $.$(A $.$(A &&
.ource@ Ban2ladesh ban"
This is an up$ard sloping yield cur*e or normal yield cur*e $hich indicates that the higher
the maturity( the higher the yield" 4hat means0 ield of *'&dau 4&bill is hi2her than that of #%&
da 4&bill and so on.
Here the ield spread bet)een the *'&da 4&bills and #%&da 4&bills is '.-%A0 )hich is the
ma3imum than those of others. 4he reason is that the demand of 4&bills 2raduall decreases )ith
term to maturit.
Call Money $ate
is the interest rate ban"s char2e a bro"er for the fundin2 of loans to investors )ho bu on mar2in.
4his is also "no)n as bro"er loan rate. 1n the call mone mar"et0 participants enter into lendin2
and borro)in2 for overni2ht. 4he transaction ta"es place due to immediate liquidit need. 4his
ma arise from various sources li"e temporar inabilit to meet the mandator :A cash reserve
requirement ?,==> demanded b the central ban"0 sudden shorta2e of fund to meet the liabilities
li"e an prescheduled repament etc. free from an specific re2ulation the participants determine
the call mone rate on a ne2otiated manner. 4he call mone rate is a volatile rate in our countr.
1t is quite affected b certain seasonalit. Durin2 the Eid especiall )hen there is a sur2e of
deposit )ithdra)als0 the ban"s find themselves in immediate liquidit crisis. 4here is a direct
and positive relationship bet)een 4&bill rate and call mone rate. When there is a seasonal cash
crisis0 ban"s rush to the call mone mar"et. 1n this situation0 call mone rate pea"s. !aturall
investors of 4&bills are not available at that time unless other)ise the are offered hi2her ield
rate.
Difference $ith the basic definition
Ho)ever0 in Ban2ladesh0 t)o and five ear securities are also re2arded as 4&bills since the are
+ero coupon securities.
+/P;
=epo is a commitment of the seller to the buer to bu bac" the instrument as and )hen the
buer intends to sell. 4his is an arran2ement bet)een seller and buer.
Earlier in Ban2ladesh0 there )as a premature encashment facilit for the investors of 4&bills.
Premature encashment facilit is a procedure of buin2 bac" the securit )hen cash is needed
2ivin2 amount and accrued interest. 4his is also called discountin2 the 4&bills. ,urrentl0 instead
of Discountin2 Windo)0 =epo facilit is opened for the investors. Here instrument isnEt required0
rather it is lined. 1nvestors can borro) either full or partial amount a2ainst the bill. 1f an investor
borro)s '$$A a2ainst the bill0 then ma3imum *;A discounted value )ill be provided. 4here is
also a =epo auction that is held side b side of the 4&bill auction. 4he ield rate of =epo is
determined throu2h bid offer and bid acceptance0 and this ield is hi2her than the ield of 4&bill.
5or e3ample0 let us assume that0 4&bill ield I %A0 =epo ield I *A0 then0 !et ield I 'A. 4o
)hom =epo facilit )ill be provided is dependent upon the liquidit in the mar"et. =epo auction
is held for ' and ( das tenure.
+e*erse +epo
When a ban" or financial institution has e3cess liquidit0 it can deposit it to Ban2ladesh ban".
4his procedure is frequentl "no)n as =everse =epo. 4here is also a =everse =epo auction that
is held side b side of the 4&bill auction. =everse =epo auction is also held for ' and ( das
tenure.
Suggestions
1ntroducin2 ne) instruments )ill create adequate opportunit for investment of short&term
e3cess fund0 )hich in turn )ill increase liquidit and further reduce dependenc on the call
mone mar"et
4he instruments ma be introduced be as ne) 1nstruments in Ban2ladesh Mone Mar"et are
e3plained here. 69 days T)bills@ this ne) lesser maturit bill )ill 2ive the investors 2reater
liquidit preference in the short term. And 2ive an out let for earnin2 return on ideal e3cess fund.
Capital market in Bangladesh
History of capital market
,apital mar"et started in U.A at Wall .treet in '-;9. 't came to Mumbai0 the commercial capital
of 1ndia around '%*$. Ho)ever0 investment in shares boomed in late '*($s. 1t too" man ears
to come to the land0 no) comprisin2 Ban2ladesh. 4he ori2in of stoc" mar"et in Ban2ladesh 2oes
bac" to April #%0 '*;: )hen a stoc" e3chan2e )as formed under the name East 8a"istan .toc"
E3chan2e Association at !araan2anC. 4radin2 started in '*;-. 1t )as renamed East 8a"istan
.toc" E3chan2e Ltd. 4ransferred to Dha"a in '*;% and a2ain renamed Dha"a .toc" E3chan2e
Ltd in '*-:.
4radin2 remained suspended durin2 the Liberation War in '*('. 4he Dha"a .toc" E3chan2e
resumed operation in '*(- )ith nine listed companies as a2ainst :;# toda. ,apital mar"et in
Ban2ladesh 2ot momentum )ith the establishment of .ecurities and E3chan2e ,ommission in
'**:. A bi2 )in2 )as added to the capital mar"et )ith the incorporation of ,hitta2on2 .toc"
E3chan2e on April '0 '**;. 7peration of ,.E started on 7ctober '$0 '**;.
The Capital market( an important ingredient of the financial system( plays a
significant role in the economy of the country"
$egulatory odies
4he .ecurities and E3chan2e ,ommission ?.E,> )as established on Gune %0 '**9 as capital
mar"et re2ulator in Ban2ladesh throu2h .ecurities and E3chan2e ,ommission Act0 '**9 ? Act ';
of '**9>. 4he commission ensures compliance of capital mar"et related la)s0 rules and
re2ulations etc. b the intermediaries and persons and institutions related )ith capital mar"et.
Basic la)s of the capital mar"et are as follo)sF
a. .ecurities Act0 '*#$
b. .ecurities and E3chan2e 7rdinance0 '*-*
c. .ecurities and E3chan2e ,ommission Act0 '**9 and
d. Depositor Act0 '***
Ban2ladesh Ban" e3ercises po)ers under the 5inancial 1nstitutions Act '**9 and
re2ulates institutions en2a2ed in financin2 activities includin2 leasin2 companies and
venture capital companies.
Participants in the Capital Market
4he .E, has issued licenses to #( institutions to act in the capital mar"et. 7f these0 '*
institutions are Merchant Ban"er 6 8ortfolio Mana2er )hile ( are 1ssue Mana2ers and '?one>
acts as 1ssue Mana2er and Under)riter.
I- Stock /<changes 4here are t)o stoc" e3chan2es ?the Dha"a .toc" E3chan2e ?DS/> and the
,hitta2on2 .toc" E3chan2e ?CS/>> )hich deal in the secondar capital mar"et. D.E )as
established as a public Limited ,ompan in April '*;: )hile ,.E in April '**;. As of 9$ Gune
#$$$ the total number of enlisted securities )ith D.E and ,.E )ere #9* and '-* respectivel.
7ut of #9* listed securities )ith the D.E0 #'* )ere listed companies0 '$ mutual funds and '$
debentures.
The %haka Stock &'change (%S&)
4he Dha"a .toc" E3chan2e Limited ?D.E> )as established in '*;:0 but its commercial
operation started in '*;-. Due to nationali+ation polic tradin2 activities of D.E remained
suspended durin2 the post liberation period and resumed a2ain '*(-. D.E is a self&re2ulator
not&for&profit or2ani+ation. As a self&re2ulator or2ani+ation D.E supervises the function of
listed companies. Administration of D.E is run b Dha"a .toc" E3chan2e ?Board and
Administrations> re2ulations0 #$$$. 4he board of directors consists of #: members0 '# directors
are elected b direct votes of D.E members and '# directors are nominated b elected members
from non&D.E members )ith the approval of the commission. 4he ,hief E3ecutive 7fficer
?,E7> is also a non&votin2 member. D.E hires the ,E7 of D.E )hich requires commissionBs
approval. 4he ,E7 conducts the dail affairs of D.E. !o) there are #9: members in D.E of
'*: members are re2istered b .E, for conductin2 securities business. Accordin2 to the rules
ever member must be corporate bod. 4ransaction and transfer of most of the securities listed
on D.E are e3ecuted electronic form. At presented D.E e3panded its on&line tradin2 activities
into the divisional and district to)ns of the countr.
The Chittagong Stock &'change (CS&)
4he ,hitta2on2 .toc" E3chan2e Limited ?,.E> )as set up in '**;. 1t is also a self&re2ulator
not&for&profit or2ani+ation and its mana2ement structure is same as D.E. 4he ,hitta2on2 .toc"
E3chan2e Limited ?,.E> started first on&line tradin2 sstem in Ban2ladesh capital mar"et in
'**% and at present it is carrin2 out tradin2 activities from Dha"a0 ,hitta2on2. .lhet0 =aCshahi0
Barisal0 ,o3Bs&Ba+ar and Khulna.
Compliance *fficer
As per the securities la)s ever intermediar institution has to desi2nate an officer as
compliance officer )hose main responsibilit is to ensure particular firms compliance )ith
securities la)s. As a primar re2ulator0 if an intermediar does not compl )ith the la)s
properl the compliance officer has to report to the chief officer of the related intermediar. 1f
violation of securities la)s continues then the compliance officer shall report to the commission.
ook uilding Method
Boo" Buildin2 8rocess of 187 pricin2 is a free pricin2 re2ime that values the compan on its
performance0 both past and future0 "eepin2 in mind its investment0 earnin2 forecast0 economic
scenario etc. 4he commission is e3aminin2 possibilit of introducin2 Boo" Buildin2 .stem for
187 pricin2 on selected basis.
Trading of Securities in the &'changes
1n D.E and ,.E tradin2 of securities is done throu2h automated sstem. As a result volume of
transaction has increased substantiall over the ears. !o) tradin2 is done in the follo)in2 four
mar"et se2ments@
a. 8ublic mar"et
b. .pot mar"et
c. Bloc" mar"et
d. 7dd&Lot mar"et
*-T-C Market
.ecurities and E3chan2e ,ommission ?7ver&the&,ounter> =ules0 #$$' )as issued in #$$# under
)hich securities de&listed from the e3chan2es and securities not listed )ith the e3chan2es but
have been issued obtainin2 consent from the commission could be traded. ,.E has provided the
platform but this facilit has not et been used.
Settlement of Securities transaction in the &'changes
Mechanism of settlement of securities transactions is elaboratel specified in D.E and ,.E
settlement of .toc" E3chan2e 4ransactions =e2ulations0 '**%. 1t also cate2ori+es securities into
A0B0 /0! and N based on profitabilit0 operation and failure to hold A/M and sustainin2 loss
that ultimatel e3ceeds paid up capital. 4his cate2ori+ation helps investors to "no) about the
fundamental and attractiveness of securit.
Durin2 the 5< #$$-&$(0 2overnance scenario of listed compan improved remar"abl. 1n this
period number of OAP cate2or companies increased and number of OBP and ONP cate2or
companies decreased and increased respectivel.
Securities Trading in the &'change through orrowing
1n a bullish mar"et securities price continues to increase and the investors ma opt for investin2
more than his equit availin2 loan from the bro"ers. A per D.EJ,.E ?MemberBs mar2in>
=e2ulations0 #$$$ investors could invest more than his o)n resources and help reapin2 profit
from the bullish mar"et.
Li"e)ise suppl of securities could also be increased throu2h short&sale mechanism. .hort&sale
refers to sellin2 of securities that the seller does not o)n. As per Dha"a .toc" E3chan2e ?.hort&
sale> =e2ulations0 #$$- an person )ith a securities borro)in2 arran2ements could sale
securities )ithout o)nin2 it. 4his mechanism helps increasin2 suppl of securities and could be a
)in&)in situation for seller0 lender and bro"era2e firm.
Securities Issue through Private Placement
=ules that are required to be complied )ith for issuance of securities throu2h private placement
is .ecurities and E3chan2e ,ommission ?1ssue of ,apital> =ules0 #$$' under )hich applicants
has to furnish certain information and documents to the commission. While accordin2 consent
the commission imposes conditions that include timel preparation of financial statements and
furnishin2 of the same to the commission0 e3ecution of all transactions e3cept pett cash items
throu2h companBs ban" account. 4hese conditions help issuer companies elevate their corporate
2overnance status and ma"e them read for raisin2 capital throu2h public offerin2.
$ights Issue
.hare issue to e3istin2 shareholders b listed companies in proportion to their capital is approved
b the commission under .ecurities and E3chan2e ,ommission ?=i2hts issue> =ules0 #$$-. As
per the said rules0 such ri2hts issue and price are required to be approved b the shareholders in
2eneral meetin2.
ii- In*estment Corporation of Bangladesh ,ICB-
4he 1nvestment ,orporation of Ban2ladesh )as established in '*(- )ith the obCective of
encoura2in2 and broadenin2 the base of industrial investment. 1,B under)rites issues of
securities0 provides substantial brid2e financin2 pro2rams0 and maintains investment accounts0
floats and mana2es closed&end 6 open&end mutual funds 6 closed&end unit funds to ensure
suppl of securities as )ell as 2enerate demand for securities. 1,B also operates in the D.E and
,.E as dealers.
iii- Speciali=ed Banks
Ban2ladesh .hilpa Ban" ?BSB>0 Ban2ladesh .hilpa =in .an2stha ?BS+S>0 BA.1, Ban" Ltd.0
some 5orei2n Ban"s and !,Bs are en2a2ed in lon2 term industrial financin2.
7" Product of capital market: a> .hares0 b> Debentures0 c> Mutual funds0 d> Bonds0 e>
Derivatives0 f> 5uture and options.
9" Players of capital market: a> 1nvestors0 b> 8L,s0 ,> .toc" E3chan2es0 d> Bro"ers and
Dealers0 e> Merchant ban"s0 f> .ecurities and E3chan2e ,ommission0 2> ,DBL.
:" Parameters used to measure si=e of capital market: a> !umber of listed companies0 b>
!umber of securities0 ,> .i+e of mar"et capitali+ation0 d> 1nde30 e> Dail trade volume0 f> /.8
ratio to mar"et capitali+ation0
8" /fficiency indicators of capital market: a> 8E multiple0 b> Dividend ield0 c> Liquidit0 d>
Disible presence of re2ulators0 e> E3it route re2ulation for sic" 8L,.
Capital market de*elopment:
4he World Ban" is alread )or"in2 )ith the /overnment and Ban2ladesh Ban" on some of
these "e issues0 and )e shall be read to )or" further )ith them )ithin the limits of our o)n
comparative advanta2e. We have been e3tremel pleased to see the coordinated approach of the
Ban2ladesh Ban"0 Ministr of 5inance0 the .E, and the !ational Board of =evenue to )or"
)ith 18D, to brin2 the first securiti+ation transaction to mar"et in Ban2ladesh. 4his has been one
solid step to)ards mobili+in2 finance for entrepreneurs and has confounded those s"eptics )ho
thou2ht that securiti+ation is Otoo sophisticatedP for Ban2ladesh. 8erhaps those s"eptics )ould
benefit from seein2 the collected talent and enthusiasm for development 2athered here in this
room toda. We )ould ver much li"e to hope that the ne3t securiti+ation )ill be another
transaction close to our heart0 that of the securiti+ation of a portion of the toll revenues of the
Gamuna Brid2e. 4he 18D, loan securiti+ation )as a lon2 time in the ma"in2 and the Gamuna
Brid2e securiti+ation appears to be follo)in2 the same path. 4his is a transaction )hich all
e3perts a2ree )ould have a maCor positive impact not onl on capital mar"et development in
Ban2ladesh0 but also in mobili+in2 ta"a finance for other strate2ic infrastructure developments
such as the proposed 8adma Brid2e. We can onl hope that the Gamuna Brid2e securiti+ation
)ill enCo the same lon2 term success. 4o facilitate this process0 it )ould be useful to have
desi2nated counterparts from the /overnment and Ban2ladesh Ban". .uch a crucial mar"et as a
domestic bond mar"et needs e3cellent domestic re2ulation and supervision if investors and
borro)ers are not to be disappointed or )orse. 1t cannot be created b outsiders.
8resentl0 Ban2ladesh capital mar"et has achieved phenomenal 2ro)th in si+e0 depth and
maturit. All indicators of capital mar"et sho)ed an increasin2 trend durin2 last couple of ears.
1ncreased investorsE participation0 demand for stoc"s is pumpin2 to price hi"e in the mar"et.
7ther indicators of the capital mar"et also recorded a si2nificant 2ro)th. Mar"et capitali+ation of
D.E0 a remar"abl increased durin2 last three ears that reflected in the ratios of mar"et
capitali+ation to the countrEs /D8 at current mar"et price. 4he ratio of mar"et capitali+ation of
D.E to /D8 rose to 9*.' percent in end 5<'$ from ;.# percent in 5<$- and from #.9 percent of
5<$$. E3cept '9.' percent of '**-Es bubble0 the ratio )as almost in hori+ontal level )ith around
belo) 9 percent up to 5<$:. 4he capital mar"et developments and its sustainabilit depend on
mar"et fundamentals at least in the medium term0 and the fundamental stren2th of the mar"et
essentiall comes from financial stren2th of the listed companies. Also0 stron2 re2ulator
environment created and maintained b the re2ulator bodies and participation of institutional
investors and professional mar"et analsts help orderl mar"et operations. 4he mar"et )itnessed
that last fe) ears man fundamental companies )ith stron2 financial stren2th have been listed
in the mar"et. 4he main re2ulator bod .E, and the /overnment of Ban2ladesh and others
related re2ulator authorities have continued their all efforts to develop the Ban2ladesh capital
mar"et that reflected in the mar"et trends. 4he Ban2ladesh capital mar"et is no) maturin2
2raduall in terms of depth and breathe and approachin2 to more shoc" resistant operational
mode.
Measures Supporting Capital Market %evelopment
4he .ecurities and E3chan2e ,ommission ?.E,> undertoo" several measures to stren2then
capital mar"et throu2h build&up the confidence of the investors in capital mar"et durin2 5<'$@
'. 5or the benefits of investors and capital mar"et0 Dha"a .toc" E3chan2e ?D.E> is advised
to provide over&the&counter ?74,> facilit to the issuers0 )hich have been delisted b the
e3chan2e0 e3cludin2 those securities )hich have been delisted upon application b the issuers
concerned.
#. 5or the benefits of the investors0 deposit refund mone is made directl into unsuccessful
187 applicantsE ban" account.
9. .toc" E3chan2es are advised that a stoc" bro"er can open ma3imum '; branches and
offices )ithin one "ilometer peripher of the main office.
:. 5or investment decision and for avoidance of confusion0 all listed companies are advised
for ma"in2 the detailed quarterl financial statements available in their )ebsite.
;. Maturin2 of all closed&end mutual funds has been fi3ed. Accordin2 to this directive no
mutual fund shall have maturit for more than '$ ears. Ho)ever0 the close&end mutual funds
)hich have alread passed '$ ears after launchin2 are allo)ed to continue a little more but must
retire )ithin 9' December #$''.
-. Ban"s0 other financial institutions and insurers are advised to form separate subsidiar
companies to run bro"era2e and dealer activities. 4he subsidiaries must be formed b 9' March
#$'$.
(. !e) criteria for mar2in loans for mutual funds have been set. Accordin2 to the ne)
criteria0 the funds that )ill trade (.; percent hi2her than their latest net asset value ?!AD> )ill
not qualif for the loans.
%. 1n order to increase the suppl of shares mandator provision has been made for
companies havin2 paid&up capital more than 4a"a $.;$ billion must appl for 187 to off&load
shares in the capital mar"et.
*. 4o cool do)n the stoc" mar"et mar2in loan criteria has been reset. Accordin2 to the ne)
criteria investors are not entitled to 2et mar2in loan to bu equit shares e3ceedin2 8JE ratio :$.
8reviousl it )as at ;$.
'$. 8lan to increase the number of mutual funds0 merchant ban"in2 license to financial
institutions.
''. .ettin2 up of Ban2ladesh 1nstitute of ,apital Mar"et to train the investors and the
officials )or"in2 in the intermediaries a2encies.
Table 6"6: Indicators of capital market de*elopment

FY
03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Number of listed
securities 260 267 259 277 281 294 308 279
Isuued caital ! debt
"billio# ta$a%
36.
1 46.8 52.8 64.7 83.7 109
147.1
8
213.1
1
&ar$et caitali'atio#
"billio# ta$a%
69.
2
142.
4 213
205.
3
412.
2
789.
4
1001.
9
2276.
98
(ur#o)er "billio# ta$a%
30.
6 24.8 74.1 46
164.
7
209.
2
892.7
9
2714.
28
*e#eral rice i#de+ 830 1319 1713
1339
.5
2149
.3
3000
.5
3010.
26
6153.
68
*,-.(/ IN 01,21N(
Number of listed
securities 1.2 2.69 -3 6.95 1.44 4.63 4.76 -9.42
Isuued caital ! debt 3.1
29.6
4
12.8
2
22.5
4
29.3
7 30.2 35.05 44.8
&ar$et caitali'atio# 5.6
105.
78
49.5
8 -3.62
100.
78
91.5
1 26.92
127.2
7
(ur#o)er
12.
3
-
18.9
5
198.
79
-
37.9
2
258.
04
204.
51
326.7
6
204.0
2
*e#eral rice i#de+ 4.7
58.9
2
29.8
7 -21.8
60.4
6 39.6 0.33
104.4
2
Capital market securities
BOND MARKET IN BANGLADESH
Bond mar"et acts as buffer of equit mar"et. 7n the one hand0 bond mar"ets are essential for a
countr to enter a sustained phase of development driven b mar"et&based capital allocation and
increased avenues for raisin2 debt capital. 7n the other hand0 the central position occupied b
domestic bond mar"ets in mar"edl increasin2 the resilience of a countrBs financial sstem and
insulatin2 it a2ainst e3ternal shoc"s0 conta2ion and reduction of access to international capital
mar"ets is established. 4his mar"et in Ban2ladesh has been found ver inefficient )ith respect to
number of issues0 volume of trade0 number of participant0 lon2&term ield curve0 interest rate
polic etc. 1n vie) of this0 the present stud has been underta"en aimin2 at identifin2 the
problems that impedes the 2ro)th and development of Bond Mar"et in Ban2ladesh. 4he stud
has found that the si+e of debt mar"et of Ban2ladesh is ver lo) as compared to other .AA=,
,ountriesF has hu2e 2ro)th potentialitF and identified important impediments to the 2ro)th and
development of Bond Mar"et in Ban2ladesh such as ris" and return factor0 liquidit and
2overnment polic factor0 issue mana2ement factor0 investment polic factor0 macro&economic
and re2ulator factor0 and mar"et 6 issue related factor. 4he stud has su22ested some important
polic measures such as re2ulator chan2e0 establishment of lon2&term ield curve0 offerin2
fiscal benefits0 encoura2in2 companies raisin2 funds throu2h corporate bond issues0 "eepin2
treasur rate lo) etc. for the development of Bond Mar"et in Ban2ladesh. Bond mar"ets in most
countries are built on the same basic elements@ a number of issuers )ith lon2&term financin2
needs0 investors )ith a need to place savin2s or other liquid funds in interest&bearin2 securities0
intermediaries that brin2 to2ether investors and issuers0 and an infrastructure that provides a
conducive environment for securities transactions0 ensures le2al title to securities and settlement
of transactions0 and provides price discover information. 4he reu!ator" reime provides the
basic frame)or" for bond mar"ets and0 indeed0 for capital mar"ets in 2eneral. Efficient bond
mar"ets are characteri+ed b a competitive mar"et structure0 lo) transaction costs0 lo) levels of
fra2mentation0 a robust and safe mar"et infrastructure0 and a hi2h level of hetero2eneit amon2
mar"et participants.
Bangladesh >o*ernment Treasury Bonds
(+Ts) ,uctions-
4reasur Bonds0 bearin2 half earl interest coupons0 )ith tenors of ;&ear0 '$&ear0 ';&ear and
#$&ear are auctioned in ever month. :% auctions of these instruments )ere held in 5<'$. A
total of (-( bids for 4a"a #'%.:* billion )ere received and ';* bids for 4a"a %(.%; billion )ere
accepted0 of )hich 4a"a 9*.:' billion )as devolved on BBJ8Ds. 4he amount of outstandin2
bonds stood at 4a"a 9*-.#- billion at the end of Gune #$'$ as a2ainst 4a"a 9':.%9 billion at the
end of Gune #$$*. 4he outstandin2 amount of bonds at the end of 5<'$ )as hi2her than #;.%-
percent that of end of 5<$*. 4he )ei2hted avera2e ield&to maturit for the treasur bonds
ran2ed from (.:( percent to *.:' percent in 5<'$. 1t )as found that the ield rates on all tenors
of treasur bonds )ere decreased sharpl durin2 the ear under the report. 1t is mentionable that
in 5<$*0 bids for a total of 4a"a #9*.*- billion )ere received0 of )hich 4a"a '#:.(' billion )as
accepted and 4a"a ;;.*% billion )as devolved on BBJ8Ds. 4he overall )ei2hted avera2e ield&
to&maturit ran2ed from *.#$ percent to '9.$( percent in 5<$*.
Bangladesh >o*ernment Islamic In*estment Bond ,Islamic Bond-
4he operations of -&month0 '&ear and #&ear Ban2ladesh /overnment 1slamic 1nvestment Bond
?1slamic Bond> introduced in 5<$; continued in 5<'$. 4his /overnment Bond is operated in
accordance )ith the rules of 1slamic .hariah. As per the rules0 Ban2ladeshi institutions0
individuals and non&resident Ban2ladeshis )ho a2ree to share profit or loss in line )ith 1slamic
.hariah ma bu this bond. As of end Gune #$'$ the total sale a2ainst this bond amounted to
4a"a #9.: billion )hile balance of total amount of financin2 stood at 4a"a ';.: billion and the
net outstandin2 a2ainst the bond stood at 4a"a %.$ billion. As of end Gune #$$* the total sale
a2ainst this bond )as 4a"a '-.: billion a2ainst the balance of total financin2 of 4a"a '#.' billion
and the net outstandin2 of 4a"a :.9 billion.
Corporate bond
,CI ond
Authorities of Advanced ,hemical 1ndustries Limited ?A,1>0 sponsor of A,1 #$ per cent
,onvertible Nero ,oupon Bonds0 have stated the follo)in2@ ?'> As per the maturit schedule0 the
record date of A,1 #$ per cent ,onvertible Nero ,oupon Bonds is March -0 #$''. 4he
bondholders )hose name )ill appear in the Depositor List on the record date )ill be entitled to
2et the redemption of 'st .eries of Bonds0 ?#> As per the announced features0 %$ per cent of the
redemption value )ill be paid in cash and rest #$A can be converted into A,1 shares. 4he
bondholders0 )ho do not )ant to e3ercise the convertibilit option0 shall notif in )ritin2 their
intention b five )or"in2 das from the record date ?March '90 #$''> to the address of Bond
Department0 A,1 Limited0 #:;0 4eC2aon 1ndustrial Area0 Dha"a&'#$%.
?9> 4he !AD per share as per last audited financial statements ?#$$*> is 4" ';-.'- and the
conversion stri"e price is 4" '('.(% as per announced formula0 ?:> 1f an bondholder 2ets
fraction or odd lot number of shares throu2h conversion0 the fraction or odd lot shares shall be
credited to suspense account and )ill be sold out in the mar"et. 4he equivalent sellin2 price
a2ainst the odd lot or fraction of shares )ill be paid to the respective bondholders and ?;> After
record date of 'st .eries of Bonds0 the number of series in each lot )ill be reduced to four from
five. Q D.E 7nline
Mudaraba Perpetual Bond ,MPB- of Islami Bank Bangladesh Limited"
Brief ;*er*ie$ of the Bank
'. Date of 1ncorporation@ March '90 '*%9
#. ,ommencement of Business@ March 9$0'*%9
9. Authori+ed ,apital@ 4". ;0$$$ million.
:. 8aid up ,apital@ 4". 90:;-.$$ million ?8re issuance of M8B>
;. !o of Branches@ '(-
Table 6"3: Details of the Issue
Description .o" of ?nits ;ffer @alue
In Taka
#mount
Tk"
8re&187 8lacement '0;$$0$$$ '0$$$ '0;$$0$$$0$$$
8ublic 7fferin2 '0;$$0$$$ '0$$$ '0;$$0$$$0$$$
4otal Dalue of Bond after 187 90$$$0$$$ '0$$$ 90$$$0$$$0$$$
Table 6"7 Basic information of the Issue:
Sl .o" Category Description
6
!ame of the Ban" 1slami Ban" Ban2ladesh
Ltd.
3
.i+e of the 1ssue 4". 90$$$ m ?4". '0;$$ m
private placement 6 4".
'0;$$ m 187
7
Unit 8rice 4". '$$$
9
Mar"et Lot ;
:
4erm 8erpetual ?no maturit
period>
8
8rofit Distribution
a> M8B )ill carr '.#;
)ei2ht a2es for distribution
of profit.
b> !ot less than -;A of the
income 2enerated b
deploment of M8B fund
and
c> An additional rate of
profit equivalent to '$A of
the rate of dividend
declared b the 1slami Ban"
Ban2ladesh Limited ever
ear. !o portion of
dividend )ill be distributed
to the M8B holders.
A Minimum .ubscription 4". ;0$$$ or multiple of 4".
;0$$$.
4 ,redit =atin2 M8B has been rated as AR b
,redit =atin2 1nformation and
.ervices Limited ?,=1.L>
5 4rustee 1nvestment ,orporation of
Ban2ladesh ?1,B>
6B Mana2er to the 1ssue 1,B ,apital Mana2ement
Limited ?A subsidiar
compan of 1,B>
Purpose of the Issue
4he main purpose of the bond is to raise fund to meet the capital adequac ratio of the Ban".
.ince the raisin2 of 4ier&' ,apital has impact on share value dilution and dividend pain2
capacit of the ban"0 the 1BBL has been loo"in2 for alternate sources of 4ier&# ,apital as a
subordinated investment instrument and identified the issuance of Mudaraba 8erpetual Bond to
resolve the issue of capital adequac.
4able '.:@ Dividend 1nformation of the Ban"
2ear Cash ,C- Bonus ,C- +ight ,C- Total Di*idends ,C-
9'.'#.#$$- ';A '$A & #;A
9'.'#.#$$; & #;A & #; A
9'.'#.#$$: & #$A & #$ A
9'.'#.#$$9 & #$A #$$A ##$ A
9'.'#.#$$' & & '$$A '$$ A
Salient 1eatures ;f Mudaraba Perpetual Bond of Islami Bank Bangladesh Ltd" ,IBBL-
'> 1t has no redemption facilit 6 pre&determined interest rates.
#> M8B )ill share income derived from investment activities and also 2et an additional rate
of profit equivalent to '$A of the rate of dividend ?no portion of dividend )ill be
distributed to the M8B holders.
9> M8B )ill be issued to meet the capital adequac ratio of the Ban".
:> 4erm@ 8erpetual ?no maturit period>.
;> 4he Minimum subscription amount is 4". ;0$$$ or multiple of 4". ;0$$$.
-> M8B as a Mudaraba instrument it )ill 2et priorit over the shareholders in respect of
2ettin2 profit and also refund of principal in case of liquidation of the ban".
(> 4he Bondholders )ill ho)ever stand subordinated to the Depositors in respect of the
pament of both profit and refund of principal.
%> M8B )ill be listed )ith both Bourses of the countr and )ill remain freel transferable
dependin2 on the mar"et demand.
*> 1BBL has alread a2reed to create floatin2 char2e to the e3tent of 4". 90$$$ million on the
present and future assets of the ban" in favour of the trustee in order to secure the interest
of the Bondholders.
'$> 4he bond )ill be further secured b the corporate 2uarantee of the 1BBL.
''>M8B )ill be treated as a 4ier&# ,apital as a subordinated investment instrument that )ill
save from dilution effect 6 enhance dividend pain2 capacit of the ban".
Profit Distribution features of MPB
All Mudaraba 5und holdersJ Mudaraba depositors of the Ban" )ill share income )hich is
derived from investment activities i.e.0 income from use of Mudaraba 5unds. 1ncome under
this cate2or )ill mean and include profit0 dividend0 capital 2ain0 rent and an other income
derived from investments.
4able '.;@ E3ample of estimated =ate of 8rofit on M8B for #$$- based on the actual
performance of the Ban" for the last ; ears )ill be as follo)s@
Sl"
.o"
Particulars 3BB8 3BB: 3BB9 3BB7 3BB3
' 8rofit on Mudaraba
.avin2s Bond ?% ears>
at '.#; )ei2hta2e
'$.%;
A
'$.9*A %.%'A '$.$:A '$.(*A
# Dividend Declared #;A #;A #$A #$A #;A
9 '$A of rate of dividend #.;$A #.;$A #.$$A #.$$A #.;$A
: Estimated =ate of 8rofit
on M8B ?'R9>
'9.9;
A
'#.%*A '$.%'A '#.$:A '9.#*A
; =emar"s Based on 5inal =ate of 8rofit.
- Entitlement Entitlement )ill be based on =ecord DateJBoo" ,losure
$isk .actors
'> =ule and principles of utili+ation 6 distribution of profit of such funds as in vo2ue in
1BBL and shall be subCect to chan2e and modification from time to time.
#> 4here is a ris" that the issuer ma fail to satisf the terms of the obli2ation )ith respect to
the timel pament of profit due to adverse mar"et condition.
9> Entrance of a ne) competitor li"e ne) ban" or financial institution or e3pandin2 services
of e3istin2 competitors ma increase the mar"et competitor and ma adversel affect the
profitabilit of the ban".

:> ,han2es in /overnment polic0 )hich are not conductive to financial and ban"in2
business ma hamper the future 2ro)th and profitabilit of the ban".
Table 6"8: B+#C Bank 3:C Subordinated Con*ertible Bonds
B+#C Bank 3:C Subordinated Con*ertible Bonds
;pening date for subscription December ;0 #$'$
Closing date for subscription December *0 #$'$
1or .on)+esident Bangladeshi Duota(
subscription closes on:
December '%0 #$'$
Issuer: B=A, Ban" Limited
Purpose: 4o raise 4ier # ,apital ?subCect to re2ulator
approval> and underta"e normal commercial
ban"in2 activities )ith the proceeds as
permitted b the Ban2ladesh Ban".
Lead #rranger: =.A ,apital Limited
Issue Manager: 1DL, 5inance Limited
Trustee: 4he ,it Ban" Limited
In*estors: *$A of the total 1ssue .i+e shall be offered to
institutional investors includin2 onshore and
offshore investors and the remainin2 '$A shall
be offered to public throu2h 187.
Issue Si=e: BD4 90$$$0$$$0$$$ ?Ban2ladesh 4a"a 4hree
Billion>
Issue Type: .ubordinated ,onvertible Bond 1ssue ?OBondP>
of B=A, Ban" Ltd. )ith qualification as 4ier #
,apital.
Tenor: %: Months from the date of issue0
1ace @alue: bullet repament.
Market Lot: Each Bond )ill have a 5ace Dalue of BD4
'0$$$ ?7ne 4housand>.
Mutual 1unds
Mutual funds are professionall mana2ed investment schemes that collect funds from small
investors and invest in stoc"s0 bonds0 short term mone mar"et instruments0 and other securities.
4his ensures a diversified portfolio for the investors at much less efforts than throu2h purchasin2
individual stoc"s and bonds. Mutual funds are usuall mana2ed b fund mana2ers )ho
underta"e tradin2 of the pooled mone and are responsible for mana2in2 the portfolio of
holdin2s. /enerall0 mutual funds are or2ani+ed under the la) as companies or business trusts
and mana2ed b separate entities. Mutual funds fall into t)o cate2ories@ open&end funds and
closed&end funds. 1n Ban2ladesh0 the number of mutual funds is small havin2 lo) issued capital.
At present0 there are onl 99 mutual funds
'GA!A4AM5? 5irst Ganata Ban" Mutual 5und >'.4B.=.? 'st Ban2ladesh .hilpa =in .an2stha
M.5. > '.41,B? 'st 1,B M.5. >'.48=1M5M5? 8rime 5inance 5irst Mutual 5und > #!D1,B? #nd
1,B M.5. >9=D1,B? 9rd 1,B M.5. >:4H1,B? :th 1,B M.5. >;4H1,B? ;th 1,B
M.5. >-4H1,B? -th 1,B M.5. >(4H1,B? (th 1,B M.5. >%4H1,B? %th 1,B
M.5. >A1BL'.41M5? A1BL 'st 1slamic Mutual 5und >A1M.'.4M5? Aims 'st
M.5. >DBH'.4M5? DBH 5irst Mutual 5und >EBL'.4M5? EBL 5irst Mutual
5und >/=AMEE!'? /rameen Mutual 5und 7ne >/=AMEE!.#? /rameen 7ne @ .cheme
4)o >/=EE!DELM5? /reen Delta Mutual 5und >1,B'.4!=B? 1,B AM,L 'st !=B Mutual
5und >1,B#!D!=B? 1,B AM,L #nd !=B Mutual 5und >1,B9=D!=B? 1,B AM,L 4hird
!=B Mutual 5und >1,BAM,L'.4? 1,B AM,L 'st M.5. >1,BAM,L#!D? 1,B AM,L .econd
Mutual 5und >1,BE8M5'.'? 1,B Emploees 8rovident M5 '@ .cheme ' >1,B1.LAM1,? 1,B
AM,L 1slamic Mutual 5und >151,'.4M5? 151, Ban" 'st Mutual 5und >151L1.LM5'? 151L
1slamic Mutual 5und&' >MBL'.4M5? MBL 'st Mutual 5und >85'.4M5? 8hoeni3 5inance 'st
Mutual 5und >8H8M5'? 8H8 5irst Mutual 5und >878ULA='M5? 8opular Life 5irst Mutual
5und >8=1ME'1,BA? 8rime Ban" 'st 1,B AM,L Mutual 5und >4=U.4B'M5? 4rust Ban" 'st
Mutual 5und >
Debentures
A tpe of debt instrument that is not secured b phsical asset or collateral. Debentures are
bac"ed onl b the 2eneral credit)orthiness and reputation of the issuer. Both corporations and
2overnments frequentl issue this tpe of bond in order to secure capital. Li"e other tpes of
bonds0 debentures are documented in an indenture.
DEBA=A,EM? Aramit ,ement Ltd.?Deb&':A> >DEBBDLU//? Ban2ladesh Lu22a2e 1nd. Ltd.
?Deb&':A> >DEBBDWELD? BD Weldin2 Electrodes Ltd.?Deb&
';A> >DEBBDN188? Ban2ladesh Nipper 1nd. Ltd.?Deb&':A> >DEBBHDE!1M? Be3imco
Denims Ltd.?Deb&':A> >DEBBH51.H? Be3imco 5isheries Ltd.?Deb&
':A> >DEBBHK!1? Be3imco Knittin2 Ltd.?Deb&':A> >DEBBH4EH? Be3imco 4e3tiles Ltd.
?Deb&':A> >
Capital market securities ,DS/-: ,Main Board as on 1ebruary 3B66-
Table 6"A: Capital market securities ,DS/-:
Total .umber of Listed Securities 9A8
Total .umber of Companies ##*
Total .umber of Mutual 1unds 99
Total .umber of Debentures %
Total .umber of Treasury Bonds #$9
Total .umber of Corporate Bonds 9
Total number of
SharesECertificates:
,.o" in mn-
Total .umber of Shares F Mutual
1und Certificates of #ll Listed
SecuritiesG
';0-(9
Total .umber of Shares of #ll
Listed Companies
'90#-%
Total .umber of Certificates of #ll
Listed Mutual 1unds
#09*9
,.o" in H BBB-
Total .umber of #ll Listed
Debentures
:$*
Total .umber of #ll Listed >o*" T)
Bonds
:0-(#
Total .umberof #ll Listed
Corporate Bonds
(099-
Total Issued Capital of : ,1igure Tk"in mn- ,1igure?SI in mn-
#ll Listed Securities ('*09'- '$0'$;.;*
#ll Companies Shares ##$0;:9 90$*%
#ll Mutual 1unds #90'%9 9#-
#ll Debentures ':$ #
#ll Listed >o*t" T)Bonds :-%0''9 -0;(-
#ll Listed Corporate Bonds (099- '$9
Total Market Capitali=ation of: ,1igure Tk"in mn- ,1igure?SI in mn-
#ll Listed Securities #09:*09;9 990$$-
#ll Listed Companies Shares '0%:90:(' #;0%**
#ll Listed Mutual 1unds 9$0:(( :#%
#ll Debentures ;(- %
#ll Listed >o*t" T)Bonds :-%0''9 -0;(-
#ll Listed Corporate Bonds -0('- *:
Con*ersion +ate: BDT against
?SD
('.'%
Table 6"4: Sectoral Performance ) 1ebruary 3B66
DS/ Sectoral Performance ) 1ebruary 3B66
Sector Market Capitalisation in
mn
C of
total
Marke
t Cap
Turno*er Tk" in mn C of
total
Turno*e
r
1ebruary January 1ebruary January
1inancial Sector
Banks ;-'0-'(.-# %-90$9%.;* #*.(# 9%0%:(.%( --09$%.:( 99.%'
1inancial
Institutions
#-$0##'.;% 9;%0''$.## '9.(( '*0#::.(% #;0*$#.$' '-.(;
Insurance '$#0;-%.9* ';*0';9.%# ;.:9 -0$-:.#* ''0-':.#% ;.#%
Mutual 1unds 9$0:(-.-$ 9*0((:.9' '.-' :0$-*.:% '$0#%'.:9 9.;:
Total 5:9(449"65 6(93B(BA8"5 :B":9 84(338"93 669(6B8"6 :5"75
: 5
Manufacturing
1oods ::0:%%.** -$0%';.*( #.9; '0%9'.-: 90'*'.(: '.;*
Pharmaceuticals ';$0:'%.(' '*(0*--.#% (.*- :0(''.9: %09$%.$- :.'$
Te<tile (#0*%#.%- ''90;(9.#% 9.%- %0:-;.#( ';0#''.;( (.9(
/ngineering %*0'((.($ ':#0#:(.*( :.(# -0%99.(- %0';$.'* ;.*;
Ceramics #*0*#'.9* ;;09%:.9* '.;% #0$$*.'# 909:9.$- '.(;
Tannery ''0:*%.*; ';0-%;.:' $.-' -#*.$9 '0'#'.#' $.;;
Paper F Printing --%.%$ '0$%:.*$ $.$: -.9; -.%% $.$'
Jute ;-9.9- %%$.*$ $.$9 9:.*: :;.9* $.$9
Cement :90%'-.#% --0#-;.-% #.9# #0$'#.;' #0*(9.9$ '.(;
Total 997(:7A"B: 8:7(5B9"A5 37"9A 38(:77"58 93(7:6"9B 37"6B
Ser*ice F
Miscellaneous
1uel F Po$er #$(0''*.-* #*#0-'-.;; '$.*- %0;'%.$: '#0;%:.9- (.:'
Ser*ice F +eal
/state
'-0#:#.#( #(0''9.*' $.%- (#:.-# '0#9%.#' $.-9
IT 90':$.%- :0-:9.(( $.'( 99'.'# ;#(.** $.#*
Telecommunicatio
n
'%%0*$-.*( 9#$0:#-.#$ '$.$$ 90;:(.-- ;0$;9.#% 9.$*
Tra*el and
Leisure
%0%9(.-; '90(*9.-; $.:( #0';-.;( :0$-;.(; '.%%
Miscellaneous -$0''-.%# %'09*-.$- 9.'% :0(#'.-' -0*;*.$' :.''
Total 949(789"38 A75(55B"69 3:"87 65(555"86 7B(934"8B 6A"96
Bond
Corporate Bond -0('-.#9 90**$.'' $.9- '#(.'' %9.$; $.''
Total 8(A68"37 7(55B"66 B"78 63A"66 47"B: B"66
>rand Total 6(445(:B6"A
7
3(46A(586"5
4
6BB 669(44A"6
B
648(585"3
9
6BB
4able '.*@ ,apital mar"et securities@ ,.E ?Gune #$'$>@
Indicators
Chittagong Stock
/<change
.o" of companies #$:
.o" of mutual funds #-
.o" of debentures #
.o" of treasury bonds )
.o" of corporate bonds )
Total /o0 of "isted Securities #9#
5i2ures in million ?4K>
.o" of shares of all listed companies -0(9$.;:
.o" of certificates of all listed mutual funds '0##;.#%
.o" of debentures of all listed debentures :.9:
.o" of all listed go*t" T)bonds &&
.o" of all listed corporate bonds &&
Total /o0 of Trada!le Securities (0*-$.'-
5i2ures in million ?4K>
Issued capital of all companies '%:0#':.#'
Issued capital of all mutual funds '#0;-;.;$
Issued debentures :099;.%;
Total issued capital #'$0'';.;-
5i2ures in million ?4K>
Total Market Capitali=ation #0;9:09*9.#(
#ll Share Price Inde< '%''-.$;';
Problems:
'. 4he 8olitical .ituation@ 4he 8eopleBs =epublic of Ban2ladesh has been a parliamentar
democrac since .eptember '**'. 4he present 2overnment is headed b the A)ami Lea2ue
)hich has an absolute maCorit0 but the opposition part has stepped up its nation)ide pro2ram
of stri"es0 processions0 and mass meetin2s. 4hese activities have )ea"ened the 2overnmentBs
intentions to foster chan2es such as the development of the financial mar"et. 1n addition0 certain
commercial and financial re2ulations are outdated in that the tend to focus on institutions rather
than functions. /overnance and accountabilit are lac"in2 in certain areas0 and there are
elements of inefficienc in the financial sstem0 mainl concernin2 the state&o)ned ban"in2
sector. Althou2h the 2overnment is a)are of these problems0 it has been slo) to improve
2overnance and develop stron2 institutional capacit. 4he problems created b these )ea"
institutions are compounded b an increasin2l confrontational.
#. A sense of ur2enc is missin2 in policma"in20 despite the 2ro)in2 imbalances in the
econom and cro)din2 out as Ban2ladesh continues to channel vast monetar resources into
servicin2 bad loans. /iven that macroeconomic chan2es can happen in short periods of time and
that nonperformin2 loan0 )hich account for a third of the loan portfolio0 can create financial
sector vulnerabilit0 the bad&loan situation could tri22er a severe liquidit crisis nation)ide. 1t
can ta"e decades to build a fi3ed&income mar"et in the )a"e of such crises. 4his issue clearl
needs immediate and focused attention.
9. ,ertain omissions or dra)bac"s of the broader la)s and re2ulations directl affect
development of the fi3ed&income mar"et.
:. 4he 2overnment securities mar"et in Ban2ladesh is small0 does not provide much of a
ield curve to support a corporate bond mar"et0 and does not provide intermediaries )ith s"ills
and a profit base to support the corporate bond mar"et.
;. =e2ulators and =e2ulations@ 7ne impediment at the re2ulator and re2ulation level is the
overlappin2 authorit bet)een the t)o financial mar"et re2ulators0 Ban2ladesh Ban" and the
.ecurities and E3chan2e ,ommission ?.E,>0 and no clear Curisdiction over the fi3ed&income
mar"et. 1n 2eneral0 BB re2ulates the commercial ban"s and their activities0 )hile the .E,
re2ulates the !B51s0 the t)o stoc" e3chan2es0 and the capital mar"et. A second problem is that
the .E, has no authorit to issue rules and re2ulations0 and the procedure as a )hole is lon2 and
dra)n out. As a result0 the .E, has not proposed an re2ulations for the issuance of bonds or
debentures. All rule proposals must first be submitted to the Minister of 5inance for approval and
then passed on for approval from Ministr of La). 5urthermore0 potential issuers have to loo" at
various sets of re2ulations and follo) a lon2 and cumbersome procedure.
-. 1nvestors@ 7n the investor side0 fe) investors are sophisticated enou2h to thin" about
investin2 in bonds. Most of them donBt have even financial literac.
(. 1ntermediaries. 1ntermediaries in Ban2ladesh lac" man of the s"ills needed to foster an
active local corporate bond mar"et. As mentioned earlier0 commercial ban"s dominate the
financial sector and not enou2h intermediaries are s"illed in securities. 5e) are able to identif
issuers and investors and brin2 them to the mar"et. 4he provide little or no research analsis on
industries or companies to encoura2e investment in the local debt mar"et. 4oo fe) private
merchant ban"s are able to conduct financial advisor and trust services. !or do an feel
motivated to become a mar"et ma"er for an issue. Hence the mar"et is illiquid0 )ith lar2e
spreads. At the same time0 the fee structure and pricin2 are hi2h enou2h to allo) intermediaries
to ma"e mone0 but because transactions are so limited0 the intermediaries seldom ma"e mone.
Even if the are able to participate0 intermediaries are reluctant to ta"e an ris" in dealin2.
%. /ro)th of mutual fund in Ban2ladesh has been slo). 7nl recentl there has been a rush
for ne) funds. Man ban"s and financial institutions are in the queue )ith proposals for their
funds. Mutual fund is often a misunderstood subCect in Ban2ladesh. Man investors do not
understand the difference bet)een mutual fund shares and other compan shares.
*. 4he .ecurities and E3chan2e ,ommission )ill have to be more efficient and
professional. 1t simpl cannot run )ith the present manpo)er. 1t needs more professionals0 more
trainin2 at home and abroad and more lo2istic support. But it is Cust not possible to attract the
ri2ht "ind of professionals )ith the current pa structure.
'$. Lac" of transparenc in public sector borro)in2@ 8ublic sector borro)in2 has been
riddled )ith lac" of transparenc that failed to eventuall proffer an reliable demand&suppl
scenario in )hich an efficient debt mar"et can function. Because of the frequent shifts and ad hoc
culture and volatilit of demand0 man of the debt instruments could not be desi2ned to be
publicl traded that could fuel a vibrant mar"et. Efforts are no) on to issue tradable instruments
and brin2 fiscal discipline.
''. 8rice manipulation@ 1t has been observed that the share values of some profitable
companies has been increased fictitiousl some times that hampers the smooth operation of D.E
'#. Delas in settlement@ 5inancin2 procedures and deliver of securities sometimes ta"e an
unusual lon2 time for )hich the mone is bloc"ed for nothin2.
'9. 1rre2ulations in dividends@ .ome companies do not hold A/M and eventuall declare
dividends that confused the shareholders about the financial position of the compan.
':. .ome members bein2 the directors of listed companies of D.E loo" for their o)n interest
usin2 the internal information of share mar"et
';. Man companies of D.E donBt focus real position of the compan as some audit firms
involve in corruption )hile preparin2 financial statements.
'-. As the D.E is small mar"et0 the spreadJcost ratio is relativel hi2her )hich is a more
important factor for capitali+ation.
Prospects:
'. A lar2e number of ne) investors from across the countr are enterin2 the mar"et.
1nstitutional investors are active in the mar"et. Asset mana2ement companies are 2ro)in2 and
their activities are visible. A number of proposals for ne) mutual funds are a)aitin2 approval.
#. =e2ulator policies should be framed )ith lon2 term vision. 1n recent months0 some
polic decisions are bein2 ta"en to address current problems at the cost of lon2 term mar"et
interest. 4hese polic chan2es include fi3ation of minimum si+e of ne) public issue0 imposin2
restriction on private placements0 disqualifin2 private sector companies under direct listin2 and
discoura2in2 ne) mutual funds.
9. Man of the stoc"s are overpriced and this is a serious ris" factor for the ine3perienced
investors. Entr of ne) companies in the mar"et can help reduce 2ap bet)een demand and
suppl and help brin2 stabilit in the mar"et.
:. 1mmediate entr of at least t)o or three lar2e companies could be e3tremel helpful for a
balanced 2ro)th of the mar"et. ,urrentl0 /rameen 8hone alone accounts for a lar2e portion of
the mar"et capitali+ation. As a result0 normal movement of its price affects the inde3
substantiall and entire mar"et is influenced b it.
;. B4,L )ith its hu2e asset is another public sector compan that could ma"e immense
contribution to suppl side of the mar"et.
-. 8rivate placements have been stopped in case of smaller companies. 1t is true that scope
of private placement has been misused in some cases recentl and the problem called for
intervention.
(. 1n the interest of improvin2 suppl of shares in the mar"et0 direct listin2 could also be
allo)ed for the private sector companies )ith some modifications. 4here should be an improved
price discover mechanism so that 2eneral investors 2et the shares at an acceptable price and
manipulations are controlled.
%. .E, has ta"en ver crucial initiatives to publici+e and educate the investors about
fundamentals to deal in share transactions.
4able #.$@ 7vervie) of .AA=, Mar"ets
.ame of
the
Capital
Markets
1ndices
!ame
1ndices
<ear
endin2
#$$%
1ndices
,urrent
Gun #$$*
Listed
,ompanies
Mar"et
,ap
in U.L
mn #$$%
4urnover
in U.L
mn
#$$%
8E
=atio
?#$$%>
<ield
A
?#$$%>
,olombo
.toc"
E3chan2e
,.E
Milan"a '-9'.9: #(#'.-: #9; :#%;.* '$##.- -.;9K :.(#K
Dha"a
.toc"
E3chan2e
D.E
/E! #(*;.9: 9$'$.#- #(- ';'9%.;' *-%(.-( '%.:# #.:%
Karachi K.E '$$ ;%-;.$' ('((.-: -;# #9;$$ 9;$.$$KK & &
Bomba
.toc"
E3chan2e .E!.EH *-:(.9' '::*9.%: :*#' -:(#$:.% 9$*'(%.( '9.(( '.(%
+ecommendations
ond market
'. 4he /overnment bonds must come first. 4o increase the attractiveness of these bonds
and to ensure their soundness0 Ban2ladesh Ban" )ill need to continue its initiatives to develop
the secondar mar"et0 lo)er transaction costs and improve upon the mar"et infrastructure to
support secondar mar"et liquidit. 4he Ban2ladesh Ban" has alread achieved a 2reat deal to
this end in a ver short time. 1t )as not so lon2 a2o that 2overnment debt mar"et tradin2 )as
effectivel +eroF no) )e see a disciplined0 or2ani+ed mar"et ta"in2 shape )ith maturities in
traded securities out to ten ears.
#. All issues of debentures are rated b independent ratin2 a2enc prior to issue. ,ompanies
issuin2 bondsJdebentures to public ma be rated periodicall to "eep trac" of issuin2 companEs
financial position.
9. 8ublic utilities and infrastructure proCects be as"ed to raise a part of debt throu2h issue of
mar"etable bonds.
:. ,oupon rates and all other issuin2 conditions of debentures be determined b mar"et
forces.
;. 1nvestment in bondsJdebentures approved b .E, ma be 2iven ta3&e3empt status up to a
certain limit.
1f all the above thin2s can be done0 then this could pave the path for a )ell&functionin2 bond
mar"et that can chan2e the e3istin2 ban"&oriented financial sstem to a multilaered sstem0
)here capital mar"ets can complement ban" financin2.
Capital market securities other than nods
S =ules0 =e2ulations0 and =e2ulators. 4he role of the BB and .E, in re2ulatin2 the fi3ed&
income mar"et needs to be clearl defined in detail so that appropriate re2ulations can be )ritten
for the public0 private0 and secondar mar"ets. 4hese re2ulations should ensure that each mar"et
is encoura2ed and protected. 1n vie) of situations around the )orld0 it li"el is best to have the
.E, re2ulate the fi3ed income mar"et. But )hichever a2enc is chosen0 the re2ulator must be
educated appropriatel to ensure that it full understands the product and is able to supervise the
mar"ets0 monitor the ris"s in the mar"ets and the intermediaries0 and enforce its po)er )here
necessar to ensure a qualit mar"et.
S ,entral Mar"et 1nfrastructure. Ban2ladesh should consider )hether to develop a central
clearin20 settlement0 and depositor institution. .uch an entit )ould support both the equit and
debt mar"ets.
S Mar"et 8articipants. 4here are too fe) professional participants in the Ban2ladesh mar"et
to create an effective secondar mar"et in fi3ed&income instruments. Activities in the mar"et are
as et too limited because the 2overnment is unable to create an effective ield curve. When such
a base is established0 mar"et participants )ill "no) their relative value for issuin2 and investin20
)hich in turn )ill attract ne) participants to the mar"et. 4he 2overnment also needs to support
private initiatives to brin2 intermediaries to the mar"etplace. 4he0 in turn0 brin2 the tradin2
mentalit to the mar"et that is essential for a secondar mar"et. 4he best )a to do this is to
create incentives for professional people to establish their o)n profitable business. With such a
base0 the mar"et )ill drive itself and private initiatives )ill ensure diversit in fi3ed&income
instruments. 4o build investor confidence0 the mar"et needs stron2 accountin2 rules and
re2ulations comparable to international standards. 4o that end0 the 2overnment should stren2then
and supervise the accountin2 rules and controllin2 bod.
S Macroeconomic. At a more 2eneral level0 to foster mar"et development0 Ban2ladesh
needs to brin2 more competition into the financial sector throu2h dere2ulation and privati+ation.
4he countr appears to be movin2 in that direction0 but the speed is slo). 4he 2overnment needs
to accelerate its efforts in this area.
S !ot onl )ill a bond mar"et require 2ood financial foundations0 but lon2&term investment
institutions )ill also need to be developed )ith demand for lon2er maturit assets. 4he
insurance and pension mar"ets are currentl not full developed in Ban2ladesh. 4hese mar"ets
should be reformed as the are the natural buers of lon2&term securities.
S .stems of mar"et ma"ers ?specialists> ma be evolved to facilitate mar"et.
S At a more 2eneral level0 to foster mar"et development0 Ban2ladesh needs to brin2 more
competition into the financial sector throu2h dere2ulation and privati+ation. 4he countr appears
to be movin2 in that direction0 but the speed is slo). 4he 2overnment needs to accelerate its
efforts in this area.
S Broader 5inancial .stem. 1deall0 there are several )as that Ban2ladesh mi2ht )or" to improve
operations in its 2overnment securities mar"et0 to create a mar"et that provides an interest rate structure
that supports the entire financial sstem and a benchmar" for corporate bond offerin2s. Ho)ever0 the
analsis performed for this stud )as not sufficient to determine )hether and if so )hen certain chan2es
mi2ht best be suited for Ban2ladesh. But some su22estions can be made )hich Ban2ladesh mi2ht
consider over time0 as it see"s to improve operation of its 2overnment securities mar"et. More
specificall0 instead of issuin2 ta3&free and nontransferable 2overnment bonds to the retail mar"et0 the
2overnment should consider issuin2 its bonds in the mar"etplace. 1t mi2ht issue 4&bills and 4&bonds )ith a
broader maturit base0 transparent pricin20 )hich are ta3&neutral and transferable. 4o start )ith0 efforts
mi2ht focus on buildin2 an effective mone mar"et ?7J!T9-; das>0 and from that base it ma be
possible over time to create ne) short&term instruments such as futures0 short&term interest rate s)aps0
and a U.DJ4a"a for)ard mar"et. 1t is important to build a more sophisticated interban" deposit mar"et
)ith different maturities. 4his )ill help create the everda price fi3in2 needed to price other financial
products ?for e3ample0 leasin2 a2reements>0 and it can help create a for)ard rate a2reement ?5=A>
mar"et. ,reatin2 an effective ield curve )ill help provide a foundation for ultimatel creatin2 a diverse
secondar mar"et.
S 8rovisions can be made to ensure investment of the 2enerated fund in the prescribed
priorit sectors.
S 4o force the listed companies to publish their annual reports )ith actual and proper
information that can ensure the interest of investors.
S 8erson bein2 the director of listed compan should not be allo)ed to be a member of
D.E
S 4here should be complete transparenc in bro"ersB transactions )ith the clients.
Conclusion
4he capital mar"et is the en2ine of 2ro)th for an econom0 and performs a critical role in actin2
as an intermediar bet)een savers and companies see"in2 additional financin2 for business
e3pansion. Dibrant capital is li"el to support a robust econom. While lendin2 b commercial
ban"s provides valuable initial support for corporate 2ro)th0 a developed stoc"&mar"et is an
important pre&requisite for movin2 into a more mature 2ro)th phase )ith more sophisticated
con2lomerates. Ban2ladeshEs stoc" mar"et is poised for rapid development. 5or this the .E,0
D.E0 ,.E and all mar"et plaers should )or" to2ether )ith the support of the 2overnment.
Mar"et confidence is sure to erode if conflictin2 si2nals are received from different authorities.
At the same time investors )ill have to understand that in an stoc" mar"et there are ups and
do)ns and the cannot blame others )henever stoc" prices slide do)n. 5ortunatel0 investors are
2ettin2 matured 2raduall and hopefull )e ma not have to see shoutin2 and slo2an in front of
the e3chan2es an lon2er. Ban2ladesh should reall focus on improvin2 2overnance and
developin2 advanced mar"et products0 such as derivatives0 s)aps etc.
Biblio2raph