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The stock market is the engine of growth for an economy, and performs a critical role in acting as an intermediary between savers and companies seeking additional financing for business expansion. Vibrant capital is likely to support a robust economy. While lending by commercial banks provides valuable initial support for corporate growth, a developed stock-market is an important pre-requisite for moving into a more mature growth phase with more sophisticated conglomerates. Today, with a $67 billion economy and per capita income of roughly $500, Bangladesh should really focus on improving governance and developing advanced market products. Despite a challenging political environment and widespread poverty, Bangladesh has achieved significant milestones on the social development side. With growth reaching 6.30 percent in 2012, the economy has accelerated to an impressive level. It is noteworthy that the leading global investment banks, Citi, Goldman Sachs, JP Morgan and Merrill Lynch have all identified Bangladesh as a key investment opportunity. The Dhaka Stock Exchange Index is at a 10-year high, however, the capital market in Bangladesh is still underdeveloped, and its development is imperative for full realization of the country's development potential. It is encouraging to see that the capital market of Bangladesh is growing, albeit at a slower pace than many would like, with market development still at a nascent stage. The market has seen a lot of developments since the inception of the Securities and Exchange Commission (SEC) in 1993. After the bubble burst of 1996, the capital market has attracted a lot more attention, importance and awareness that have led to the infrastructure we have in the market today. To enlighten the theoretical aspect of trading policy in the stock market I have gathered information from the official websites and several books related to the issues regarding the stock markets in Bangladesh. I have come out with some major findings from the information I got. Finally, I have focused on making changes in the current trading aspect of the stock market, which I think will help the stock market to contribute more in the economy of Bangladesh.
The financial system of Bangladesh
The financial system is a set of institutional arrangements through which surplus unit transfer their fund to deficit units. The main constituents of the financial system of Bangladesh are – a) Financial institutions 1. Banks i. ii. iii. iv. Private commercial banks Public commercial banks Private foreign commercial banks Specialized financial institutions
2. Non- banks i. ii. iii. iv. v. vi. Insurance companies Security firms Investment banks Financial companies Mutual finds Pension funds
b) Financial instruments 1. Money market instruments i. ii. iii. iv. Treasury bills Commercial paper Negotiable certificate of deposits. Bank acceptances
2. Capital market instruments i. ii. iii. iv. v. Bonds Stocks Government securities Bank & consumer commercial paper Debentures
c) Financial Markets 1. Primary market 2. Secondary market 3. Money market 4. Capital market
As the focus of my report is the stock market of the country, I will emphasize on the related issues of the primary market & secondary market of the country. The primary & secondary markets of Bangladesh are regulated by the regulations enacted by Bangladesh Securities and exchange Commission
sub-brokers. • Prohibiting fraudulent and unfair trade practices relating to securities trading in any securities market. The Commission is a statutory body and attached to the Ministry of Finance.Bangladesh Securities and Exchange Commission The Bangladesh Securities and Exchange Commission (BSEC) was established on 8th June. • Monitoring and regulating all authorized self regulatory organizations in the securities market. The BSEC aims at protecting the interests of securities investors. underwriters.. trustee of trust deeds. on 10 December 2012. merchant bankers and managers of issues. monitoring and regulating of collective investment scheme including all forms of mutual funds. its name has been changed as Bangladesh Securities and Exchange Commission. . The Chairman and Commissioners of the Commission are appointed by the government and have overall responsibility to formulate securities legislation and administer as well. The Commission's main functions are: • • Regulating the business of the Stock Exchanges or any other securities market. 1993. portfolio managers. registrar of an issue. Through an amendment of the Securities and Exchange Commission Act. Registering and regulating the business of stock-brokers. share transfer agents. transparent and efficient securities markets and ensuring proper issuance of securities and compliance with securities laws. • Promoting investors’ education and providing training for intermediaries of the securities market. • Prohibiting insider trading in securities. investment advisers and other intermediaries in the securities market • Registering. Earlier its name was Securities and Exchange Commission. 1993. developing and maintaining fair.
to carry out day to day executive functions as well as finance & accounts. • Conducting research and publishing information. Capital issue Department . The departments in BSEC are Administration & Finance Department – that deals with human resources. Objective of the study • • • • • To provide an idea about primary & secondary market in the stock market. Undertaking investigation and inspection. Corporate Finance Department .supervises and monitors the listed companies after issuance of primary shares in light of the securities laws. To give one idea about the steps to be taken by the investors. To discuss about the products available in the stock market.drafts amendments of securities laws.supervises activities of Central Depository Bangladesh Limited (CDBL).• • Regulating the substantial acquisition of shares and take-over of companies. inquiries and audit of any issuer or dealer of securities. all sorts of logistic activities.accords consent to issue equity and debt securities through initial public offer and also other than public offer. To enlighten the concept of stock exchanges in Bangladesh. the Stock Exchanges and intermediaries and any self regulatory organization in the securities market. Capital market regulatory reforms & compliance Department .takes legal measures including imposition of penalty against those who breach/violate securities laws in consideration of nature of crimes they commit. suggests reforms of the market and provides clarifications Central Depository system Department . . Enforcement Department . To focus on the trading activities of the stock exchanges.
The securities are issued by the company directly to investors. Borrowers in the new issue market may be raising capital for converting private capital into public capital. Through this process. the works are separable like work before IPO consent and work after IPO consent. money passes between public investors. . Through this process Investor has to organize all the relevant information. The company receives the money and issues new security certificates to the investors. such as loans from financial institutions. to possibly monetize the investments of early private investors. one is work before Consent and another in work after consent. Initial public offerings are used by companies to raise expansion capital. In the whole listing procedure. Primary issued are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. Procedures to go for IPO There are some instructions have to be followed to get consent from Securities Exchange Commission. a private company transforms into a public company. The new issue market does not include certain other sources of new long term external finance. Primary market The primary market is the market for new long term equity capital. this is known as "going public.• • To find out some problems in the trading of stock exchanges. Therefore it is called New Issue Market." The financial assets sold can only be redeemed by the original holder. The primary market performs the crucial function of facilitating capital formation in the economy. on a securities exchange. These instructions are mandatory for investors.An initial public offering (IPO) is a type of public offering where shares of stock in a company are sold to the general public. A company selling shares is never required to repay the capital to its public investors. for the first time. In this market the securities are sold for the first time. To come out with some suggestions to improve the trading. After the IPO. and to become publicly traded enterprises. when shares trade freely in the open market. The listing procedure is divided into two Parts according to their behavior. IPO (Initial Public offering) .
Selection of Advisors: Before applying for consent every company suppose to have section of legal advisor. Legal Adviser is responsible for Security of internal information. Selection of underwriters: Selection of underwriters & completing underwriting Selection of underwriters: Selection of underwriters & completing underwriting agreement is another essential process of IPO listing procedure. But. Bankers to the issue will be the important stake holder and they will be responsible for deposit and withdraw money of investors. Lender should have to issue a letter that if the Company change their existing capital structure then they will not have any objection. It never happens besides applications are over subscribe more than 10 times of offer. 5. Another important process is changing organization’s employee management and also restructuring and obtaining Reports thereon. 3. Underwriters are liable for successful float of all the shares. Audit of Accounts: Organization supposed to have Audit of their accounts by authorized Auditor duly signed on each page. 6. then underwriter will have to buy and hold that particular amount of shares. 2. Selection of Bankers to the Issue: Bankers Letter confirming opening of separate account for IPO and accepting their appointment as such Rule -18 of Public Issue Rules 2006. then it is necessary to collect NOC from all the lenders. . in case of Bangladesh Capital Market History.Works before Obtaining the Consent from Securities Exchange Commission – 1. If the company have loan from several banks. by the issuer’s chief executive officer/managing director. Local Organization usually appoints only Local Advisor and multinational organization supposed to have two legal advisers both Local & Foreign. 4. Completion of Valuation and restructuring: Before getting consent Organization willhave to complete their total asset Valuation. Collection of NOC from Lenders: Collection of No Objection Certificates (NOC) from Lenders is a mandatory to get IPO approval. If the shares under subscribed. Listed organization’s top level employee usually has to be followed by the auditor.
10 copies of Financial Statement have submitted to SEC. Through this account Company has to refund warrant money to the investor. CDBL maintain online transaction of securities by taking some fees and they listed all the investor in Stock Market. Draft Prospectus: Before applying for IPO Company will have to drafting the abridge version of prospectus and dealing with Printers on printing of Prospectus. Rule 18 (21) of the Public Issue Rules 2006 says that the application for consent shall be accompanied by some exhibits including Credit Rating Report.chief financial officer and issue manager according to the Rule -3 of Public Issue Rules 2006. 12. Refund warrant guarantee: Company supposed to have opened a separate Bank Account for refund warrant purpose.000. Refund Warrants. one copy each to DSE and CSE. Due Diligence etc. The audited account shall not be older than 120 days of the end of the period for which the Financial Statement is prepared. it is mandatory to complete agreement with Central Depository Bangladesh Limited (CDBL). It also called Mother Accounts for Refund Warrant. Forms. If the application is . Approval from Sponsors: At this point of IPO process now it is necessary to take approval from the sponsor and documentation the process. undertaking and information from Sponsors/ Directors. No issue of shares at a premium or issue of right shares shall be made by a public company unless the issue is rated by a credit rating company and declaration about such rating is given in the prospectus or right offer document (Sec. After completion of agreement now company will have to take decision on depositing sponsors shares during Lock-in-Period with Custodial Bank or with CDBL. Fees of BDT 10. 9. At present there are more than 1600000(sixteen lac investors) in Bangladesh Capital Market.3 of Credit Rating Companies Rule 1996). Letter of Allotment etc. 8. who will not get the share. Credit Rating Report: Generally it takes at least two months to complete the Credit Rating after the Annual Audit is completed and credit report is mandatory for IPO listing process. 7. Application Submission: Application has to submit to SEC for consent to Issue with approved Prospectus and deposit the Govt. Declarations. 11. Agreement with CDBL: Before submission of Application to SEC. 10.
documents are provided by the applicant are reliable then SEC shall issue letter of Consent within 60 days of receipt of complete application. usually before 10-15 days prior to opening of subscription.incomplete the SEC shall inform the applicant within 28 days of receipt of application and if the issuer fails to remove incompleteness within 30 days of communication. 2. Submission of prospectus: After getting approval from SEC the first step is to submit the abridged version of prospectus in SEC for approval.( Section 138 of Companies Act 1994). . 3. it shall file fresh file fresh application. CSE & Issue Manager within 3 working days of the issuance of Consent Letter (Rule 6(2) of Public Issue Rules 2006). Announcement for the investor: Company will have to Publish of abridged version of prospectus in 4 newspapers (2 English + 2 Bengali) within 3 working days of the issuance of Consent Letter (Rule 5(1) of Public Issue Rules 2006). CSE and Issue Manager and will have to post the full prospectus vetted by SEC in Websites of Issuer. (Rule -17 of Public Issue Rules 2006). 4. DSE. Issuer Company will have to submit a diskette containing the text of vetted prospectus to SEC. Works After Obtaining the Consent from Securities Exchange Commission – 1. A paper clipping of published Abridged Version of Prospectus has to submit to SEC within 24 hours of publication in newspapers. SEC. If the application submitted by the applicant is fresh and correct then usually it takes 45days to get IPO consent. Provide full prospectus: Issuer Company will have to submit 40 copies of printed prospectus to SEC and also submit printed copies of abridged version Prospectus and application forms to Bangladesh Embassies by EMS of postal departments within 5 working days from the date of publication of abridged version of prospectus in newspapers. (Rule -17(4) of Public Issue Rules 2006). Consent from SEC: if the application and information. Application for listing: At this point Applicant should apply to all Stock Exchanges in Bangladesh and submit the vetted prospectus to the Stock Exchanges within 7 working days from the date of issuance of the Consent Letter (Rule 17 of the Public Issue Rules 2006). 13. And also have to submit signed copy of the Prospectus with Registrar of Joint Stock Company (RJSC) on or before the date of publication of prospectus in newspapers. DSE.
Issuer shall notify the underwriter to take up underwritten shares. 7. In the secondary market. and futures are bought and sold. It is therefore important that the secondary market be highly liquid (originally. is the financial market in which previously issued financial instruments such as stock. Subscription period: Subscription List shall be opened and sale of securities commence after 25 days of publication of Abridged Version of Prospectus.. securities are sold by and transferred from one investor or speculator to another. Approval of listing: Granting of listing applications by DSE & CSE for issuing the share. By NRB be made to the Issuer Company within the closing date so as to reach the Company by the closing date plus 9 days. (Regulation 3(3) of DSE Listing Regulations) Secondary market The secondary market. 9. providing liquidity and the spreading of risk. In case of under subscription: In case of under subscription. 8. it is the existence of a flourishing secondary market. options. 6. also called aftermarket. Full payment is to be made by the underwriter of underwritten amount within 15 days of Issuers notice. Application to Stock Exchanges for Listing: For application for Listing issuer has to submit it to SEC attested copies of applications filed with Stock Exchanges within 7 working days of issuance of consent letter (Application shall be made by the Company at least 10 days prior to issue of first Prospectus (Regulation 3 (2) of DSE Listing Regulations). The time limitation is within 10 days of close of subscription date. the only . In most cases a stock exchange largely fulfils the role of a secondary market. (Rule . with the flotation of new issues representing only a small proportion of its total business. Spot buying rate to be collected from Sonali Bank on the date of opening of subscription.5. The exchange shall decide the question of granting permission within a maximum period of 6 weeks from closure of subscription lists. Transaction rate: To apply spot buying rate (TT Clean) in US $ and UK pound and Euro of Sonali Bank for subscription of NRB‟s.5 of Public Issue Rules 2006) Subscription List shall be closed after remain open for 5 consecutive banking days. However. bonds.
Stock Exchanges of Bangladesh Bangladesh has two Stock Exchanges. The objectives & functions of the Stock Exchanges • To provide market place or facilities for bringing together buyers and sellers for trading of securities. ⇒ Pre-Automation Concept: Stock Exchange is a recognized market place where authorized representatives of the investors assemble for buying and selling of issued securities on competitive bids and/or offers. • Clearing and settlement of the traded securities. All exchanges are self-regulated. Provide investment opportunities for all groups of investors through quick. fair trading and protect investors in the securities in compliance of laws. ⇒ Post-Automation Concept: It is a recognized market system which provides on-line real time facilities to the investors for buying and selling of issued securities on electronic matching basis against competitive bids and/or offers.way to create this liquidity was for investors and speculators to meet at a fixed place regularly. Dhaka Stock Exchange (DSE). Dhaka and Sylhet in June 1998. • To ensure orderly market. Concept of stock exchange A Stock Exchange may be defined on the basis of pre-automation and post-automation concept. • • Listing of the securities. private sector entities which must have their operating rules approved by the BSEC. established in 1954 commenced screen based automated online trading in August 1998 and Chittagong Stock Exchange (CSE). commenced screen based automated online trading from Chittagong. established in 1995. easy and accurate transaction. . this is how stock exchanges originated.
• Stock Exchanges may make rules/regulations. 1998 grouped the listed companies of our stock exchanges into following four categories: A . suspension and other disciplinary measures against it’s members for violation of code of conduct as well as other securities laws. On the other hand firms/companies those are not listed with any of the stock exchanges are unlisted companies. Debentures and Mutual Funds. Settlement of Stock Exchange Transactions Regulations. Newly listed company with at least 10% EPS. with approval of SEC. Category of the listed companies Companies or firms which are listed with stock exchanges are called listed public limited company. Newly listed company with less than 10% EPS. Its’ rules provide for the expulsion. Z – category companies – .• • • • Stock Exchanges are basically functioning as Self-regulatory Organization (SRO). Stock Exchanges have an oversight responsibility on the activities of their members. Declared at least 10% dividend in the last calendar year. B – category companies – • • • Regular in holding the current AGM. It is also monitor the activities of listed securities. • It has the power to take punitive measures against the listed companies for violation of it’s’ rules/regulations.category companies – • • • • Regular in holding the current AGM. to carry out the aforesaid functions. Declared less than 10% dividend in the last calendar year.
however. N. Accumulated loss exceeds paid-up capital.• • • • Failed to hold current AGM. Not in operation for more than six months. G. this condition shall not apply if the company declares dividend out of current years profit and holds AGM.category companies – Newly listed companies shall be grouped under this category for first year. .category companies – Newly listed green field companies shall be grouped under this category. Failed to declare dividend.
Conceptual Issues .
a share is an indivisible unit of capital. a type of security. mutual fund. such as Debenture Bond . A joint stock company divides its capital into shares. Ordinary share usually carries with it the right to vote on certain matters. termed as issuing shares. A shareholder. • Ordinary share – Ordinary share is a form of corporate equity ownership. expressing the proprietary relationship between the company and the shareholder. or any other organization.The products available in the stock market – The different products available in the stock market are – Share • • Ordinary Share Preference Share Mutual Fund Debt Securities • • Share A share is a single unit of ownership in a corporation. also known as a stockholder. Thus. which are offered for sale to raise capital. and is thus a part-owner of the company. The income received from shares is known as a dividend. The process of purchasing and selling shares often involves going through a stockbroker as a middle man. The denominated value of a share is its face value: the total capital of a company is divided into a number of shares. is a person who owns shares of a certain company or organization.
the entire fortunes of your portfolio depends on this one asset. other mutual funds and other securities) on behalf of the investors/unit holders and distributes the profits. An open-end fund is one that is available for subscription all through the year. this risk is substantially reduced. a company can have both a "voting" and "nonvoting" class of common stock.electing the board of directors. This is because by holding all your money in just one asset. • Preference share . a mutual fund allows an investor to indirectly take a position in a basket of assets According to basic financial theory an investor can reduce his risk by holding a portfolio of assets instead of only one asset. and electing the company's board of directors. Call ability. In fact. A closed-end fund has a stipulated maturity period which generally ranging from 5 to 15 years. investing in mutual funds bears the same risk as investing in the equities. Holders of ordinary share are able to influence the corporation through votes on establishing corporate objectives and policy. Mutual fund investments are not totally risk free. Debt securities include government bonds. CDs. Mutual fund A Mutual Fund is a professionally managed collective investment scheme that pools money from many investors and invests typically in securities (stocks. the only difference is that due to professional management of funds the controllable risks are substantially reduced. A preference does not assure the payment of dividends. corporate bonds. Nonvoting. interest rate and maturity/renewal date. short term money market instruments.ended mutual fund. By creating a portfolio of a variety of assets. preferred have preference to dividends payments. By structure mutual funds are of 2 types – Open-ended mutual fund & Closed. • Debt securities –Any debt instrument that can be bought or sold between two parties and has basic terms defined. By fund categories mutual funds are of 2 types – Equity mutual fund categories & Bond mutual fund categories. but the company must pay the stated dividend rate before paying dividends on common stock. However. Preference in assets. stock splits. .Preference in dividends. such as notional amount (amount borrowed). In other words. In general.Preferred share is a special class of shares which may have features like . convertibility to common stock. bonds. Additional benefits from ordinary shares include earning dividends and capital appreciation. at the option of the corporation. in the event of liquidation.
only an issue manager can sell shares under private placement on behalf of an issuer company The stock market regulator has introduced a guideline for placement of shares with private investors to bring more transparency into the mechanism of fund-raising. the type of issuer and income payment cycles. According to the guideline.municipal bonds. including institutions. Private placement is a way of raising funds from chosen or selected private investors without an initial public offering. preferred stock. shares allotted through private placement will be subject to lock-in for one year. The total dollar value of trades conducted daily in the debt markets is much larger than that of stocks. with much of the trading now conducted electronically. Restrictions have been placed on the mass-scale distribution of shares through private placement with a one year lock-in period in the sales of stocks. They are typically classified and grouped by their level of default risk. higher risks of payment default almost always lead to higher interest rates to borrow capital.Private placement occurs when a company makes an offering of securities not to the public. it cannot be transferred to another person or entity. especially by nonlisted firms. Such offerings do not need to be registered with the Securities and Exchange Commission (SEC) and are exempt from the usual reporting requirements. The interest rate on a debt security is largely determined by the perceived repayment ability of the borrower. Private placement . However.Most debt securities are traded over-the-counter. according to the guideline. but directly to an individual or a small group of investors. In Bangladesh's stock market. but riskier than cash. mandatory tax identification numbers of subscribers and submission of the subscribers' list to the regulator. Before raising capital through private placement. Debt securities on the whole are safer investments than equity securities. The proposed capital may be raised from not more than 100 investors. the number of investors may be increased to 150 before the final disclosure. collateralized securities and zero-coupon securities. as debt securities are held by many large institutional investors as well as governments and non-profit organizations. Debt securities get their measure of safety by having a principal amount that is returned to the lender at the maturity date or upon the sale of the security. Private placements are generally considered a cost-effective way for small businesses to raise capital without "going public" through an initial public offering (IPO). a company must . before which.
” it said. the ownership of the instrument can be transferred in the secondary market. it said.obtain consent from SEC as per rules. profiles of key management personnel. basic earnings per share. the interest rate and other conditions of the bond will have been influenced by a variety of factors. It is a debt security. depending on the terms of the bond. is obliged to pay them interest (the coupon) and/or to repay the principal at a later date. • Bond -Bond is an instrument of indebtedness of the bond issuer to the holders. At the time of issue of the bond. A complete list of subscribers should be submitted to SEC within 15 working days of closing of the subscription. “Applications should be submitted to SEC through a merchant bank along with an information memorandum. It must contain a background of the company. schedule of project implementation. Very often the bond is negotiable. adding that a company should not use general solicitation or advertising to market the shares. “The subscription money should be deposited through beneficiary owner's accounts. under which the issuer owes the holders a debt and. . the length of the term and the creditworthiness of the issuer. audited financial statements. and sometimes monthly). annual. Sponsor or promoter groups should maintain a minimum post-issue shareholding of 30 percent of the total paid-up capital of the company. i. the guideline said. such as current market interest rates. diluted earnings per share for the last three years and net asset value based on the last balance sheet The information memorandum should be provided to potential investors. termed the maturity. Interest is usually payable at fixed intervals (semiannual. reasons for capital raising.e.
7316157% 0.23405 32.16798 11. of indexed shares ) Closing M.00919 1563.Cap = ∑ ( CP X Total no.Dhaka Stock Exchange Ltd Last update on Feb 17.7592221% Index Calculation Algorithm (according to IOSCO Index Methodology): Current Yesterday's Index = Opening M.Cap Yesterday's = Closing Index X Closing M.Cap -------------------------------------------------------------- Closing Index Opening M.Cap -------------------------------------------------------------- Current M.Cap Closing Index X Current M. 2013 at 11:10AM DSEX Index DGEN Index DS30 Index 4344.No 1 Index Name Base Index Remarks DSEX (all shares) 350 (as on 01-11-1993) .78293 0.9113664% 0. of indexed shares ) There are three indices in the DSE as follows : Sl.Cap = ∑ ( LTP X Total no.20423 4429.75692 39.
B.Market Capitalization IOSCO .70321 .2 3 DGEN (A. G & N) DS20 817.36558 3642.63704 (as on 24-11-2001) 1000 (as on 01-01-2001) SEC directive regarding index was on 17-11-2001 Abbreviations and Acronyms M.Closing Price Last Traded Price Highest Lowest Index Graph of 28-03-2013 value: value: 3692.Cap .International Organization of Securities Exchange Commissions (IOSCO) LTP CP .
67858 The Vertical lines of the graphs indicate the index value and the horizontal lines of the graphs indicate different times when the value of the index got changed.14759 1352.07538 Highest Lowest Index Graph of 28-03-2013 value: value: 1370. .65384 3749.Highest Lowest Index Graph of 28-03-2013 value: value: 3805.
4663 -38. Selection of stocks for the benchmark index should be such that it represents the whole market. B & Z category were introduced) and Base Value is set to 1000. This index is disseminated on line to the entire Brokers' Work Stations (BWSs) during trading sessions and after every three minutes the index value will be refreshed.603 CSE30 .Index CSE30 CSCX CASPI Value 11605.The Base Date of this index is 15th April 2001 (when A. then its last day's closing price is taken for computation of index closure. Value-Weighted Index satisfies the above criterion.It provides a discussion about the important criterion for an index. suspended for indifinte period and non-traded for preceding six months of review meeting.1313 13446. The use of index closure algorithm prevents any intentional manipulation of the closing index value . The criterion is that the movement of the index fully represents the aggregate movement of the index's constituent assets and that the index's returns are realizable by an investor who has held a portfolio identical to the asset mix of the index. If an index constituent has not traded in the last 30 minutes. The index is reviewed in the Index Committee Meeting after every six months like other two indices of CSE.4474 -22. If an index constituent has not traded at all in a day. This also excludes the companies/scrips which are debt securities. CSCX . mutual funds.5055 8553. All CSE indices are calculated using following formula: Free-float market capitalization of index constituents/ Base Market capitalization * Base Index Value The closing index value on any trading day is computed taking the weighted average of all the trades of index constituents in the last 30 minutes of trading session. The new index includes all but not the Z category companies. which is to be used as a benchmark of performance. the weighted average price of last 50 trades is taken for computation of the index closure.6556 Change -7.
The Vertical lines of the graphs indicate the index value and the horizontal lines of the graphs indicate different times when the value of the index got changed. .
Findings of the study .
The Premier Cement Mills Limited encompasses 1050 trading numbers which is the highest one. M. The AB Bank encompasses 483 trading numbers which is the highest one. Dutch-Bangla Bank.I. Prime Bank. The name of the banks are mentioned below – AB Bank Limited. Southeast Bank.00 pm Sunday – Thursday All securities of the stock exchanges are distributed in different sectors. Export Import (Exim) Bank of Bangladesh. LAFARGE SURMA CEMENT LTD. ICB Islamic Bank Limited. Heidelberg Cement Bd. Confidence Cement. Standard Bank Limited. Pubali Bank. United Commercial Bank Ltd. Mercantile Bank Ltd. The Premier Bank Ltd. Jamuna Bank Ltd.The trading session at DSE & CSE is performed as a non-stop platform in the following sessionContinuous Trading hours Trading day 10. First Security Islami Bank Limited. The name of the companies in Cement sector are mentioned below – Aramit Cement. Islami Bank. Cement Factory Limited. Mutual Trust Bank Ltd. • Cement – The cement industries sector engaged in the stock market comprises 7 private companies. Al-Arafah Islami Bank.00 am to 3. NCCBL. Shinepukur Ceramics Limited holds 172 trading numbers which is the highest one. IFIC Bank. Shahjalal Islami Bank Ltd. The name of the companies in ceramics sector are mentioned below – . Meghna Cement. City Bank. Eastern Bank. Uttara Bank. One Bank Limited. Premier Cement Mills Limited. Rupali Bank. Bank Asia Ltd. BRAC Bank Ltd. Social Islami Bank Limited. NBL. Trust Bank Limited. Like as – • Bank – The banking sector engaged in Stock market of Bangladesh comprises 30 commercial banks. • Ceramics sector – Ceramics sector involved in stock market comprises 5 companies. Dhaka Bank.
Ltd. IBBL Mudaraba Perpetual Bond. Bd.Thai Aluminium.Fu-Wang Ceramic. • Financial institutions – The financial institutions sector involved in stock market comprises 22 companies. The name of the companies in this sector involved in trading currently are . BSRM Steels Limited. First Lease Finance and Investment Ltd. IBBL holds 35 trading numbers which is the highest one.(Deb-14%). The Singer Bangladesh encompasses 609 trading numbers which is the largest one. The name of the companies are given below – Aftab Automobiles. Anwar Galvanizing. National Tubes. Services Ltd hold 421 trading numbers which is the highest one.(Deb-14%). • Corporate bond – Corporate bond sector involved in stock market contains 3 companies.(Deb-14%). Beximco Denims Ltd. Ltd. The name of the companies are given below – Bay Leasing & Investment Limited. Delta Brac Housing Finance Corp. Beximco Textiles Ltd. Kay and Que. • Debenture – In this sector 8 companies are involved in the stock market of Bangladesh. Sub 25% Convertible Bonds of BRAC Bank L. Aziz Pipes.(Deb-14%). RAK Ceramics. Deshbandhu Polymer Limited. . Eastern Cables. ICB. BD Welding Electrodes Ltd.Ltd Bangladesh Industrial Fin. The Peoples Leasing and Fin. Bangladesh Zipper Ind. Shinepukur Ceramics Limited. Golden Son Ltd. Ltd. Atlas Bangladesh. National Polymer.ACI 20% Convertible Zero Coupon Bonds. Singer Bangladesh.L. Bangladesh Finance and Investment Co. IDLC Finance Ltd. Industrial Prom.(Deb-14%).Autocars. Standard Ceramic. Beximco Fisheries Ltd. Bangladesh Lamps. (Deb-14%). Quasem Drycells. Beximco Knitting Ltd. Alam Cold Rolled Steels Ltd. Navana CNG Limited. Renwick Jajneswar & Co (Bd). Bangladesh Luggage Ind. Bangladesh Limited. Co. GPH Ispat Ltd. Olympic Industries. International Leasing & Financial Serv. Ltd. GSP Finance Company (Bangladesh) Limited. Monno Ceramic. FAS Finance & Investment Limited. • Engineering – The engineering sector engaged in stock market comprises 23 companies.(Deb15%). Monno Jute Stafflers. BD. S. The 3 companies are . Rangpur Foundry.(Deb14%).Aramit Cement Ltd.
Co. Fu Wang Food. Gemini Sea Food. • Insurance – There are 46 insurance companies which are involved in the stock market. Services Ltd. Delta Life Insurance. CVO Petrochemical Refinery Limited. Zeal Bangla Sugar Mills Ltd. Ltd. Titas Gas Transmission & Dist. Summit Purbanchol Power Company Limited. GBB Power Ltd. Summit Power Limited. Golden Harvest Agro Industries Ltd. City General Insurance Co. Ltd. The name of the companies in this sector are mentioned below – Agrani Insurance Co. Phoenix Finance and Investments Ltd. Peoples Leasing and Fin. Prime Finance & Investment Ltd. The name of the companies in this sector are mentioned below – Bd. Central Insurance. Eastern Insurance. Fine Foods Limited. Apex Foods. United Leasing. Eastland . Dhaka Electric Supply Company Ltd. Jamuna Oil Company Limited. Linde Bangladesh Limited. Meghna Petroleum Limited. Asia Pacific General Insurance Co. Uttara Finance. Asia Insurance Limited. BGIC. of BD Ltd. Khulna Power Company Limited. Premier Leasing & Finance Limited. • Food $ allied – The Food & allied industries sector involved in stock market contains 17 companies.& Dev. BATBC. Islamic Finance & Investment Ltd. • Fuel & power – The Fuel & power sector engaged in stock market comparises 15 companies. National Housing Fin. Eastern Lubricants. The name of the companies in this sector are mentioned below – AMCL (Pran). Bangas. Ltd. Continental Insurance Ltd. Co. Power Grid Company of Bangladesh Ltd. MIDAS Financing Ltd. Ltd. Ltd. Shyampur Sugar Mills Ltd. Barakatullah Electro Dynamics Ltd. Meghna Condensed Milk. Dhaka Insurance Limited. Rangpur Dairy & Food Products Ltd. MJL Bangladesh Limited. LankaBangla Finance ltd. Padma Oil Co. Welding Electrodes. Rahima Food. and Inv. Meghna Pet Industries. The Golden Harvest Agro Industries Ltd encompasses 1333 trading numbers which is the highest one. BGIC holds 242 trading numbers which is the largest one. Union Capital Limited. Beach Hatchery Ltd. National Tea. The Dhaka Electric Supply Company Ltd holds 343 trading numbers which is the highest one.
AB Bank 1st Mutual fund.F.F. Rupali Insurance. "Reliance One" the 1st scheme of . Phoenix Finance 1st Mutual Fund. Paramount Insurance Company Ltd. Standard Insurance Limited. Green Delta Mutual Fund. Aims 1st M. Progressive Life Insurance Co. PRIME INSURACE. Reliance Insurance. Pragati Life Insurance Ltd. Sonar Bangla Insurance Ltd. Islami Insurance Bangladesh Limited. United Insurance. Republic Insurance Company Limited. EBL First Mutual Fund. Ltd.F.F. Provati Insurance Company Limited. ICB AMCL Islamic Mutual Fund. National Life Insurance. Meghna Life Insurance Co. AIBL 1st Islamic Mutual Fund. MBL 1st Mutual Fund . Federal Insurance. 6th ICB M. ICB AMCL Second Mutual Fund. EBL NRB Mutual Fund. Popular Life First Mutual Fund. Prime Finance First Mutual Fund. Northern General Insurance Company Ltd. • IT sector – The IT sector comprises 6 companies involved in the stock market. First Bangladesh Fixed Income Fund. Prime Islami Life Insurance Ltd. 1st Bangladesh Shilpa Rin Sangstha M. 8th ICB M. Janata Insurance. IFIL Islamic Mutual Fund-1. Phoenix Insurance.Insurance. ICB AMCL 1st M. Grameen One : Scheme Two. Ltd. 7th ICB M. Green Delta Insurance. Takaful Islami Insurance Limited. Prime Bank 1st ICB AMCL Mutual Fund. Global Insurance Ltd. Nitol Insurance Co. Aamra Tecknologies Ltd is having the highest number of trading values.F. Pioneer Insurance. 5th ICB M. ICB AMCL Third NRB Mutual Fund. Popular Life Insurance Co. Pragati Insurance. Ltd. NLI First Mutual Fund. Grameen Mutual Fund One. 2nd ICB M. Ltd.F. ICB AMCL 1st NRB Mutual Fund.F. Sandhani Life Insurance. IFIC Bank 1st Mutual Fund. NCCBL Mutual Fund-1.F. Fareast Islami Life Insurance Co. ICB Employees Provident MF 1: Scheme 1. The Grameen One : Scheme Two holds 168 trading numbers which is the highest one . Rupali Life Insurance Company Limited. Karnaphuli Insurance. Peoples Insurance. Ltd. Sunlife Insurance Company Limited.F. PHP First Mutual Fund. 4th ICB M. Purabi Gen. • Mutual funds – The Mutual funds sector contains 41 companies engaged in the stock market. DBH First Mutual Fund. Mercantile Insurance Co. Padma Islami Life Insurance Limited. Ltd. The name of the companies are given below – First Janata Bank Mutual Fund. Insurance. 1st ICB M.F. 3rd ICB M. LR Global Bangladesh Mutual Fund One.F. ICB AMCL 2nd NRB Mutual Fund.
Beximco Pharma. Renata Ltd. Pharmaceuticals & chemicals – The pharmaceuticals sector engaged in stock market contains 22 companies. Active Fine Chemicals Limited. Trust Bank 1st Mutual Fund. Libra Infusions Limited. • • • • • • Services & real estate Tannery industries Telecommunication Textile Travel & leisure Treasury bond – The Treasury bond sector engaged in stock market contains 221 companies. Keya Cosmetics. Reckitt Benckiser(Bd. • • Paper & printing – Paper & printing sector comprises one company in the stock market. Beacon Pharmaceuticals Limited. Global Heavy Chemicals Limited. The name of the companies are given below – ACI Limited. Imam Button.Reliance Insurance Mutual Fund. ACI Formulations Limited.)Ltd. Pharma Aids. Kohinoor Chemicals. Orion Infusion Ltd. Marico Bangladesh Limited. Glaxo SmithKline. Ambee Pharma. The Orion Pharma Ltd holds 9370 trading numbers which is the highest one. Salvo Chemical Industry Limited. Beximco Synthetics. the general ways to trade in the stock market can be mentioned as follows - Ways to trade in the stock market - . The Ibn Sina. Square Pharmaceuticals Ltd. Southeast Bank 1st Mutual Fund. • • • Papers & printing Leather & footwear Miscellaneous After over viewing the trading in the DSE & CSE. Orion Pharma Ltd.
• Telephonic orders can also be submitted provided that such orders shall be confirmed in writing with in 24 hours. • Short-selling of the securities are prohibited if it is not done under Dhaka Stock Exchange (Short Sale) Regulations 2006 Types of Order • Based on price. • Trading in the securities can be executed through written orders submitted to the concerned broker. Market order: Market order is the order to be executed at the touchline price. orders may be of the following categories. • All orders will match automatically. . • The price of the securities can not go beyond specified circuit breaker range and an investor can quote at the tick price of the securities as specified by the exchanges. and Market order Limit order: Limit order must have a price limit which ensures that the order shall be traded at the price equal to or better than the limit price. • Short-selling of the securities are prohibited if it is not done under Dhaka Stock Exchange (Short Sale) Regulations 2006. A market order is matched immediately on arrival in to the trading engine at the touchline price.• Trading in the securities can be executed through written orders submitted to the concerned broker. • Telephonic orders can also be submitted provided that such orders shall be confirmed in writing with in 24 hours. namely:Limit order. • The price of the securities can not go beyond specified circuit breaker range and an investor can quote at the tick price of the securities as specified by the exchanges.
the remaining part of such order shall not lose its priority. the oldest order shall be executed first. Howla or Contract Note The automated trading system of the exchanges automatically provides the contract note immediately upon completion of trade. Trade Confirmation Trade confirmation note is a proof of the transaction issued by broker. • • If an order is executed partly. brokerage and other charges. Price of the security. If two or more orders are listed in the order book at the same price. etc. • Orders that cannot immediately be executed shall be queued for future execution in a specific order of priority mainly based on price and time of entry. The order and howla or contract note number and date. Clearing and settlement – • A trade executed through exchanges is settled amongst the brokers through the clearing house of the exchanges. shall be executed first. at the lowest selling or highest buying price.• Orders which are at the most favorable price. The queue priority is determined by the system through an interactive process. Name and quantity of the security bought or sold. The broker shall issue a trade confirmation note to his client within twenty four hours of the execution of order and it should be numbered and time stamped. The trade confirmation note shall show: Date of the trade. . that is. This note is the evidence of transaction and shows the contract number with date of execution and other details of the concerned trade.
For settlement of the trades of the securities under Z-category the the aforesaid periods are T+3 and T+7 respectively. • A member shall make settlement to his client by delivery of securities and/or make payment by cheque within one day of his receipt of securities and/or cheque from the Clearing house. the buying and selling brokers deposit cheque and securities respectively to the clearing house on 2 nd day of the trade (T+1) and the clearing house deliver securities and give cheque to the buying and selling broker respectively on 4th day of the trade (T+3). ⇒ Broker/Dealers are the members of the exchanges. ⇒ They are licensed by the Commission to act as broker/dealer. The market intermediaries in the stock market – ⇒ Stock-broker/Stock-dealer and their authorized representative ⇒ Merchant Banker/Portfolio Manager/ Underwriter ⇒ Asset Management Company ⇒ Custodian ⇒ Trustee ⇒ Depository Participant (DP) ⇒ Broker is entitled to buy and sale the securities on others account and Dealer is entitled to buy and sale the securities for his own account. . except Z category securities.• In settlement of trade. Interest shall also be payable to a client for delayed payment at 1. 500 for each day for each default. Any default shall attract a fine of Tk. ⇒ Authorized Representatives (AR) are employees of broker/dealer.5% per month.
In the form of margin facilities several term & conditions are attached. The investors should be well-informed about all the terms & conditions. The investors should know the client code number for trading. For fund deposit they should posses the money received with proper signature of the authorized person of the stock broker. 2000. When trading will be done by negotiation the investors should perform the task of setting the rate of commission. ⇒ Their activities are regulated by SEC (Broker/Dealer and Authorized Representatives) Regulations. Responsibilities of investors to their stock brokers – The investor/client should have a proper signature in the customer account information to form a contractual agreement. ⇒ They are also licensed by the Commission.⇒ Apart from the broker/dealers ARs are authorized to deal with the clients of the concerned broker. For the deposits of the share the investors should take acknowledgement receipt which should contain the signature of the authorized person of the stock broker. Rules and regulations in the stock market – . They should have all the necessary information about the introducers. The investors should provide proper declaration in respect of shares trading by director or sponsors.
Like . Common objective of investment in secondary market is to maximize profit from bullish market and or minimize loss from bearish market. • • Product. broker and authorized representative) Rules.⇒ Securities & Exchange Rules. 1999 ⇒ Settlement of Dhaka/Chittagong Stock Exchange Transactions Regulations. 2002. Net asset value per share. market position of the product etc. • • The investors should be satisfied enough about the management setup of the company The investors should gather information regarding some relevant issues of the company. Price Earning ratio (P/E). technology. Market price and its fluctuation. 1998. ⇒ Securities & Exchange Commission (substantial shares acquisition) Rules. Major future prospects that will challenge the stock market . Before making investment decision one should determine his own objective for investment. ⇒ Securities & Exchange Commission (stock dealer. of the company. Turnover rate of the shares or liquidity position etc. Dividend. ⇒ Margin Rules. • The investor should have all he necessary information about the industry of the company and their average return for last few years. No. ⇒ Dhaka Stock Exchange (Short Sale) Regulations 2006. of shares outstanding.Earning per share (EPS). the investor should analyze the financial statements of the company and decide to invest in the shares of that company. Dividend pay out ratio. 1987. Some factors to be considered while making investment in the secondary market • • • Investments in capital market are primarily made either for capital gain or for getting regular income as dividend. of the company. growth rate. market position etc. 2000. • After determining the objective.
IT sector with our talented developers. A deep sea port requiring 1 billion dollar is going to start with a policy decision that itwill also be listed. The Pharmaceutical sector and API enjoying WTO benefit is growing shar Textile sector as backward linkage to thriving export oriented garments industries is booming.• • • • • • • The Telecom Giants in Bangladesh are finalizing their offers for IPO in the market. yet to demonstrate the massive potentials of software industry of the country . Power and energy sectors demand for capital is 5 to 10 billion dollar within short time to meet the immediate needs of 5000 MW power demand. Export oriented food processing industry needs huge capital and technical capacity to meet the growing standards in global market for marine food. fruits and poultry.
Conclusion Major findings The stock exchanges suffer from a major problem like unexpected rise and fall in the share price. Such fluctuations take place because of the general confidence of the investors about • • • • Political stability Euphoria of investments in shares Prospect of quick capital gains A vacuum in respect of institutional presence in the share market .
• The concept of centralization of the securities market has not been implemented that arise technical problems and political infighting. CSE look for their own interest using their internal information of share market. . • Financing procedures and delivery of securities sometimes take an unusual long time for which the money is blocked from nothing. Through the thorough study on the stock exchanges of Bangladesh I have come out with some major problems. As a result the shareholders as well as investors do not have any idea about position of that company. • • The absence of comprehensive legal and supervisory framework Lack of skilled manpower as well as financial and non-financial institutions involved in the securities market. • The lack of proper policy framework that provides incentives and protection to investors. • Some companies do not hold Annual General Meeting(AGM) and eventually declare dividends that confused the shareholders about the financial positions of the company. • The intrinsic values for securities traded are sometimes estimated without considering the current market prices of the securities. • Many companies do not focus real position of the company as some audit firms involve in corruption while preparing financial statements. • Some members being the directors of listed companies of DSE.• • • Monopolistic dominance of member brokers Inefficiency of the SECs to cape with the developments Absence of proper application of circuit breakers. Such as – • The share values of some profitable companies have been increased fictitiously some items that hamper the smooth operation of Stock market.
investment banks and floatation of more mutual funds in the private sectors. The management of DSE and CSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms. • • To introduce full computerized system for settlement of transactions.• The dominance of bigger public sector and borrowing of public sector as well as government form the institutional sources rather than the market. • • The brokers should not be allowed to deal in the Scripps on their own accounts. To take remedial action against the issues of fake certificates. To force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors. The composite Quotation system (CQS) should be introduced and implemented that available the exchange specialist bid-ask quotes to the subscribers. • Banks. • To make arrangement to set-up merchant banks. insurance companies and other financial institution should be encouraged deal in share business directly. • • • To control and abolish kerb market form premises of stock market. Conclusion . Suggestions to improve the activities of the stock market • To introduce automated monitoring system that may control price manipulation. malpractices and inside trading. Suggestions & recommendations There are some ways to make the improvement in the overall performance of the CSE & DSE I have focused on some issues which can be considered as suggestions or recommendations to overcome such situation.
A dedicated financial market cell at the Ministry of Finance could be formed to coordinate with these regulators as well as other ministries. Bangladesh Telecom Regulatory Commission and other regulatory bodies is now getting established. Floatation of SOE scrips is expected to expand the market by couple of times Corporatization of SOEs will bring in transparency as well as confidence on the government financial system. including monetary management. they were not serving each others' interests. Vietnam and the other most dynamic economies in the region. it may be a good idea to decide on certain milestones and link them to the disbursement of Development Credit Support of the World Bank. Individually. The government is making good progress in other sectors. the capital market will undoubtedly play a critical role in leading Bangladesh towards being the next Asian tiger with growth comparable to India. Bangladesh Bank.To expedite the market development process. In terms of creating market depth. The supply of securities can be increased if the SOEs are allowed to operate through the stock exchanges. corporatization of public-sector banks and others through this linkage. The recent measures taken by the transitional government have already begun to positively impact the markets. more profitable state-owned-enterprises should be listed. The missing link between the SEC. hence the country was deprived of great initiatives. and there was no effective coordination among them. . The Bangladesh capital market still has a long way to go. If more investorfriendly policy reforms were to be implemented.