A case study on

Performance of Dhaka Stock

Exchange

Course Name: Investment Management

Course Code: FIN 1101

Submitted To:

Priyanka Das Dona

Assistant Professor

Department of Business Administration

United International University

Submitted By:

Tanvir Ahmed Onif

Batch: 54D

ID: 3687

Department of Business Administration

United International University

Submission Date: 13.11.2021

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 Acknowledgment
I would like to express my gratitude and indebtedness to my course instructor

Priyanka Das Dona, Assistant Professor (Finance), Department of Business

Administration, United International University.

With her inexhaustible guidance, valuable advice, continuous

inspiration constructive criticism and generosity she helped me to carry out

this assignment successfully. Lectures sheet and class lectures hat given by the

instructor helped me to discuss the subject matter and to evaluate the

assignment. I am very grateful to my instructor as she provided me the

direction of how the assignment have to complete and what topics and areas

have to cover to make the assignment perfect enough. I would also like to

express our gratitude to the journalists and web developers who creates journals

and websites which helped ME to gather all the necessary information. I also

like to thank those people who give their valuable comments and helped me to

do a successful analysis on Dhaka Stock Exchange.

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 Table of contents:

Chapters Page

 Introduction……………………………………………………….4

 Objective of the study…………………………………………….5

 Sources of information………………………………………...…5

 Rational of the study……………………………………...……...6

 Short overview of DSE ……………………………...…………..6

 Last 3.5 years (2018-2021) performance of DSE……………….8

 Findings………………………………………………………….17

 Recommendations……………………………………………....18

 Conclusion…………………………………………...………….19

 References……………………………………………………….20
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Introduction:

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The Dhaka Stock Exchange is the prime bourse of the country. Through its highly
fault-tolerant automated trading system, the exchange can offer facilities for
smooth transparent and highly efficient provisions for secondary market activities
of shares, debentures and wide varieties of others securities. Managed by a 24
members strong Board of Directors, the overall operations of the exchange is
professionally run by a team of qualified executives. The Dhaka Stock Exchange is
the rallying point for enterprises to raise capital in Bangladesh. With a nationwide
membership of over 238 brokers and dealers, DSE espouses shared vision of

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Bangladeshi businesses all over. The exchange maintains the lead in providing the
perfect launch pad to raise capital by mobilizing savings of general people to set up
large industries.

Objectives of the study

“DSE -A milestone for Economic Development”– the name of the paper defines
the main objective. DSE is contributing a lot for the nation through market
capitalization by creating investment opportunities for the deficit holders of the
society from the surplus holder who have not such available sources of
investments. DSE is performing the role of transferring capital for the overall
development of the nation. The main objective of the study is to gains Practical
knowledge about the activities of Membership Affairs Department of DSE. Other
objectives are as follows:
General Objectives:
1. Last three and half years’ performance of Dhaka Stock Exchange
2. To appraise the activities of Dhaka Stock Exchange Limited.
3. To appraise the development of Dhaka Stock Exchange Limited
4. To present an overview of Dhaka Stock Exchange Limited

Source of information
Primary data & information:

Primary sources included direct formal and informal interviews of the employees
of brokerage house; it was face to face communication. I asked different question
about DSE. Some people are very cordial to respond me.

Secondary data & information:

 Annual report DSE.

 Monthly review of DSE.
 Several kind of academic Test-Book.
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  Different publications regarding stock exchange function
 Price index

Rational of the study

The Dhaka Stock Exchange (DSE) is the most reliable stock exchange in
Bangladesh; it has various departments that provide services for the investors. This
report titled “last three and half years’ performance of Dhaka Stock
Exchange” is prepared to fulfill the requirement of the internship program of the
M.B.A degree. It is mandatory requirement of the program that require a student to
work in a particular organization for minimum90 days. This report, which contains
the outcome of a project assigned by the Dhaka Stock Exchange Ltd., is presented
to the concerned teacher as well as the organization.

Short overview of DSE

The government initially recognized the need for a stock exchange in what was
then East Pakistan after it was discovered that the Calcutta Stock Exchange had
restricted trades of Pakistani shares and securities in early 1952. The Pakistani
Provincial Industrial Advisory Council quickly formed an organizational group to
help establish a stock market in East Pakistan. The organizing committee's second
meeting, held on March 13th, 1953, took a crucial step. Various aspects of the
matter were addressed in detail in the cabinet chamber, Eden Building, under the
chairmanship of A. Khaleeli, Secretary of the Government of East Bengal,
Commerce, Labor and Industries Department. The committee rejected the central
government's proposal to create a branch of the Karachi Stock Exchange in Dhaka,
believing that East Pakistan should have its own stock exchange. It was advised
that the Dacca Narayanganj Chamber of Commerce and Industry approach its
members about obtaining membership cards for the projected Stock Exchange for
Rs.2000 each. The exchange should take place in Dhaka, Narayanganj, or
Chittagong, according to the plan. To organize the exchange, a committee
comprised of major business and industrial figures in the province was formed,
with Mirza Mehdi Ispahani serving as the convener.

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The chamber informed its members and members of linked associations about the
meeting's proceedings and asked them to indicate whether they were interested in
participating in the planned stock exchange. On July 7, 1953, a conference was
held in the chamber in which roughly 100 people were interested in the formation
of the exchange. The gathering invited eight gentlemen to become promoters of the
exchange, with M Mehdi Ispahani as convener, and authorized them to draft the
exchange's Memorandum and Articles of Association, as well as apply for
registration under the Company's Act of 1913. J. M. Addison-Scott, Mohamed
Hanif, A. C. Jain, A.K. Khan, Abdul Jalil, M. Shabbir Ahmed, and Sakhawat
Hossain were the exchange's other seven promoters.
It was also decided that the membership price would be RS. 2,000, with a monthly
subscription fee of RS. 15. There were to be no more than 150 people in the
transaction. On September 3, 1953, a meeting of the promoters was held at the
chamber, at which it was decided to appoint Orr Dignam & Co. as the solicitor to
draft the stock exchange's memorandum and articles of association, based on the
rules used by stock exchanges in other countries and taking into account local
conditions.
On April 28, 1954, the East Pakistan Stock Exchange Association Limited was
formed by the eight promoters. On June 23, 1962, as a public limited corporation,
the name was changed to East Pakistan Stock Exchange Ltd. The name of East
Pakistan Stock Exchange Limited was changed once more on May 14, 1964, to
"Dacca Stock Exchange Ltd."
The authorized capital of the Exchange was RS.3, 00,000 at the time of
incorporation, divided into 150 shares of RS. 2,000 each, and it was enlarged to
RS. 5,00,000 in an extra ordinary general meeting held on February 22, 1964,
divided into 250 shares of RS. 2,000 each. The exchange's paid-up capital was RS.
4, 60, 000, divided into 230 shares of RS. 2,000 each. However, 35 shares out of
230 were issued with a face value of RS. 2,000 and a premium of RS.79,98,000
each at a premium of RS.79,98,000 apiece.
Despite being formed in 1954, formal trade began in Narayanganj in 1956 after
receiving the certificate of establishment of business. However, it was relocated to
Dhaka in 1958 and began operations at the Narayangonj Chamber Building in
Motijheel C/A.
The Stock Exchange bought 8.75 katha of property from the government at 9F
Motijheel C/A on October 1, 1957, and moved to its current location in 1959.

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The DSE was first incorporated as the East Pakistan Stock Exchange Association
Limited on

April 28, 1954. However, formal trading began in 1956, 196 securities listed on the
DSE with a total paid up capital of about Taka 4 billion. On June 23, 1962 it was
renamed as East Pakistan Stock Exchange Limited. After 1971, the trading
activities of the Stock Exchange remained suppressed until 1976 due to the
liberation war and the economic policy pursued by the government. The trading
activities resumed in 1976 with only 9 companies listed having a paid up capital of
Taka 137.52 million on the stock exchange. In May 13, 1964 it was renamed as
Dacca Stock Exchange Limited. In 1986 it was renamed as a Dhaka Stock
Exchange Limited.

As of 30th December, 2008 there were 412 Securities listed on the DSE with a
market capitalization of Taka 1043.80 billion. Total turnover value as on
December 30, 2008 was tk. 4.31 billion.

Last 3 years performance (2018-2021)

of DSE:
In 2018 Stocks continued to tumble amid jitters over banks' liquidity crisis. After
starting the day at 5,710, DSEX, the benchmark index of the Dhaka Stock
Exchange, plunged to below 5,700 points in less than half an hour. Eventually, it
lost 81.92 points to close the day at 5,623.64. With yesterday's plunge, the DSE
lost 204 points in the last three days. “The Bangladesh Bank has relaxed the
rules to help banks address its liquidity crisis, but there is no reflection of it
in the market,” said a senior official of the DSE.

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The state banks' loan-deposit ratio is very low, so they can invest more in the
capital market, said Mohammed Nasir Uddin Chowdhury, president of the
Bangladesh Merchant Bankers Association (BMBA).

DSE: Turnover: Annual: Value data was reported at 781,624.950 BDT MN in

2020. This records a decrease from the previous number of 1,459,655.405 BDT
MN for 2019. DSE: Turnover: Annual: Value data is updated yearly, averaging
662,431.915 BDT MN from Jun 1997 to 2020, with 24 observations. The data
reached an all-time high of 3,258,632.868 BDT MN in 2011 and a record low of
12,616.940 BDT MN in 1998. DSE: Turnover: Annual: Value data remains active
status in CEIC and is reported by Dhaka Stock Exchange. The data is categorized
under Global Database’s Bangladesh – Table BD.Z002: Dhaka Stock Exchange:
Turnover.

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Average turnover in volume:

Years Average of volume Growth rate %

2018 96,590,445.16 6%
2019 108,924,193.98 13%
2020 106,476,437.09 -2%
2021 (up to June) 165,977,530.60 56%

The average growth rate of total yearly turnover in value is 34.57%

As we can see in the graph the average turnover is comparatively lower from 2005
to 2021. But from 2007 it has been increasing up to 2016. So it seems very goo

Average DSE general index:

Years Average of volume Growth rate %

2018 3,000.95 3.80%
2019 6,463.43 115.38%
2020 5,999.75 -7.17%
2021 (up to June) 4,548.16 -24.19%

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 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

As we can see in the graph the Average General Index was stable from the year
2010 to 2021 and the index was 819.67, 817.64 and 814.07 respectively. Then
from 2004 it started to rise and it was highest on the year 2019 which was
6,463.43. After that it fell.

Average Turnover in Value

The average turnover in value has been calculated by converting the daily turnover
in value to yearly turnover in value using the Pivot table function in MS Excel. The
following data is presented here:

Years Average of value Growth rate %

2018 4,003,117,980.54 -5%
2019 4,981,687,302.42 24%
2020 4,227,043,595.02 -15%
2021 (up to June) 5,562,297,971.77 32%

The average growth rate of total yearly turnover in value is 52.02%

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As we can see in the graph the average turnover in value is very low from 2005 to
2021.

Average Market Capitalization

Market capitalization is defined as a measurement of the size of a business

enterprise value. Market capitalization is equal to the share price in secondary
market multiplied by the number of areas outstanding for company XYZ.
Capitalization is the therefore the company's worthiness public opinion.
Capitalization cannot give the actual value of a company but rather a market
estimate of a company's value, based on public perceived future prospects,
economic and monetary conditions - and the general public is always wrong. The
average market capitalization has been calculated by using by using the Pivot table
function of MS excel on the daily data collected from DSE.

Years Average of Growth rate %

M.Capitalisation (In Tk.)
2018 2,463,538,140,137.03 0%
2019 3,023,453,856,366.58 23%
2020 3,213,589,983,818.36 6%
2021 (up to June) 3,246,753,321,953.33 1%

The average growth rate of yearly market capitalization in value is 31.77%

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As we can see in the graph average market capitalization is lower from 2005 to
2021. Then from 2009 it started to rise up to 2016 then again fall in 2017 and 2018.

Annual Working Days

It represents number of working days in a year at Dhaka Stock Exchange. These

yearly working days has been found by using Pivot table in MS excel:

Years Number of working days Growth rate %

2018 238 0.00%
2019 238 0.00%
2020 244 2.52%
2021 (up to June) 158 -35.25%

As we can see in the graph the annual number of working days remains somewhat
stable through the time from 2005 to 2021 but in 2021 it fell surprisingly.

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Average DSE General Index:

The data we have found on DSE General Index was presented day wise. But we
have converted these values into yearly data by calculating the average of each
year. These calculations are presented below:

Years Average DSE General Growth rate %

Index
2018 3,000.95 3.80%
2019 6,463.43 115.38%
2020 5,999.75 -7.17%
2021 (up to June) 4,548.16 -24.19%

As we can see in the graph the Average General Index was stable from the year 2010 to 2021.
Then from 2013. It started to rise and it was highest on the year 2019 which was 6,463.43. After
that it fell.

Total Number of Securities

Traded it is the number of shares or contracts traded in a security or an entire

market during a given period of time. The Total Number of Securities traded in
DSE is presented on the table below:

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 Years Total Number of Growth rate %
Securities Traded
2018 $21,688,678,489 27.83%
2019 22,988,525,949 5.99%
2020 25,996,168,160 13.08%
2021 (up to June) 26,106,074,345 0.42%

As we can see in the graph the total number of securities traded per year started to increase from
2006 to 2021. Then it fell and rose again from 2016 and reached highest in 2021 which was
26,106,074,345 securities.

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These information can be used to calculate Beta Coefficient.

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 Findings
After analyzing the key factors: Turnover, Market capitalization, Index and P/E
ratio which are the main indicators of overall DSE performance we have found-

 Our stock market is not that stable rather very volatile

 Political clashes heavily influence our stock market

 Some companies do not help annual general meetings regularly and

eventually declare dividends that do not reflect the real or actual financial
position.

 The concept of centralization of securities has not yet been implemented.

 There is a lack of skilled manpower is DSE as well as in financial and non-

financial institutions that are involved in the DSE.

 Political squabbles have a significant impact on our stock market.

 It has been observed that share values of some profitable companies have
been increased factiously sometime that hampers smooth operations of DSE.

 Reliable and unbiased information about capital issue is not available.

 The notion of securities centralization has yet to be realized.

 In the DSE, as well as in financial and non-financial institutions involved in

the DSE, there is a shortage of skilled labor.

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 Recommendations
To improve the condition of DSE we have come up with some recommendations.
Such as-

 Introduce full computerized system for transactions

 Introduce automated monitoring system to minimize price manipulation,

malpractices and inside trading.

 Financial institutions should be discouraged from dealing directly with the

stock market.

 Accurate capital market information should be available on the internet,

reducing investor misunderstanding.

 Forcing the listed companies to arrange annual general meeting regularly

and pay dividends that are appropriate for their financial state.

 Punish members and brokers for breaching of contract and fraudulent

behavior.

 Financial institutions should be discouraged to deal with the share business

directly.

 Government should control the political unrest strictly.

 Unbiased and correct information about capital market should be available

on the internet so that the investor’s confusion reduces.

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  Skilled employees should be hired for DSE as well as for other institutions.
Their HR policies need to be rectified.

Conclusion
The capital market is market for securities, where companies and Governments can
raise long-term funds. It is the group of interrelated markets, in which capital in
financial form is lend or borrowed for medium and long term and, in cases such as
equities, for unspecified periods. The primary role of the capital market is to raise
long-term funds for governments, banks, and corporations while providing a
platform for the trading of securities. This fund raising is regulated by the
performance of the stock and bond markets within the capital market. Bangladesh
capital market is one of the smallest in Asia but the third largest in the south Asia
region. The Dhaka Stock Exchange is the prime capital market of Bangladesh. It
provides the listed companies with a channel to seek capital fund from the public
and at the same time it provides the investors a place to buy and sell shares of the
listed companies. The objectives of the Exchange are to establish a sound and
stable securities market based on just and equitable principles of trade as well as to
conduct the business in securities giving due regards to the public interest. For this
it is continuously working and the improvement can be seen through its
performance and the new initiatives taken by the DSE. The Exchange is a non-
profit making public company. It works for the betterment of the country's
economy. Thus the Dhaka Stock Exchange is relentlessly trying to make the

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securities market an efficient reliable transparent organization that will be capable
of meeting the challenges of economic reality of the country.

References:
1. https://www.dsebd.org/

2. https://lankabd.com/

3. https://www.thedailystar.net/business/dhaka-stock-exchange-
market-dse-go-into-free-fall-in-2018-1547983

4. https://www.dhakatribune.com/articles/business/stock

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