Term Paper Financial Market

Term Paper
Analysis of Capital Market

Securities in Bangladesh: Present
Status & Prospect
Fardin Khan, Rajesh Datta Roy, Md. Al-Amin, Md. Bashir Ahamed
MBA 19
Department of Business Administration,
Bangladesh University of Professionals
2020
Bangladesh University of Professional
Analysis of Capital Market Securities in Bangladesh:

Present Status & Prospect
Course Title: Financial Institutions &
Markets Course Code: FIN 6402
Submitted To
Md. Kaysher Hamid
Lecturer
Department of Business administration
Submitted By
Group 2
Name ID
Fardin Khan` 1923-2021
Rajesh Datta Roy 1923-2036
Md. Al-Amin 1923-2038
Md. Bashir Ahamed 1923-2041
Department of Business administration

(MBA Regular-19)
Submission Date: 27/10/2020
LETTER OF TRANSMITTAL
Date: 27/10/2020
Md. Kaysher Hamid
Lecturer
Department of Business administration,
Subject: Submission of Report on “Analysis of Capital Market Securities in Bangladesh:

Present Status & Prospect”
Dear Sir,
It is a great pleasure and privilege to present the report titled “Analysis of Capital Market
Securities in Bangladesh: Present Status & Prospect’’ which was assigned to us as a partial
requirement for the completion of the course Financial Institutions & Markets (FIN - 6402).
It is our great pleasure to work on this area which helped us to gain an in-depth knowledge on
Capital Market instrument situations and development in Bangladesh. Throughout the study we
have tried with the best of our capacity to accommodate as much information and relevant issues
as possible and tried to follow the instructions as you have suggested.
We are grateful to you for your guidance and kind cooperation at every step of our endeavor on
this report. We would remain deeply grateful if you kindly take some pen to go through the
report and evaluate our performance.
Sincerely,
Name ID
Fardin Khan` 1923-2021
Rajesh Datta Roy 1923-2036
Md. Al-Amin 1923-2038
Md. Bashir Ahamed 1923-2041
MBA, 19
Faculty of Business Administration (General)
ABSTRACT
To improve the performance of the existing capital market instruments and, to reduce the risk,
the introduction of a new product is necessary for any capital market. Bangladesh's capital
market is operating with only five products with no significant improvement in an instrument
like; Bond & debentures. So, the research intends to evaluate the present status growth and
development of existing financial instruments and to recommend ways to mobilize existing and
introduce new financial instruments in the capital market of Bangladesh. The data collected from
the Security & exchange commission, Dhaka stock exchange, Stock exchange for the year 2014
to 2018 for exhibiting the interrelated development and interpretation of the analysis. According
to the evaluation, the most used product is common stock, and the least is the corporate bond. So,
there should be an increased number of new financial instruments in the capital market to reduce
the dependency on shares only, various types of preferred stock, bonds, options, futures, and
forwards instruments recommended stabilizing the current market.
------------------------------------------------------------------------------------------------------------
Keywords: Capital Market, Capital Market Instruments, Market Capitalization
ACKNOWLEDGEMENT
We want to present our acknowledgments by expressing gratitude to all of those who have aided
and support to the completion of this thesis project.
First, all glory and praises be to Almighty Allah who has blessed me with the bounties and
capabilities to accomplish the task within the given period.
Then it’s worth to mention about my respectable, responsible and resourceful project supervisor
(Lecturer Md. Kaysher Hamid, Department of Business Administration,
Bangladesh University of Professionals.) for his guidance, insightful discussions and

encouragement throughout this study.
We are also grateful and indebted to the companies, columnists of leading newspapers and
secondary data provider for their assistance in our collecting data. Thanks to all the respondents
for making it possible for us to conduct the survey.
TABLE OF CONTENTS
TITLE PAGE
NO.
COVER PAGE I
TITLE PAGE II
Letter of TRANSMITTAL III
ABSTRACT IV
ACKNOWLEDGEMENT v
TABLE OF CONTENTS vi
CHAPTER 1: INTRODUCTION 1
1.1 Background of the study 1-2
1.2 Problem Statement 2
1.3 Objective of the study 3
1.4 Significance of the study 3
1.5 Scope of the study 3
1.6 Scheme of the study 4
CHAPTER 2: LITERATURE REVIEW 4
2.1 Empirical Literature Review 4
2.2 A brief about capital market in Bangladesh 4-5
2.3 Types of Financial Products/Securities 6
2.4 No. of Financial Products/ Securities traded in Bangladesh 6
2.4.1 Equity/ Common Stock 7-9
2.4.2 Mutual Fund 9-10
2.4.3 Corporate Bond 10
2.4.4 Treasury Bond 11
2.4.5 Debenture 11
CHAPTER 3: Research Methodology 12
3.1 Research Technique 12
3.2 Sources of Data 12
3.3 Sampling and Sampling Technique 12
3.4 Data Processing & Analysis 12
CHAPTER:4 Finding & Analysis 13
4.1.1 Number of Financial Instruments 13-15
4.2.2 Capitalization 16-18
CHAPTER: 5 Conclusion & Recommendation 19
5.1 Summary of findings 19
5.2 Recommendation & Conclusions 20
References 21
APPENDIX 23-34
‘
Analysis of Capital Market Securities in Bangladesh: Present Status & Page|1
Prospect
CHAPTER 1:
INTRODUCTION
1.1 : Background of the Study

Sound Capital Market is an indispensable part of an Economy. Without sound and efficient capital
market, rapid economic development could be hampered as capital market provides long term
funds to entrepreneurs. Capital Market of Bangladesh is still highly speculative and lacks
transparency due to poor regulatory framework. In Bangladesh, Financial sector was historically
driven by banks and capital market had fewer rules to play as people had mixed perception about
the risk pattern in capital market that discouraged them mostly to invest there. But in the mid of
ninetieths of last century capital market started to show vibrant behavior that make people
interested about the stock exchanges. As the index was rising sharply and everyone was making
money, many people started to invest their money to the heated market that made a bigger bubble
and finally the bubble bursts. Benchmark index came down to 700 point in November 1997 from
its highest 3600 point in November 1996. Thousands of investors lost their money that made them
reluctant to invest in the capital market again. It took one decade for them to forget the history of
collapse. After that, regulators had taken many steps to stabilize the market. Hundreds of new
issues came to the market. Central depository, circuit breaker, online trading, etc. were introduced
in the market to attract investors. As a result, the market started to grow again. Investors started to
forget the history of 1996 and started to invest again. This time most investors were new and
young with little knowledge about stocks and did not care about market risk. They invested their
money and finally lost everything when the bubble started to burst in December, 2010 that had
started to grow from the year 2009. This time Benchmark index came down to 3616 points in early
February 2012 from its highest point 8918 in December 2010. Millions of investors lost their
money and came down to the street. This is the small picture of stock market crashes in
Bangladesh. In both cases regulators had failed to take proactive measures to not grow the bubble
and caused losses for millions of investors when the bubbles burst. When analysts were anxious
about the bubbles, regulators were ignoring them and even defended the bubbles. But through
corrective regulations capital market is recovering and approaching to strong position again.
Presently capital market is contributing significantly to economy, where market capitalization to
GDP ratio was 19.7% last year. There are now 562
Prospect
securities traded in stock exchanges of 296 companies (up to March 2017) with number of
debentures and government bonds. This term paper is on the securities, which are commonlytraded
in financial markets. There are two types of financial markets; Money Market& Capital Market. In
Money market, all the short-term securities, such as: Treasury bills, commercial papers, negotiable
certificates of deposits etc. are traded and in the capital market, all the long-term securities such as:
Bonds, mortgages, stocks etc. are traded. Here in this paper we will discuss the securities in capital
market and its current status and prospect in Bangladesh.
1.2 : Problem Statement

The capital market of Bangladesh is small, inefficient and underdeveloped. Of the total financial
system, the ‘non securities’ sector accounts for more than ninety percent of the financial activities
in the countries. But this bank based system is virtually on the verge of collapse due to huge
nonperforming loans and colossal volume of classified and default loans. So, we are concerned
with ‘securities segment’ because the securities market can develop the national economy. The rate
of institutional investment is very low in Bangladesh. The capital market has not yet attained the
credibility as a reliable avenue for investment from the side of the general public. The main
problems of capital market of Bangladesh are; serious dearth of risk free assets in the secondary
market to individual buyers, absence of varied tradable financial Instruments. The availability of
low financial instruments in market, the capital in the market is low comparatively to the
developed country and the investors – both institutions and individual are not attracted to invest in
capital market in Bangladesh. Introduction of new instruments of finances will provide the
opportunities to the companies for getting required fund at lower cost. The introduction of new
financing sources will increase the investor’s participation in the future offering of companies.
This will raise more funds. The research aims are to evaluate the growth and development of
existing financial instruments and to recommend for introducing new financial instruments in the
capital market of Bangladesh. The traditional instruments are not attractive to the investors. So, it
is assumed that new instruments will increase the attraction of investors and volume of capital
market and will reduce the dependencyon bank based credit.
Prospect
1.3 : Objectives of the Study

i. To evaluate the growth and development of existing financial instruments in the
capital market of Bangladesh.
i. To know about the potential and opportunities of capital market.
i. TTo recommend policies for introducing new financial instruments in the capital market
of Bangladesh.
1.4 : Significance of the Study

The purpose of the study is to explore a well scanned scenario of Bangladesh capital market, its
significance and its prospects. Although some research has been conducted relating to this topicbut
there is little empirical evidence about how essential stock market is to economic development of a
country.
A sound capital market prompts better economic base and influence its future growth and so it can
help realize Bangladesh’s growth potential. The capital market of Bangladesh is on the brink to
play its due role as a medium for financing investment and thereby making a notable contribution
to economic growth, employment creation and poverty alleviation.
The capital market plays an important role in quickening the pace of economic development but
the existing state of the capital market is under-developed and not in a position to ensure economic
progress of the country. Hence this research will try to highlight the significance of capital market
for the nation and explore what are the probable signs of progress.
1.5 : Scope of the Study
This study is focused on the recent trend of the capital market of Bangladesh. The study will
explain the regulatory aspects of capital market of Bangladesh. It will also help to understand the
prevailing problems in capital market and the initiatives to overcome those problems.
Prospect
1.6 : Scheme of the Study
Chapter One: Focuses on the background of the study, problem statement, objectives,
significance and scope of the study.
Chapter Two: Discusses the literature review of capital market in Bangladesh considering
different research projects and articles.
Chapter Three: Shows the detail of the methodology used in finding out the materials for this
paper which also include the study design, sampling, sampling technique and data collection
process.
Chapter Four: Findings and Analysis attained through secondary data and research
Chapter Five: Contains summary of result Conclusion and Recommendation given for subjected
research topic.
CHAPTER 2
LITERATURE REVIEW
2.1 Empirical Literature Review

“There is a general consensus among scholars that stock market plays an important role in the
development of an economy” (Hearn and Piesse, 2010; Adjasi and Biekpe, 2006; Levine and
Zervos, 1998). “For instance, it accelerates economic growth by enhancing mobilization of
domestic and foreign resources and facilitating investment” (Bencivenga et al., 1996). “Critics of
securities market, however, argue that markets characterized by weak corporate control
mechanisms may jeopardize investor wealth” ( La Porta et al., 1998; 1997). “This phenomenon is
more pervasive in developing economies because they are characterized by weak regulatory
institutions and poor systems of corporate governance” (Hearn and Piesse, 2010)
2.2 A brief overview about Capital Market in Bangladesh

While the capital market of Bangladesh may be the smallest in Asia, it is still the most prominent
in the South Asian region. It includes two entirely automated stock exchanges. Dhaka Stock
Exchange (DSE) is the first and leading stock market of Bangladesh. It had been
Prospect
incorporated as “East Pakistan Stock Exchange Association Limited” on April 28, 1954 and
began trading formally in 1956. Because of the liberation war in 1971, the trading was
interrupted for 5 years. In 1976, DSE again started trading with nine listed companies. Currently
there are 579 Securities, 312 Companies, 37 Mutual Funds,8 Debentures,221 Government
Treasury Bonds,1 Corporate Bonds listed in DSE as of January 2019, with a total market
capitalization of US$99,176 million. On the other hand, Chittagong Stock Exchange (CSE)
began its journey on October 10, 1995. Under the Securities and Exchange Commission Act,
1993, Bangladesh Securities and Exchange Commission (BSEC) was established on June 8,
1993. The mission of the BSEC is to safe guard the interests of investors construct a transparent
and dynamic securities market and assure appropriate issuance of securities and conformity with
securities laws. BSEC basically looks after controlling the business of the stock exchanges,
providing extensive training the intermediaries within the exchange, registration and regulation
and analyzing and publishing informative research. Central Depository Bangladesh Limited
(CDBL) was incorporated on August 20, 2000. CDBL provides services like reinforce the
productive delivery, settlement and transfer of securities by automated book entry system
registration of transfer of securities etc. (Anuva, 2019)
2.3 Types of Financial Products/Securities

A financial market refers to a broad term describing any marketplace where buyers and sellers
participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial
markets are typically defined by having transparent pricing, basic regulations on trading, costs
and fees and market forces determining the prices of securities that trade. Some financial markets
only allow participants that meet certain criteria, which can be based on factors like the amount
of money held, the investor's geographical location, knowledge of the markets or the profession
of the participant. (Ahmed, 2014)
Securities traded in financial market can be classified as:
1) Money Market Securities
2) Capital Market Securities
Prospect
3) Derivative Securities
2.4 No. of Financial Products/ Securities traded in Bangladesh

Now, only five categories of products are traded in the market. These are common share, mutual
fund, debenture, Treasury bond, and corporate bond which were introduced in the market in
1977, 1980,1987,2005,2007 respectively.
The corporate bond and debenture market are regulated by the SEC although the market is small.
Fixed income securities first came into existence in 1987 with the floatation of debenture by two
companies. As on November, 2011, only eight debentures exist in the Dhaka stock exchange. No
new debenture was issued after 1999. Besides these, ten debentures already went to maturity. The
corporate bond market is not mentionable feature. Only three corporate bonds are trading in the
capital market. First corporate bond is floated in 2007 by the Islami bank Bangladesh limited
named as IBBL Mudaraba perpetual bond. Then in 2010, ACI zero coupon bond is introduced in
the market. The primary market of government securities is regulated by the ministry of finance
and Bangladesh bank. The government securities are traded in two places –over the counter
segment and the organized segment at the stock exchange. The CDBL (Central Depository
Bangladesh Limited) provides the depository function for all securities including government
securities and corporate bond and debentures. The OTC (over the counter ) segment of the
secondary market in the government securities is regulated by Bangladesh Bank while the stock
exchange traded segment is regulated by Securities and Exchange Commission (SEC). Primary
dealer of government securities is regulated by Bangladesh Bank. Trading of government
treasury bonds stated in December 2005 at DSE. As in November 2011, 221 treasury bonds are
traded in the market with the name of 5-years Treasury bond, 10-years Treasury bond, 15- years’
treasury bonds, and 20- years’ Treasury bond. The common stocks are traded in DSE and CSE.
The Dhaka stock exchange started it operation in 1977 with only 9 companies’ share capital.
Presently as on November 2011, the numbers of common share are 232 in DSE which are
gradually increased. The numbers of companies issued share are 192,234,247,218 in 1995, 2000,
2005, and 2010 respectively. The Dhaka stock exchange introduced Mutual funds operation in
1980.Now, as on November 2011, the numbers of Mutual funds share are 37 in DSE which are
gradually increased. The numbers of Mutual funds are 1,3,9,10,15 in 1980, 1985, 1998, 2000,
and 2005 respectively. (Shahidul & Jahan, 2012)
Prospect
2.4.1 Equity/ Common Stock

Stock:
The stock (also capital stock) of a corporation constitutes the equity stake of its owners. It
represents the residual assets of the company that would be due to stockholders after discharge of
all senior claims such as secured and unsecured debt. Stockholders' equity cannot be withdrawn
from the company in a way that is intended to be detrimental to the company's creditors.
Equity Shares:
The stock of a corporation is partitioned into shares, the total of which are stated at the time of
business formation. Additional shares may subsequently be authorized by the existing
shareholders and issued by the company. In some jurisdictions, each share of stock has a certain
declared par value, which is a nominal accounting value used to represent the equity on the
balance sheet of the corporation. In other jurisdictions, however, shares of stock may be issued
without associated par value. Shares represent a fraction of ownership in a business. A business
may declare different types (classes) of shares, each having distinctive ownership rules,
privileges, or share values. Ownership of shares may be documented by issuance of a stock
certificate. A stock certificate is a legal document that specifies the number of shares owned by
the shareholder, and other specifics of the shares, such as the par value, if any, or the class of the
shares. In the United Kingdom, Republic of Ireland, South Africa, and Australia, stock can also
refer to completely different financial instruments such as government bonds or, less commonly,
to all kinds of marketable securities.
Types of Stock:
Stock typically takes the form of shares of either common stock or preferred stock. As a unit of
ownership, common stock typically carries voting rights that can be exercised in corporate
decisions. Preferred stock differs from common stock in that it typically does not carry voting
rights but is legally entitled to receive a certain level of dividend payments before any dividends
Prospect
can be issued to other shareholders. Convertible preferred stock is preferred stock that includes
an option for the holder to convert the preferred shares into a fixed number of common shares,
usually any time after a predetermined date. Shares of such stock are called "convertible
preferred shares" (or "convertible preference shares" in the UK). There are two main types of
stocks: common stock and preferred stock.
1. Common Stock: Common stock is, well, common. When people talk about stocks, they
are usually referring to this type. In fact, the majority of stock is issued is in this form.
We basically went over features of common stock in the last section. Common shares
represent ownership in a company and a claim (dividends) on a portion of profits.
Investors get one vote per share to elect the board members, who oversee the major
decisions made by management. Over the long term, common stock, by means of capital
growth, yields higher returns than almost every other investment. This higher return
comes at a cost since common stocks entail the most risk. If a company goes bankrupt
and liquidates, the common shareholders will not receive money until the creditors,
bondholders and preferred shareholders are paid. In order to have a say in how the
company is run, you must own common stock. When individual investors or groups of
investors (for example, institutional investors) attempt to influence company policy or
attempt a hostile takeover, they must be shareholders in that company. Common stock
does not have any guaranteed dividends; instead, investors hope that the company will
pay larger dividends from the profits. Since common shares do not guarantee returns,
these shares are more responsive to the performance of the company. Similarly, the
growth potential is greater because there is no cap on the dividends that can be paid out if
the company does very well. However, with common shares there is also the added risk
of losing the entire investment because common stockholders are generally paid only
what's left after everyone else takes their share when a company goes out of business.
2. Preferred Stock: Preferred stock represents some degree of ownership in a company but
usually doesn't come with the same voting rights. (This may vary depending on the
company.) With preferred shares, investors are usually guaranteed a fixed dividend
forever. This is different than common stock, which has variable dividends that are never
guaranteed. Another advantage is that in the event of liquidation, preferred shareholders
Prospect
are paid off before the common shareholder (but still after debt holders). Preferred stock
may also be callable, meaning that the company has the option to purchase the shares
from shareholders at any time for any reason (usually for a premium). New equity issue
may have specific legal clauses attached that differentiate them from previous issues of
the issuer. Some shares of common stock may be issued without the typical voting rights,
for instance, or some shares may have special rights unique to them and issued onlyto
certain parties. Often, new issues that have not been registered with a securities governing
body may be restricted from resale for certain periods of time. Preferred stock may be
hybrid by having the qualities of bonds of fixed returns and common stock voting rights.
They also have preference in the payment of dividends over common stock and also have
been given preference at the time of liquidation over common stock. They have other
features of accumulation in dividend. In addition, preferred stock usually comes with a
letter designation at the end of the security; for example, Berkshire-Hathaway Class "B"
shares sell under stock ticker BRK.B, whereas Class "A" shares of ORION DHC, Inc.
will sell under ticker OODHA until the company drops the "A" creating ticker OODH for
its "Common" shares only designation. This extra letter does not mean that any exclusive
rights exist for the shareholders but it does let investors know that the shares are
considered for such, however, these rights or privileges may change based on the
decisions made by the underlying company. Some people consider preferred stock to be
more like debt than equity. A good way to think of these kinds of shares is to see them as
being in between bonds and common shares. Preferred stock is more secure than common
stock because it has priority should the company go bankrupt. However, it has less
potential for growth and no voting rights, so it will generally provide lower returns than
common stock. Preferred stocks are also more likely to receive dividends which provide a
guaranteed return on the investment. However, if you have no aspirations of owning the
company and are looking for a stable investment, preferred stock may be a good option.
(Ahmed, 2014)
2.4.2 Mutual Fund
Mutual fund is a process in which asset management company collect money from the investors
for the purpose of investing in securities like stock, bond money market and many others assets.
Analysis of Capital Market Securities in Bangladesh: Present Status & P a g e | 10
Prospect
Any individual person or financial institution can invest in mutual fund. Professional money
managers operate mutual funds. The formation of mutual fund includes in unit investment trusts,
open-end funds and close-end funds. This market is based on equity and have little possible to
introduce any financial instrument. Because the rapidly development has not happened in mutual
fund industry. But mutual fund can be the best alternative investment in this undiversified many
marked. The activity of mutual fund in Bangladeshi capital market is very slow. The term mutual
fund cannot legally define in Bangladesh but it is most commonly use to collect investment
companies’ money that are regulated and sold in the financial market. There are sometimes
referred as unit fund and collective fund. According to the basic financial theory investments in
mutual fund is not totally risk free but also have same risk in investing in equity. But the main
difference is that the professional management handles this mutual fund investment. For that
mutual fund investment reduce the risk rather than the other investment. The capital of mutual
fund is limited and that offer limited number of certificates for sells to the public. (Mosabbir,
2018)
2.4.3 Corporate Bond
A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise
money effectively in order to expand its business. The term is usually applied to longer-term debt
instruments, generally with a maturity date falling at least a year after their issue date. (The term
"commercial paper" is sometimes used for instruments with a shorter maturity.) Sometimes, the
term "corporate bonds" is used to include all bonds except those issued by governments in their
own currencies. Strictly speaking, however, it only applies to those issued by corporations. The
bonds of local authorities and supranational organizations do not fit in either category. Corporate
bonds are often listed on major exchanges (bonds there are called "listed" bonds) and ECNs, and
the coupon (i.e. interest payment) is usually taxable. Sometimes this coupon can be zero with a
high redemption value. However, despite being listed on exchanges, the vast majority of trading
volume in corporate bonds in most developed markets takes place in decentralized, dealer-based,
over-the-counter markets. Some corporate bonds have an embedded call option that allows the
issuer to redeem the debt before its maturity date. Other bonds, known as convertible bonds,
allow investors to convert the bond into equity. Corporate Credit spreads may alternatively be
earned in exchange for default risk through the mechanism of Credit Default Swaps which give
an unfunded synthetic exposure to similar risks on the same 'Reference Entities'. However,
owing to quite
Prospect
volatile CDS 'basis' the spreads on CDS and the credit spreads on corporate bonds can be
significantly different. (Ahmed, 2014)
2.4.4 Treasury Bond
Treasury bond is a marketable, fixed-interest U.S. government debt security with a maturity of
more than 10 years. Treasury bonds make interest payments semi-annually and the income that
holders receive is only taxed at the federal level. Treasury bonds are issued with a minimum
denomination of $1,000. The bonds are initially sold through auction in which the maximum
purchase amount is $5 million if the bid is non-competitive or 35% of the offering if the bid is
competitive. A competitive bid states the rate that the bidder is willing to accept; it will be
accepted depending on how it compares to the set rate of the bond. A noncompetitive bid ensures
that the bidder will get the bond but he or she will have to accept the set rate. After the auction,
the bonds can be sold in the secondary market. (Ahmed, 2014)
2.4.5 Debenture
Debenture is also a sort of IOU issued by institutions to collect funds from people. They can be
viewed as a certificate of loan taken by the firm from investors. Debentures are, in many
respects, similar to bonds. But the main difference with bonds is that debentures have a shorter
maturity than bond, usually 1-10 years. Also, while bonds provide coupon as well as face value
at the end, debentures usually provide periodic payments covering both interest and principal,
and payment stops at maturity. In addition, bond issuing firms usually have underlying assets as
collateral that serves as a guarantee to make payments, while debentures usually do not have
such assets as collateral. Usually, debentures are issued by large, financially sound firms whose
ability to service the debt is not in question. Usually the main purchasers of debentures are
pension funds and insurance companies. (educarnival, 2012)
Debentures can be classified as the following-
1) Regular debentures– debentures that have first priority in fulfilling claims.
2) Subordinate debentures– debentures that receive claim after bonds, regular
debentures and secured short-term credits.
Prospect
CHAPTER 3
RESEARCH METHODOLOGY
3.1 Research Technique
The researcher used both quantitative and qualitative analyses to explore the study with desk/
secondary research technique & the utilization of secondary data.
3.2 Sources of Data
This study prepared mostly by secondary data and the sources of data are Publications of
Securities and Exchange Commission, Dhaka stock Exchange (DSE) Chittagong Stock
Exchange (CSE), Stock market Report on Newspaper, Bangladesh Bank, Bangladesh Bureau of
Statistics, Bangladesh Economic Review, Books and Journal, Internet Website.
3.3 Sampling and Sampling Technique:
The sample data were selected through purposive sampling method from the annual report of
Dhaka Stock Exchange & Chittagong Stock exchange focusing on the year from 2014 -2018 to
have a sense of the growth, changes and status of the capital market instrument.
3.4 Data Processing & Analysis:
After assembling and organizing data by from the mentioned year ranges, the researcher coded,
cleaned and filtered those through Microsoft Excel, and Google Analytics. Besides, statistical
analysis with percentages, figures and tables were generated by the software to establish
relationship among variables and frequency distribution was used as a statistical analytical
method for displaying descriptive statistics. The relevant information was then obtained in a
standard form using tables, frequencies and percentages to analyze and interpret the information.
Finally the results were illustrated by charts and tables for the better understanding of the
analysis.
Analysis of Capital Market Securities in Bangladesh: Present Status & Page|
CHAPTER 4:
FINDINGS AND
ANALYSIS
4.1.1 Number of financial instruments

4.1.1.1 Mutual funds
Year Frequency Percentages Change (%)
2014 41 22.04 %
2015 36 19.35 % -12.2
2016 35 18.81% -2.8
2017 37 19.89 % 5.7
2018 37 19.89 % 0.00
Total 186 100.00 %
From the table we can see that the mutual funds are growing negatively for the year 2015,
2016. In the year 2017 it grew by 5.7% but in the next year there was no new mutual funds
came in the market. So we can say that number of mutual fund are not growing in a constant
way. In 2014 the highest number of mutual fund was in the capital market.
4.1.1.2 Debentures
2014 8 20.00 %
2015 8 20.00 % 0.00
2016 8 20.00 % 0.00
2017 8 20.00 % 0.00
2018 8 20.00 % 0.00
Total 40 100.00 %
From this table we can say that there is no new debenture instruments in Bangladesh
capital market for last 5 years.
4.1.1.3 Corporate bonds

2014 2 25.00%
2015 2 25.00% 0.00
2016 2 25.00% 0.00
2017 1 12.50% -50.00
2018 1 12.50% 0.00
Total 8 100.00%
From the data we can see that the number of corporate bonds are insignificant in the
capital market of Bangladesh. Very few time new corporate bonds come in the market.
4.1.1.4 Treasury bonds

2014 221 20.00
2015 221 20.00 0.00
2016 221 20.00 0.00
2017 221 20.00 0.00
2018 221 20.00 0.00
Total 1105 100.00
The number of treasury bonds remain unchanged for last 5 years. There is a small possibility
that new treasury bonds will come in the capital market because government may take
international loan at the lower cost than treasury bonds.
4.1.1.5 Equity
2014 283 18.94 %
2015 292 19.54 % 3.2
2016 297 19.88 % 1.7
2017 305 20.41% 2.7
2018 317 21.23 % 3.9
Total 1494 100.00 %
The only financial instrument which grows positively every year is equity. Every year new
companies are coming in the capital market through IPO. But only number of equity
instrument cannot make the market strong. If only good companies come in the market than
market will be strong. From the table we can see that in number of equity instruments are
increasing almost by 1% every year.
NUMBER OF INSTUMRNTS
EquityTreasury bondsCorporate bondsDebentures
Mutual funds
3
3
2
2
2
2
2
4
3
3
8
8
8
2
1
2014 2015 2016 2017 2018
In the graph we can see that most of the capital market instruments are equity. After the
equity treasury bonds has most of the instruments. Mutual funds and debenture has some
significant number of instruments but corporate bonds is very rare in the capital market of
Bangladesh for last 5 years. If we gave bird’s eye view then we can see capital market of
Bangladesh consists of equity, treasury bonds and mutual funds.
4.1.2 Capitalization
4.1.2.1 Mutual funds
Year Total capital (crore) Percentages Change (%)
2014 4365.01 17.59 %
2015 4611.20 18.58 % 5.6
2016 5036.79 20.30 % 9.2
2017 5,402.29 21.77 % 7.3
2018 5,402.29 21.77 % 0.00
Total 24817.58 100.00 %
The market capitalization of mutual funds has a positive growth. But in 2018 it was
unchanged. Apart from that we can say that the mutual funds capitalization is growing in a
good rate.
4.1.2.2 Debentures
2014 35.37 20.00 % 0.00
2015 35.37 20.00 % 0.00
2016 35.37 20.00 % 0.00
2017 35.37 20.00 % 0.00
2018 35.37 20.00 % 0.00
Total 176.85 100.00 %
The number of debentures and capitalization of debentures are unchanged over the time. If
we consider the market capitalization then debentures have no significant impact to change
the market structure.
4.1.2.3 Corporate bonds

2014 600.00 25.21 %
2015 595.11 25.03 % -0.815
2016 585.01 24.56 % -1.7
2017 300.00 12.60 % -48.72
2018 300.00 12.60 % 0.00
Total 2380.12 100.00 %
We have seen that the number of corporate bonds has very few change but in term of
capitalization we can see it is declining. In 2018 it was unchanged but from2014-2017 it had
lost its capital in the market. Though it is changing negatively but the rate of change is small.
If the number of corporate bond increase or decrease the capitalization may increase or
decrease at a great rate for small number corporate bonds.
4.1.2.4 Treasury bonds

2014 54859.22 20.00 % 0.00
2015 54859.22 20.00 % 0.00
2016 54859.22 20.00 % 0.00
2017 54,859.22 20.00 % 0.00
2018 54,859.22 20.00 % 0.00
Total 274296.10 100.00 %
From the table we can see that the capitalization of Treasury bond is unchanged for last 5
years. But if we see the capital size then we can say that the increase or decrease of Treasury
bond capital may change the market structure in a significant way.
4.1.2.5 Equity
2014 49335.74 17.28 %
2015 52640.10 18.44 % 6.7
2016 56034.68 19.63 % 6.45
2017 61,369.62 21.49 % 9.5
2018 66,128.18 23.16 % 7.75
Total 285508.32 100.00
Mainly Equity capitalization shape the capital market of Bangladesh. It is positively growing
for last 5 years. As the economy of Bangladesh is increasing new companies are coming in
the capital market. We can hope that in recent year it will grow its capital more than previous
years.
MARKET STRUCTURE
EquityTreasury bondsCorporate bondsDebenturesMutual funds
66128.
61369.
18
56034.
62
54859.
54859.
52640.1
49335.74
68
5402.
5402.
5036.
4365.
595.11
585.01
461
35.37
35.37
35.37
35.37
35.37
600
300
300
2014 2015 2016 2017 2018
From this graph we can understand which financial instruments have bigger impact in the
capital market of Bangladesh. We can see equity, treasury bonds, and mutual funds shape the
market capitalization of Bangladesh capital market. There is a strong possibility that mutual
funds may grow faster than treasury bonds. But debentures and corporate bonds are
insignificant for last 5 years in capital market capitalization.
CHAPTER 5:
CONCLUSION &
RECOMMENDATION
5.1 Summary of Findings

From the data and graphs we can see that most of the financial instruments in Bangladesh
capital market are equity and treasury bonds. Mutual funds hold the third position in aspect of
the number of instruments where debenture and corporate bonds have no significant impact in
the market. If we consider number of the instruments then only equity has the positive growth
in the capital market where other instruments may grow negatively or zero growth. But the
situation may change as new chairmen is appointed in the Bangladesh stock exchange
commission. The Bangladesh Securities and Exchange Commission (BSEC) is anticipating
mutual funds' contribution in stock market capitalization to balloon from some 3 per cent at
present to 20 per cent. The sector should hold strong to help the stock market gain strength
and also meet higher demands of private investment in coming years, The BSEC in a recent
meeting said it brought changes to some rules and that more would follow centering mutual
funds to bring discipline and accountability and revive investor confidence.
At the same time BSEC has taken some initiatives to bring new IPO in the market. In 2020
new commission rejects some IPO application for poor financial performance, distortion in
financial instruments or if companies violate any commissions rules. So only good companies
IPO will be in the market which will grow confidence to the investors. So the number of
equity share may decline in recent years but the market will be stronger than before. Some
renowned companies already came in the capital market like Walton, Associate oxygen,
Express Insurance. Some good companies are on the way to come in the capital market like
Energypack, Robi axiata. So the equity market has a great possibility in near future.
Treasury bond is the most secure investment in the economy but recently the demand of
Treasury bond is declining. Complex purchasing procedure, the absence of promotional
activities and marketing and the lack of confidence are mainly hampering the growth in the
country's bond market. Complex purchasing procedure, the limited selling agents abroad and
USD exchange rate risk are the major challenges for promoting the bonds. It is difficult to
grow the country's bond market with only three bonds among specific and limited customers.
If you do not have several kinds of bonds with a wider angle, you cannot expand your market.
Splitting the denomination of the existing bonds, offering some non-monetary benefits to the
clients like special cards for Bangladeshi airport pass, and allowing the sales by agent banks
are important for the growth in bonds.
Corporate bond is very rare in Bangladesh capital market. For last 5 years there was only 1
corporate bond. But the situation is going to change. New commission authorized Dutch
Bangla Bank Limited, Southeast Bank Limited, Al- Arafa Islami Bank Limited, Aamra
Networks limited, Pran Agro Limited to issue corporate bonds. The total bonds value will be
almost 2150 corer taka. So investors may expect that along with corporate bonds debentures
will alsocome in the market to make the capital market stronger than any other time
5.2 Conclusion & Recommendations

The capital market of Bangladesh has gone through a lot of downturns in the past two years.
As a result, investor confidence went down as well. The situation went further south with the
COVID-19 pandemic. Now it is time for policymakers to diversify the market so that
investors, businesses, and even the government can benefit and help in the path to economic
recovery.
The proposed financial instruments could be various types of bond, SWAP, Option, Futures.
Bond: There are lots of scopes to develop the bond market with various features like dual
currency bond, convertible bond, and income bond. The SWAP will be introduced to minimize
the risk of dependency on share capital only. The currency swap, commodity swap, interest
rate swap will be effective, The Option, the derivatives instruments are the vital products in the
capital markets. The Chittagong Stock Exchange proposed to SEC for introducing derivatives
products but it is not implemented yet. There is a large field of financial products in this area
such as call option, put option, multi period option, spread, and straddle. Futures; it is a
derivative product with a feature of depending on any fundamental products which will enrich
the capital market of Bangladesh. Preferred stocks; Characteristics of preferred stock is
specified between the common stock and bond.
New rules, IPO of renowned companies, good governance, efficient management all these
aspect will help Bangladesh capital market to perform well in future. New commission of
Bangladesh stock exchange commission is taking all the necessary step to revive the capital
market as a result we saw the DSEX index went up 5094points from 3953points in September,
2020. So the future of Bangladesh capital market is promising to the investors.
Most important thing is that Bangladesh capital market is performing well in 2020 after a long
term down trend. According to research by Asia Frontier Capital, DSEX, the benchmark index
of the Dhaka Stock Exchange (DSE), posted a double digit growth by 24.4% in Q3 (July-
September), of 2020, the highest gain in key index among the world’s top performing stock
exchanges.
REFERENCES
Ahmad, Zahid et al. (2012). Stock market development and economic growth: A comparative
study of Pakistan and Bangladesh. African Journal of Business Management, 6(8), 2985-
2989. Retrieved from http://www.academicjournals.org/AJBM
B., McGuire Paul & John, D. Conroy. (2004). Fostering Financial Innovation for the
poor. FDC. Retrieved from jbao.atu.edu/Fall2008/Bepari,%20Mollik.doc
Chaudhury, M., & Miyan Allimullah. (2010). Development of Capital Market in

Bangladesh. Retrieved from
http://people.mcgill.ca/files/mohammed.chaudhury/CapMarketsBD.pdf
Chittagong Stock Exchange Ltd. (2018). CSE-30 Company Profile. Chittagong: CSE.
Dhaka Stock Exchange. (2018). Monthly Review, 26(5). Dhaka, Bangladesh: Dhaka
Stock Exchange Limited.
Fabella, R., & Madhur, S. (2003). Bond Market Development in East Asia: Issues
and Challenges. Asian Development Bank, Manila: ADB.
Finance Ministry. (2011). Bangladesh Economic Review-2010. Dhaka: Economic Wing.

International Organization of Securities Commissions. (2002). The Development of
Corporate Bond Markets in Emerging Market Countries. May, USA.
Jahur, M. S. (2009). Development of Bond Market in Bangladesh: Issues, Status and

Policies. Portfolio, 3, July-September. Chittagong: Chittagong Stock Exchange.
Kothari, C. R. (2005). Research Methodology. New Delhi, India: New age International
pvt. Ltd.
Levine, Ross & Sara Zervos. (2012). Stock Markets, Banks, and Economic Growth.
The American Economic Review, 88(3), 537-558.
Marshall John, F., & Vipul, K. Bansal. (2003). Financial Engineering. New
Delhi,India: Prentice Hall of India Pvt. Ltd.
Mu, Yibin. (2007). South Asia Bond Markets and Bangladesh. World Bank, Dhaka.
Rashid, M. (2008). The Potential of the Bangladesh Capital Market. Monthly Review,
The Daily Star, 3(5), May.
Securities and Exchange Commission. (2019). Annual Report 2014-2018. Dhaka, Bangladesh.
Rahman, Md. Tariqur & Khondker Golam Moazzem. (2011). Capital Market of Bangladesh:
Volatility in the Dhaka Stock Exchange (DSE) and Role of Regulators. International Journal
of Business and Management, 6(7). http://dx.doi.org/10.5539/ijbm.v6n7p86
The Annual Report. (2005/2006/2007/2008). Bangladesh Bank, Dhaka, Bangladesh.

World Bank. (2003). Improving the Investment Climate in Bangladesh. Washington.
Retrieved from http://www.undp.org/ods/publications.html
Yewar, S. (2005). Debt Market in Bangladesh-Problems and Prospects. Paper Presented in

the National Conference, AIMS, Dhaka.
Shahidul, M. I., & Jahan, S. (2012). Analysis of Financial Products of Capital Market
in Bangladesh. International Journal of Marketing Studies 5(8)
Analysis of Capital Market Securities in Bangladesh: Present Status &
APPENDIX
ANNUAL REPORT 2018-19 - BSEC

Analysis of Capital Market Securities in Bangladesh: Present Status &
ANNUAL REPORT 2018-19 - DSE

Term Paper Financial Market

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Term Paper Financial Market

Uploaded by

Copyright:

Available Formats

Term Paper

Analysis of Capital Market

Analysis of Capital Market Securities in Bangladesh:

Department of Business administration

Subject: Submission of Report on “Analysis of Capital Market Securities in Bangladesh:

Bangladesh University of Professionals.) for his guidance, insightful discussions and

1.1 : Background of the Study

1.2 : Problem Statement

1.3 : Objectives of the Study

1.4 : Significance of the Study

1.5 : Scope of the Study

2.1 Empirical Literature Review

2.2 A brief overview about Capital Market in Bangladesh

2.3 Types of Financial Products/Securities

2.4 No. of Financial Products/ Securities traded in Bangladesh

2.4.1 Equity/ Common Stock

2.4.2 Mutual Fund

2.4.3 Corporate Bond

2.4.4 Treasury Bond

3.1 Research Technique

3.2 Sources of Data

3.3 Sampling and Sampling Technique:

3.4 Data Processing & Analysis:

4.1.1 Number of financial instruments

4.1.1.3 Corporate bonds

4.1.1.4 Treasury bonds

4.1.2.3 Corporate bonds

4.1.2.4 Treasury bonds

5.1 Summary of Findings

5.2 Conclusion & Recommendations

Chaudhury, M., & Miyan Allimullah. (2010). Development of Capital Market in

Finance Ministry. (2011). Bangladesh Economic Review-2010. Dhaka: Economic Wing.

Jahur, M. S. (2009). Development of Bond Market in Bangladesh: Issues, Status and

The Annual Report. (2005/2006/2007/2008). Bangladesh Bank, Dhaka, Bangladesh.

Yewar, S. (2005). Debt Market in Bangladesh-Problems and Prospects. Paper Presented in

ANNUAL REPORT 2018-19 - BSEC

ANNUAL REPORT 2018-19 - BSEC

ANNUAL REPORT 2018-19 - BSEC

ANNUAL REPORT 2018-19 - DSE

You might also like