Welcome to our group

presentation

 We are Team :Bay of Business

We consist of…

Name ID No.

Nesar Sifat 20086

Rifat Jahan Ana 20095

Md. Maruf Hossain 20118

Meraz Hossain 20129

Contents of the Presentation
 Introduction
 Types of Primary market instrument
 Public offering and its types
 Book Building Method
 Types of Secondary market instrument
 Capital Market crush and it’s impact of our economy
 Recommendations
 Conclusion
 References
 Financial Markets

 Financial Markets are the centers or arrangements that provide

facilities for buying and selling of financial claims.
Stated formally, financial markets provide channels for allocation of
savings to investment.

 The financial markets have two major components:

 Money market
 Capital market
 Money Market
 Money market refers to the market where borrowers and lenders exchange
short-term funds to solve their liquidity needs.
Money market instruments are generally financial claims that have low default
risk, maturities under one year and high marketability.
 Instruments traded in Money Market:
 Treasury Bills
 Call Money /Notice Money
 Commercial Paper
 Certificate of Deposits
 Commercial Bills
 Capital Market

 Market where long term funds are borrowed and lent, the primary
purpose being directing the flow of savings into long-term investments.

 Capital Markets deal in long-term claims (maturity period above 1 year).

Basic Capital Market Instruments
Types of Capital Market

 Primary Market

 Secondary Market
Primary Market
 Primary market is that market in which shares ,debentures and other
securities are sold for the first time for the purpose of collecting
long term capital .The primary market is called “ New Issue
Market“.

 The money collected from this market is generally used by the

companies to modernize the plant ,machinery and buildings ,for
extending business ,and for setting up new business unit.
Features of Primary Market
 It is related with new issues of share
 It comes before secondary Market
 It has various methods of float capital

Followings are the methods of raising capital in the primary market:

 Private Placement
 Right Issue
 Electronic –Initial Public Offer(IPO)
Public Offering
 Offering of security to general public who respond to the invitation
of the issuer to make an offer to subscribe to the security being
issued. The invitation to make an offer is called prospectus.

 Burdens of public offering

 Distraction of management from the operations of the company
 Restriction on publicity and other marketing activities
 Compliance with sec reporting requirements
 Reduced flexibility
Cost associated with Public Offering
 Spread
 Other direct expenses
 Indirect expenses
 Under pricing
 Green shoe option
Types of Public Offering

 Negotiated Purchase
 Competitive Bid
 Best Effort Basis
 Direct sales
 Privileged Subscription
Different IPO Pricing Systems

 Fixed Price – Price set by the issuer and issue manager at which all
the shares are issued

 Auction- Price is determined form the bids received in sealed

envelope

 Book Building- IPO offering price is determined based on demand

form institutional investors. It minimizes the chance of over/under
pricing.
Procedures of Book Building For Bangladesh

The Book Building Process will have two stages:

 Price discovery and Book Building by eligible Institutional

Investors

 Public Offer based on price found out through Book Building

process.
Book Building Method for Direct listing

 Direct listing of securities with stock Exchanges:

 Securities could be listed with the stock exchanges without the rigor
of IPO Process;

 Have created exit route for multinational companies;

 Enhancing market depth and liquidity;

 Have created alternative investment opportunity;

Probable Impact of Book Building Method in
Bangladesh Capital Market
 Positive Impact:
 Good issuer would be encouraged to raise fund from capital market
 Difference between issue price and first day trading price will be
narrowed down
 Tendency for opening fake BO accounts will be reduced
 Negative impact:
 Retail investors may be disinclined to buy security at higher price
of the issue
 Shares may be issued at price which is more than the intrinsic value
of underlying assets
Secondary Market
 Secondary market is that market in which the buying and selling of the
previously issued securities is done. The transactions of the secondary
market are generally done through the medium of stock exchange. The
chief purpose of the secondary market is to create liquidity in securities.

If an individual has bought some security and now he wants to sell it

,he can do so through the medium of stock exchange to sell or vice
versa.
Features of Secondary Market

 It creates liquidity

 It comes after primary Market

 It has a particular place

 It encourages new investments

Types of Capital Market

 Dhaka Stock Exchange (DSE)

 Chittagong Stock Exchange (CSE)

Preferred stock in Bangladesh
Preferred stocks Issued by firms listed in Dhaka Stock Exchange:
 Summit Power
 Beximco Pharmaceuticals
 Aftab Automobiles
 Peoples Leasing and Financing Limited
 RN Spinning Mills
Bond Markets in Bangladesh
Only 3 bonds listed in Dhaka Stock Exchange:

 BRAC BANK SUBORDINATED 25% CONVERTIBLE BOND

(BRACSCBOND)

 IBBL MUDARABA PERPETUAL BOND (IBBLPBOND)

 ACI 20% CONVERTIBLE ZERO COUPON BOND

(ACIZCBOND)
ACI 20% CONV. ZERO COUPON
BOND
 Zero Coupon Bond, which means it doesn't give any periodic interest
(coupon) payments to the investor, rather it is sold at a deep discount from its
face value.

 20% Convertible bond, which means the bond holder (investor) have the

option of redeeming the entire face value of the bond in cash upon maturity
or can redeem 80% in cash and convert 20% of the bond value in the
common stock of Advanced Chemical Industries Limited (ACI).  
Capital Market Crush

 A stock market crash is a sudden dramatic decline

of stock prices across a significant cross-section of a stock
market resulting in a significant loss of paper wealth.
Reasons of Capital Market Crash in Bangladesh

 Primary Issuance Problems

 Secondary Market Problems
Primary Issuance Problems

Pre-IPO & IPO Wrong Valuation

Illegal Private Placement Process of Asset
Direct Listing
Market Problems
Secondary Market Problems

Block Serial and

Stock Price
Placement Artificial
Manipulation
Trading
Impact of stock market crash on the
economy of Bangladesh
 Decrease in output

 High inflation rate

 High unemployment

 Imbalance in International Trade

Recommendations

 No inside trading

 Special monitoring team

 Well efficient executive board of DSE & CSE

 Political stability of Bangladesh

 No corruption in pre –IPO and IPO

 Efficient role of Bangladesh Bank

 Legal Action by Government

Conclusion

Capital market plays an important role in ensuring the emergence of a

vigorous and efficient economy.

It facilitates the internationalization of an economy by linking it with the

rest of the world.
References
ADB symposium on capital market development in the Asia-Pacific region. (1986).
[Manila, Philippines]: [Asian Development Bank].

Ahmed, M. (1997). Capital markets and institutions in Bangladesh. Aldershot, Hants,

England: Ashgate.

Anon, (2017). [online] Available at: http://bangladesh capital market [Accessed 19

Aug. 2017].

Hasan, M., Kamil, A., Mustafa, A. and Baten, M. (2013). An Empirical Analysis of
Higher Moment Capital Asset Pricing Model for Bangladesh Stock Market. Modern
Applied Science, 7(5).
Continued….
Islam, M. and Jahan, S. (2012). Analysis of Financial Products of Capital Market
in Bangladesh: Present Status and Future Development. International Journal of
Marketing Studies, 4(5).

Mostafa Arif, K. (2016). Capital Market Investors’ Attitudes in Bangladesh:

Evidence and Policy Implications. International Journal of Economics, Finance
and Management Sciences, 4(6), p.344.

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