Report On
Capital Market in Bangladesh ECO-101: Principle of Microeconomics Section No: 14
Prepared For: Kazi Abul Bashar Adjunct Faculty East West University Department of Economics
Prepared By: A.F.M.Ahsan Ullah Id No: 2007-1-10-015 Department of Business Administration
Date of Submission: April 20, 2 011
EAST WEST UNIVERSITY
1.0 Introduction: The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are regulated by its Articles of Association rules & regulations and bye-laws along along with with the Securi Securitie tiess and Exchan Exchange ge Ordina Ordinance, nce, 1969, Compan Companies ies Act 1994 & Securities & Exchange Commission Act, 1993.
1.1 Background of Dhaka Stock Exchange:
•
East Pakistan Stock Exchange Ltd was finally named as Dhaka Stock Exchange (DSE) on 14 May 1964.
•
Although incorporated in 1954, formal trading started in 1956.
•
Prior to independence in 1971, the number of listed companies in DSE was 196 with a total paid up capital of Tk. 4 billion.
•
The total number of listed securities is now 378.
1.2 Role of Capital Market: The primary role of the capital cap ital market is to raise long-term funds for governments, g overnments, banks, and corporations while providing a platform for the trading of securities. This fund rising is regulated by the performance of the stock and bond markets within w ithin the capital market.
1.3 Policies of Dhaka Stock Exchange (DSE):
•
DSE DSE can can intr introdu oduce ce auto automa mate te moni monito tori ring ng syst system emss that that may may cont contro roll pric pricee manipulation, malpractices and inside trading.
•
It can make sure all the listed companies publish their annual reports with actual and proper information that can ensure the interest of the investors.
•
To force force the listed listed compani companies es to declar declaree and pay regular regular divide dividends nds through through conducting Annual General Meeting.
•
To make arrangement to set up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors.
•
More More banks, banks, insura insurance nce compan companies ies and other other financ financial ial instit instituti utions ons should should be encouraged to deal in share business directly
•
The management of DSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms.
•
To train the investors about fundamentals to dea l in share transactions.
•
To punish the member brokers for breaching of contract.
2.0 Capital Market of Bangladesh : Bangladesh capital market is one of the smallest in Asia but the third largest in the south Asia region. It has two full-fledged automated stock exchanges namely - Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange(CSE). It also consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it implements rules and regulations, monitors their implications to operate and develop the capita market.
2.1 Function of Dhaka Stock Exchange (DSE):
•
Listing of Companies
•
Providing the screen based automated trading of listed Securities
•
Settlement of trading
•
Granting approval to the transaction
•
Market Administration & Control
•
Market Surveillance
•
More More banks, banks, insura insurance nce compan companies ies and other other financ financial ial instit instituti utions ons should should be encouraged to deal in share business directly
•
The management of DSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms.
•
To train the investors about fundamentals to dea l in share transactions.
•
To punish the member brokers for breaching of contract.
The capital market is market for securities, where companies and Governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and a nd the bond market. Capital market 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 Market: •
The primary market deals with newly issued securities and is responsible for generating new long-term capital.
The Secondary Market: •
The secondary market handles the trading of previously-issued securities, and must remain highly liquid in nature because most of the securities are sold by investor
2.2 Nature of Dhaka Stock Exchange: Public Market : Only trading of market lot share is done here through automatic matching. • Spot Market: Spot transactions are done here through automatic matching which must be settled •
within 24 hours. Block Market: A place where bulk quantities q uantities of shares are traded through pick and fill basis. • Odd Lot Market: Odd lot scripts are traded here based on pick and fill basis. •
2.3 DSE Clearing & Settlement Process:
The Clearing and Settlement module provides the management of trade from the point of entry into the Settlement Pool trade database until it has been delivered, settled and removed from the Settlement Pool. It consists of three major business processes. Clearing: Parti Particip cipant ant trade trade report reporting ing,, affirm affirmati ation, on, billin billing g and assign assigning ing settle settlemen mentt
instructions.
Settlement: The process of overseeing that delivery of all instruments to the buyer and
payment of all moneys to the seller has occurred before removing the trade from the settlement pool.
For “A” Category
For “Z” Category
Here is a complete picture of the settlement system for all of our 427 Instruments in Five (5) groups in the Four (4) markets. •
A Group: Number of Instruments are 338 (150 + 8D + 22M + 158TB), Here D for Debentures, M for Mutual funds & TB for Treasury Bonds (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility for scrip only through DSE Clearing House on T+1, T+3 basis). "A" and "DA" are marked in BASES columns columns for Non-Demat & Demat instrument instrument respectively respectively in our TESA Trading Software.
•
B Group: Group: Number Number of Instr Instrume uments nts are 44(Tra 44(Tradin ding g in Public Public,, Block Block & Odd-lo Odd-lott Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). "B" and "DB" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
•
G Group: Number of Instrument is 0 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). "G" and "DG" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
•
N Group: Number of Instrument is 11(Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). "N" and "DN" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
•
Z Group: Number of Instruments are 34(Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+9 basis). "Z" and "DZ" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
Here is the summary of Dhaka Stock Exchange Limited in a table format. We can easily have an idea about the current market scenario.
Main Board as on February 2011
Total Number of Listed Securities
476
Total Number of Companies
229
Total Number of Mutual Funds
33
Total Number of Debentures
8
Total Number of Treasury Bonds
203
Total Number of Corporate Bonds
3
Total number of Shares/Certificates: Shares/Certifi cates:
(No. in mn)
Total Number of Shares & Mutual Fund Certificates of All Listed Securities*
15,673
Total Number of Shares of All Listed Companies
13,268
Tota Totall Numb Number er of Cert Certif ific icat ates es of All All List Listed ed Mutu Mutual al Fund Fundss
2,39 2,393 3 (No. in ' 000)
Total Number of All Listed Debentures
409
Total Number of All Listed Gov. T-Bonds
4,672
Total Numberof All Listed Corporate Bonds
7,336
Total Issued Capital of :
(Figure Tk.in mn) (FigureUS$ in mn)
All Listed Securities
719,316
10,105.59
All Companies Shares
220,543
3,098
All Mutual Funds
23,183
326
All Debentures
140
2
All Listed Govt. T-Bonds
468,113
6,576
All Listed Corporate Bonds
7,336
103
Total Market Capitalization Capitalizati on of:
(Figure Tk.in mn) (FigureUS$ in mn)
All Listed Securities
2,349,353
33,006
All Listed Companies Shares
1,843,471
25,899
All Listed Mutual Funds
30,477
428
All Debentures
576
8
All Listed Govt. T-Bonds
468,113
6,576
All Listed Corporate Bonds
6,716
94
Conversion Rate: BDT against USD
71.18
* Total No. of Shares/Share Capital / Market Capital includes Bonus /Right of shares.
2.4 Listing Companies in DSE:
There are several companies which are are listed in Dhaka stock exchange ltd. If we divide those companies into sector wise, we can find the information from the below graph.
The graph is based on the market capitalization of DSE. It reflects that banks hold maximum maximum capitalization capitalization percentage percentage of 29.72%. Financial Financial Institutio Institutions ns come after that which which reflec reflects ts 13.77% 13.77% of total total market market capital capitaliza izatio tion. n. Then Then comes comes Fuel Fuel and Power, Power, Telecom, Pharmaceuticals, Insurances and Engineering sector.
Investors take different decisions on the base of a sector’s Earning Per Share (EPS), Price Earnin Earning g ratio ratio (PE (PE Ratio) Ratio),, Divide Dividend nd policy policy,, Earnin Earnings gs and some some other other criter criteria. ia. The following table gives us a clear idea about the overall performance of sector wise share in Dhaka Stock Exchange.
Sectoral Performance - February 2011: DSE Sectoral Performance - February 2011
Market in mn
Capitalisation %
February
January
of Turnover Tk. in mn total Market Cap February January
561,617.62
863,038.59
29.72
38,847.87
66,308.47
33.81
Financial Institutions 260,221.58
358,110.22
13.77
19,244.78
25,902.01
16.75
Insurance
102,568.39
159,153.82
5.43
6,064.29
11,614.28
5.28
Mutual Funds
30,476.60
39,774.31
1.61
4,069.48
10,281.43
3.54
Total
95 954,884.19
1,420,076.95
50.54
68,226.42
114,106.19
59.39
Foods
44,488.99
60,815.97
2.35
1,831.64
3,191.74
1.59
Pharmaceuticals
150,418.71
197,966.28
7.96
4,711.34
8,308.06
4.10
Textile
72,982.86
113,573.28
3.86
8,465.27
15,211.57
7.37
Engineering
89,177.70
142,247.97
4.72
6,833.76
8,150.19
5.95
Ceramics
29,921.39
55,384.39
1.58
2,009.12
3,343.06
1.75
Tannery
11,498.95
15,685.41
0.61
629.03
1,121.21
0.55
Paper & Printing
668.80
1,084.90
0.04
6.35
6.88
0.01
Jute
563.36
880.90
0.03
34.94
45.39
0.03
Cement
43,816.28
66,265.68
2.32
2,012.51
2,973.30
1.75
Total
443,537.05
653,904.79
23.47
26,533.96
42,351.40
23.10
292, 292,61 616. 6.5 55
10. 10.96
8,518 ,518.0 .04 4
12, 12,584. 584.36 36
7.41 7.41
Service & Real Estate 16,242.27
27,113.91
0.86
724.62
1,238.21
0.63
IT
3,140.86
4,643.77
0.17
331.12
527.99
0.29
Tele Teleco comm mmun unic icat atio ion n
188, 188,90 906. 6.97 97
320, 320,42 426. 6.20 20
10.0 10.00 0
3,54 3,547. 7.66 66
5,05 5,053. 3.28 28
3.09 3.09
Travel and Leisure
8,837.65
13,793.65
0.47
2,156.57
4,065.75
1.88
Miscellaneous
60,116.82
81,396.06
3.18
4,721.61
6,959.01
4.11
Total
484,364.26
739,990.14
25.63
19,999.61
30,428.60
17.41
Corporate Bond
6, 6 ,716.23
3,990.11
0.36
127.11
83.05
0.11
Total
6,716.23
3,990.11
0.36
127.11
83.05
0.11
Grand Total
1,889,501.73
2,817,961.98
100
114,887.10
186,969.24
100
Sector
% of total Turnover
Financial Sector
Banks
Manufacturing
Service & Miscellaneous Miscellaneous
Fuel uel & Powe ower
207, 207,11 119. 9.69 69
Bond
3.0 Last One Year Performance DSE: The capital market is yet to emerge as an effective investment avenue to most of the small savers on one hand and attractive avenue for the corporate bodies in raising fund on the other, especially since the boom and burst of 1996. The negative spillover effect of
the grim capital market performance dampened potential public issue of debt securities. However However,, with with recent recent resur resurgen gence ce of the market market the appetit appetitee for invest investmen mentt grade grade securities has again been pronounced that could unleash fresh demand for listed debt securities.
In 2010 capital market experienced huge momentum on the basis of some aspect. In 2010 we have observed the highest trade volume in a single day. We have observed the highest percentage gain in index in a single day and also we have observed the highest decline (%) in a single day in the history of capital market. In December’2010 the index reached to its highest point at 8918.51. From then index started to decline and decline and it stopped at 5203 index in March’2011.
DSE Performance: March 2010 to February 2011 Ratio of
DSE Turnover Month
Value
Volume
Turnover to
Index DSI
DGEN
DSE 20
Tk. in mn
Nos. mn
Mar-10
175,115.99
747.99
0.08
4,573.81
5,582.33
2,952.01
Apr-10
191,303.18
700.63
0.08
4,641.54
5,654.88
3,039.17
May-10
386,238.36
1,013.99
0.08
5,030.05
6,107.81
3,432.23
Jun-10
387,733.65
1,203.94
0.14
5,111.63
6,153.68
3,650.04
Jul-10
322,769.28
1,163.22
0.11
5,278.89
6,342.76
3,721.78
Aug-10
394,438.07
1,793.43
0.13
5,555.49
6,657.97
3,874.50
Sep-10
312,562.35
1,602.83
0.10
5,930.90
7,097.38
4,137.93
Oct-10
468,008.97
2,265.35
0.14
6,612.14
7,957.12
4,533.18
Nov-10
471,717.20
Market Cap.
2,233.33
0.13
7,135.16
8,602.44
5,119.13
Dec-10
387,174.09
2,275.47
0.11
6,877.66
8,290.41
5,204.98
Jan-11
186,969.24
1,442.65
0.06
6,198.82
7,484.23
4,701.74
Feb-11
114,887.12
1,020.38
0.05
4,317.89
5,203.08
3,514.51
Monthly Performance for one year (DSE Performance - February 2011
So we have observed huge fluctuations take place last four or five months due to market crash at the month of December and so on. On March 10, 2010 DSE General Indez was on point of 5582.33, on November 10, 2010 it stood at 8602.41 point. Then market started falling and the index stand now at point of 5203.08 on February 10, 2011.
Graph: Index of last one year for DSI, DGEN and DSE20 Index
4.0 Present Condition of Market: Market is in bottom line at present. present. All the share prices stand at reasonable reasonable and they are attractable. If we see the price earning ratio of the companies of different sector, we can find overall PE is low enough to invest into those shares. The PE ratio is the lowest if we analysis analysis last five years data of DSE. Today PE of bank sector is 14.13 which was 21.75 last year. So there occurred a huge price correction in the [rice of banking sector shares and the prices are in bottom line now. The lowest PE ratio is 9.15 for Mutual Fund sector. Some companies of mutual fund are traded below their face value. So we can easily determine the correction level of share’s price last five months. Average PE of total market stands at 17.79 which was 26.66 last year.
Sectoral P/E - February 2011 Sector
Sectoral Price Earnings Ratio Feb-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Bank
14.13
21.75
16.46
16.33
25.99
16.24
18.24
Financial Institutions
31.50
43.35
32.45
25.26
15.13
7.88
33.83
Mutual Funds
9.15
12.54
29.06
20.37
20.29
6.13
6.55
Engineering
32.08
51.13
36.50
30.24
28.57
17.34
14.14
Food & Allied
18.65
25.46
17.29
16.93
23.28
18.69
9.13
Fuel & Power
14.91
21.16
17.71
15.83
35.95
18.87
22.32
Jute
26.30
42.72
27.23
12.15
7.98
6.74
12.55
Textile
30.08
46.66
32.93
13.85
12.14
12.01
10.08
Pharmaceuticals
25 2 5.07
32.83
27.64
30.96
21.05
11.76
10.84
Paper & Printing
67.29
109.15
27.59
9.36
6.23
6.62
4.69
Service & Real estate
23.17
38.68
45.65
22.66
8.82
12.62
8.16
Cement
20.08
30.36
56.90
10.26
12.61
18.53
16.13
IT
38.76
57.31
60.71
46.52
15.25
11.12
10.46
Tannery
14.06
19.08
15.39
16.43
15.38
8.00
10.28
Ceramic
57.89
107.15
39.97
47.80
29.85
14.88
17.06
Insurance
33.87
55.04
31.39
21.81
15.59
10.24
20.87
Telecommunication
11.58
19.64
84.85
Travel and Leisure
47.82
74.64
Miscellaneous
14.47
19.68
28.85
34.43
14.43
11.05
7.83
Market P/E
17.79
26.66
25.65
18.42
23.58
14.51
13.85
Table: Price earning ratio for last five years
5.0 The Market Collapse: (2010-2011) So we have observed a market crash in our capital market which we many didn’t expect after 1996 turmoil. The 1996 crash of share market not only depleted the market value and volume of the Dhaka Stock Exchange, it ruined many families, mainly from the middle middle class, class, who were enticed by a few manipulators manipulators.. When thousands thousands had put in their last stake, insiders made profit by selling at the pick of value before leaving the market and siphoned the cash outside the country. This happened while the government was in full function and regulatory bodies were active. When millions lost their cash and left with scripts of negligible value, the courts, lawyers, government bodies, human right groups and the civil society did not seem to care. Despite everything that was said, nothing happened on the ground, except those who lost remained losers. The subsequent government also dropped a few crocodile tears and shrugged off the matter. In 2010 we also experienced the same as 1996. Aggrieved investors set fire to wood and paper in front of the DSE building and blocked the road from Shapla Chattar to Ittefaq
Moor. They chanted slogans against the top bosses of the premier bourse and market regula regulator tors, s, and demande demanded d resign resignati ation on of the central central bank bank governo governor. r. Market Market inside insiders rs blamed the recent fall on the central bank's measures to control the liquidity flow in the bank bankin ing g syst system em.. The The cent centra rall bank bank also also issu issued ed anot another her dire direct ctiv ivee aski asking ng fina financ ncial ial institutions to adjust their stock investment exposure by December. From January, no institution will be allowed to invest more than 1 0 percent of its total liabilities in the stock market, and the exposure will be calculated based on market price, not cost price. The International Monetary Fund's prescription to Bangladesh Bank for addressing the overexposure of commercial banks to the stock market also propelled the unprecedented fall. The SEC's excessive initiatives to cool the market in a short time are also blamed for the crash. The measures and unexpected and unnecessary intervention of a donor agency took a big toll on the market We can summarize some pin points for this collapse of capital market in 2010-11 in the following manner:
•
Liquidity crisis:
The main reason of downfall of the market I guess is the liquidity crisis. All the banks and other financial institutions felt that crisis in large scale. For this crisis the money market situation also performed badly. We have seen the money market interest rate went upto 150% in a single day. Moreover Bangladesh Bank pressurized the banks to reduce CRR and SLR rate. So that influenced also to that crisis. As a result huge amount of funds got out of the market in a short time. It influenced the market strongly to decline in a large scale.
•
Private Bank’s Investment:
Banks play an important role in the whole economy. They are the largest capitalization companies which are listed in DSE. Many banks were engaged to general banking earlier. But last few years we have seen many banks are investing the money of their valued depositors in the stock market to earn earnings besides their operating income. Whereas banks are supposed to invest 25% of their deposit the banks invested up to 70% of their
investment. This type of investment from banks is for short term but the amount is huge in size. So when those banks booked their profit, they sold their share in the peak market. As a result huge amount of fund got out of the market; market lost its capital and it went in downtrend again.
•
Bangladesh Bank Monitoring:
Bangladesh Bank played an important role in the capital market. They are supposed to monitor the money market whereas they mostly concentrate on the capital market. They can do that for the betterment of good banking for sure. But they acted like in an ineffective and inefficient way. When market reached to its peak then they started to monitor tightly whereas in the early stage they remained silent.
•
CRR and SLR Rate:
According to Bangladesh Bank circular, all the private banks were supposed to reduce the Statut Statutory ory Liquid Liquidit ity y Ratio Ratio (SLR) (SLR) and Cash Cash Reserv Reservee Ratio Ratio (CRR) (CRR) for better better liqui liquidit dity y purpose. Since all the banks invested their big portion in the capital market and they had to reduce the SLR and CRR rate, so they went for selling their holdings. So market went in downward.
•
SEC Monitoring:
Security Exchange Commission is the regulator of the Bangladesh Capital Market. But they were failed to do so properly and effectively. In this case we have observed SEC has lack of efficient manpower to run and monitor two capital markets in the country. SEC has failed to initiate their authoritarian power effectively and efficiently. When market went upward and upward, they took various decision to cool the market. But all the decisions influenced the market to go upward.
•
Surveillance of DSE:
The main objective of the Surveillance function of the Exchange is to promote market integrity in two ways -
•
By monitoring price and volume movements (volatility) as well as by detecting potential market abuses at a nascent stage, with a view to minimizing the ability of the market participants to influence the price of the scrip/scrips in the absence of any meaningful information.
•
By managing default risk by taking necessary actions timely.
But the surveillance of didn’t work properly for the betterment of the market. When the price of a company doubled then the surveillance committee asked that company why price is increasing. But before doubling the price they remained silent. It is found that many of the members of that committee are involved directly or indirectly with the market. •
Demutualization:
Dhaka stock exchange has its members, directors, brokers, dealers etc. All the elements of DSE don’t work separately. So we have seen an individual is a member of DSE; again he is the stock broker and stock dealer too. So this individual is likely to get benefit from the market in favor of him/her.
•
Ideology of Capital Market:
We know the savers are prone to invest their idle money in the capital market. But in Bangladesh we have seen in the last year all the people of all stages were running to invest their valued earned money in the market. They are short term investors of this market and they wished to get an extra profit or income within a short time. So market capital went high and high. When market started to fall, these investors got panicked and sold off their shares. As a result market fall again.
•
Merchant Banks are in action:
All the privat privatee banks banks and financi financial al insti institut tution ionss have opened opened their their mercha merchant nt banking banking division in these days. Merchant banks offer margin load to the clients. Some offer 1:1 loan of the equity of a client. If an individual has 1 lac taka he will get another 1 lac and in total he will be able to invest 2 lac. For margin loan he is supposed to pay interest to
that bank. Merchant banks have to monitor the margin ratio of their clients time to time. Every bank has its own margin ration benchmark and its own policy to call margin from the client clients. s. When When market market was falli falling ng and fallin falling, g, client clients’ s’ margin margin ratio ratio reduce reduced d and reduced. So at one time banks forced their clients to sell their shares to avoid loss of banks capital. So there was more selling pressure and that influenced the market to go downtrend more.
•
Lack of knowledge of small investor:
Most of the investor of our capital market are small investor. And we have seen many of them have lack of proper knowledge about the market. They just buy a share to get profit after 3 days when the shares got matured. But how and why they are supposed to get a profit they dint know well. So when market goes decline the investors are supposed to wait and not to sell in loss. But the got panicked and sold off their share in loss even. So this attitude prolonged the market to go in bearish situation.
•
Speculation and Manipulation:
There are lots of rumors in the market always. And our illiterate investors are more prone to value those rumors. Many of the rumors went wrong. There was wrongly made speculation and manipulation too. Suppose Eastern Housing Co. (EHL) had a price of tk. 600 in the last month. After one month it is now tk.1000 and there was strong speculation that it would go to tk.2000 easily. So the investors who bought at 600-700 taka level didn’t sell EHL. They believed that speculation. But ultimately that didn’t happen. There was example of manipulation too. A share had a price of tk. 40 only. In a year this price rose upto tk. 2000 which means that individual share gave maximum 4900% gain in a single year.
•
December closing:
The market crash happened at the end of November and December. It was the time closing for many of the financial institution. So institutions, who had investments in the market, started to peg their profit into their bag. So lots of profit taking took place in that time. It influenced the market to go in the bearish too.
6.0 Problems and Solutions: 6.1 Problem and Limitations of Dhaka Stock Exchange (DSE): Price Manipulation •
It has been observed that the share values of some profitable companies have been increased fictitiously some times that hampers the smooth operation of DSE.
Delays of settlement •
Financing Financing procedures and delivery delivery of securities securities sometimes sometimes take an unusual long time for which the money is blocked for nothing.
Irregular payment dividends •
Some companies do not hold Annual General Meeting and eventually declare dividends that do not reflect the real or actual financial positions of the company and ultimately shareholders become confused.
Selection of membership •
Some members being the directors of listed companies of DSE look for their own interest using the internal information of share market.
Improper Financial Statement •
Many companies of DSE do not focus real position of the company as some audit firms involve in corruption while preparing financial statements. As a result the shareholders as well as investors do not have any idea about position of the company.
Technical problems and political infighting •
The concept of centralization of securities market has not been implemented that arises technical problems and political infighting.
Lack of skilled manpower •
In DSE DSE as well well as fina financ ncia iall and and non finan financi cial al inst instit itut utio ions ns invol involve ved d in the the securities market.
The lack of proper policy
•
Absence on framework that provides incentives and protection to investors.
6.2 Suggestions to Improve the Activities of DSE:
•
Re-establishment of Security Exchange Commission is highly necessary at this moment. SEC is is supposed to to have honest, skilled, knowledgeable, clean imaged people.
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DSE is composed of 25 member’s board. There are 12 members of stock broker and 12 of dealers and the rest is chief executive officer. So board members are the market player and controller as well. So it is easy for them to manipulate market. So Demutualization is needed now.
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There should be a supportive atmosphere between Dhaka Stock Exchange Ltd (DSE) and Security Exchange Commission (SEC). Their goal should be the same to work for the betterment of the market.
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Bangladesh bank should impose bar or circular on the investment criteria for the private banks and other financial institutions.
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Conducting in-depth investigations based on preliminary enquiries/analysis made into trading of the scrip. In case of irregularities observed , necessary actions are initiated or investigation case forwarded to SEC, if necessary through the CEO.
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To force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors.
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To introduce introduce automated automated monitoring monitoring system that may control control price manipulation, manipulation, malpractices and inside trading.
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There should be a new regulation for the placement business on the eve of preIPO state.
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To introduce full computerized system for settlement of transactions.
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To force force the listed listed compani companies es to declar declaree and pay regular regular divide dividends nds through through conducting Annual General Meeting.
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The department may issue verbal/ written warning to member/s when market irregu irregular lariti ities es in the scrip scrip are suspec suspected ted.. The depart departmen ment, t, throug through h the CEO, CEO,
impo impose sess pena penalt lty y or susp suspen end d the the memb member er/s /s who who are are invo involv lved ed in mark market et irregularities, based on the input/ evidence available from investigation report. •
To take remedial action against the issues of fake certificates.
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To punish the member brokers for breaching of contract.
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Strengthening market regulation and supervision
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Developing the capital market infrastructure
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Modernizing capital market support facilities
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Increasing the limited limited supply of securities in the market
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Developing institutional sources of demand for securities in the market an d
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Improving policy coordination.
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Liaisi Liaising ng with with Compli Compliance ance Office Officers rs of compan companies ies to obtain obtain commen comments ts of the company on various price sensitive corporate news items appearing in selected News Papers.
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Comments received from the companies are disseminated to the market by way of online news bulletin.
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Investigations based on rumor verifications are carried out, if required, to detect cases of suspected insider trading
7.0 Conclusion: The market is still struggling to be stable. Market is trying to recover from its bearish mood mood but but we have have obser observe ved d stil stilll much much conf confus usio ion, n, lack lack of coope coopera rati tion on amon among g the the government, DSE members, and regulators. All are waiting for a stable market so that investors get confidence to put their valued money in this market. I think it is the high time government should sit with all the elements of capital market and take proper steps to stabilize the market for the greatest interest of the small investors as we know they are heart of this market.
8.0 Reference: 1 2
www.dsebd.org Ann Annual report of Dhaka Stock ock Exchange Ltd
