The reason behind the recent Bangladesh share market: There is a lot of reason behind the recent share

market crash in Bangladesh. There are so many reasons for the fall of 2010 share market in Bangladesh. The major and most critical reasons was stock price manipulation, spilt stock, asset revaluation, faulty methods of IPO, charges high premium for issuing stock, illegal private placement. Increase the number of brokerage house in whole county more than 530 braches. Lack of cooperation among the regulatory body, corruption of regulatory authority , venal money, central bank decision, unnecessary comments from the different higher personnel of government, rumor, illiterate and inexperienced investors, unethical approaches by the businesses and brokerage houses, large amount invested by commercial banks, gamlers, asymmetry of information. Wrong signals from responsible quarters since the care taker government caused the asset price bubble.

Dramatic increase in stock holder is another major reason for recent share market crash. As the individual investor increases in the market so the demand for share increase but with that demand capital market fail to fulfill the demand of investors. As we know if the demand goes up and the supply does not match up with that its called bubble. So it is another most critical reason for recent share market fall. As we know in term of caretaker government everybody felt fear to invest because of different circumstance has taken by caretaker government against investors as well as black money holders. So share became a place for all kind of investor to invest especially for black money holder. As the investors invest more in capital market then the demand increase dramatically as a result the price of share started to increase at that time. As the price started to increase so the general investors especially individual investors started to enter in capital market. Another major reason of recent capital market crash is the illegal private placement. As we know the in the time of private place only the institutional investor remain present and it is possible manipulate the price. Because in the bulk building method the institutional investors are the main character who set the price of IPO. So institutional investors and the issuing company has taken the illegal mechanism which increase the price of IPO. As result the authority ban the bulk building method for issuing share in certain period. Regulatory failor is the vital reason for recent share market crash. As a highest regulatory of capital market the SEC totally fail to maintain their activity. There was no combination among the capital market regulatory agency for example Bangladesh bank take so many action without taking any recommendation and any kind of suggestion from SEC. on the other hand sec took so many action without taking any consideration of DSE and CSE.

Banks and other financial institutions have increased their participation directly n the markets and also through loaning money to BO a/c holders for trading on margins. They and also many brokerage houses have been allowed to open brokerage houses in divisional and district hqrs making it easier and attractive to trade in shares. As a result the number of BO accounts shoot up to 33 lakh from below five lakh. These BO a/c holders also acted as intermediaries of their friends and relations from all corners of the country as they were given promises of higher returns compared with savings a/cs in banks and bonds. Behaviorally human beings are attuned to act in a manner that is called as herd mentality like cattle. The lure of making a fast buck always attracts people and like in 1996 they rushed in thousands. The upsurge began a year or so back when Grameen Phone offered a large IPO (over 4000 crore) with much higher values over the face value of Tk. 10 only. Even then the issue was only about 10% of the total capital of Grameen Phone. When trading began with such higher value and it was included in the DSE index for the entire capital value of Grameen there was a big jump in the index about 1000 points. So the faulty index gave wrong signal to investors and the upward rise never stopped there after. When the index reached 6000 or so from under 3000 journalists asked the finance minister about it and he quickly dismissed that the market was not overheated. Around the same time some foreign firms set their feet into the market and created further push up. Since there was no capital gain tax on the earnings and no restrictions were placed by Bangladesh Bank on transferring their capital plus gains they took advantage of super returns and transferred money out of the country by buying dollars from the curb markets. The book building method was allowed to raise prices of IPOs by using faulty accounting practices and many low earning companies took advantage of the system in private placements and then going to market with much higher valued IPOs without due regard to P/E ratios. Some fifty or so companies were waiting to join the game as the president of DSE charged about weak accounting in a press conference just the day before the mayhem. In a country where accounting figures are regularly changed to suit purposes of the business firms and audits are done to satisfy mere formality use of book building method of price discovery was not appropriate and manipulation were common. Combination of wrong information to the investors, illegal participation of banks and institutions in the stock markets, weak accounting functions are at the core of the crisis that saw billions of taka wiped out.

the immediate reason for this crash was the policy of the regulators of the market who laid down a limit for investment by the banks and other financial institutions in the stocks. This was done in order to avoid the market being overvalued. As the banks and other big investor institutions withdrew the capital from the market, the panic ensued. Current Bangladesh share market can experience huge decline because of: a) Most of the share prices are very high (lack support of fundamentals). B) People who are involved in the market has egger to make quick profit by short trading only. Most of them do not want to hold shares for little long. C) Excess liquidity in the market also pushing share prices without solid reason (only speculation).Manipulators are active! d) Our banking other financial institutions has exposed it selves to very much risk (By involving speculative share trading now).When the market will down turn or crash they will in serious trouble (Bangladesh Bank must see this matter).

Because of power and infrastructure shortages most entrepreneurs could not invest in the real sector (meaning industries). Bangladesh was having current account surpluses (thanks to huge remittance flows). S0 more money was coming in than going out. Interest rates went down.