Professional Documents
Culture Documents
On
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
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 with the Securities and Exchange Ordinance, 1969, Companies Act 1994 &
Securities & Exchange Commission Act, 1993.
East Pakistan Stock Exchange Ltd was finally named as Dhaka Stock Exchange
(DSE) on 14 May 1964.
Prior to independence in 1971, the number of listed companies in DSE was 196
with a total paid up capital of Tk. 4 billion.
DSE can introduce automate monitoring systems that may control price
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 the listed companies to declare and pay regular dividends through
conducting Annual General Meeting.
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.
Listing of Companies
Settlement of trading
Market Surveillance
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.
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 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 deals with newly issued securities and is responsible for
generating new long-term capital.
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: Participant trade reporting, affirmation, billing and assigning settlement
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 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.
476
229
33
203
(No. in mn)
2,393
15,673
13,268
(No. in ' 000)
409
4,672
7,336
719,316
10,105.59
220,543
3,098
23,183
326
All Debentures
140
468,113
6,576
7,336
103
2,349,353
33,006
1,843,471
25,899
30,477
428
All Debentures
576
468,113
6,576
6,716
94
71.18
* Total No. of Shares/Share Capital / Market Capital includes Bonus /Right of shares.
There are several companies which 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 capitalization percentage of 29.72%. Financial Institutions come after that
which reflects 13.77% of total market capitalization. Then comes Fuel and Power,
Telecom, Pharmaceuticals, Insurances and Engineering sector.
Investors take different decisions on the base of a sectors Earning Per Share (EPS), Price
Earning ratio (PE Ratio), Dividend policy, Earnings and some other criteria. The
following table gives us a clear idea about the overall performance of sector wise share in
Dhaka Stock Exchange.
Market
in mn
February
Capitalisation %
of Turnover Tk. in mn
total
Market Cap February January
January
%
of
total
Turnover
561,617.62
863,038.59
29.72
38,847.87
66,308.47
33.81
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
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
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
292,616.55
10.96
8,518.04
12,584.36
7.41
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
Telecommunication
188,906.97
320,426.20
10.00
3,547.66
5,053.28
3.09
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
6,716.23
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
Financial Sector
Banks
Manufacturing
207,119.69
Bond
the grim capital market performance dampened potential public issue of debt securities.
However, with recent resurgence of the market the appetite for investment 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 December2010 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 March2011.
DSE Turnover
Month
Value
Volume
Tk. in mn
Nos. mn
Mar-10
175,115.99
747.99
Apr-10
191,303.18
May-10
Turnover to
Index
DSI
DGEN
DSE 20
Market Cap.
0.08
4,573.81
5,582.33
2,952.01
700.63
0.08
4,641.54
5,654.88
3,039.17
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
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
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
18.65
25.46
17.29
16.93
23.28
18.69
9.13
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
25.07
32.83
27.64
30.96
21.05
11.76
10.84
67.29
109.15
27.59
9.36
6.23
6.62
4.69
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
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
Table: Price earning ratio for last five years
25.65
18.42
23.58
14.51
13.85
Moor. They chanted slogans against the top bosses of the premier bourse and market
regulators, and demanded resignation of the central bank governor. Market insiders
blamed the recent fall on the central bank's measures to control the liquidity flow in the
banking system. The central bank also issued another directive asking financial
institutions to adjust their stock investment exposure by December. From January, no
institution will be allowed to invest more than 10 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.
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 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.
According to Bangladesh Bank circular, all the private banks were supposed to reduce the
Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) for better liquidity
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 -
But the surveillance of didnt 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 dont 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.
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.
All the private banks and financial institutions have opened their merchant 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 clients. When market was falling and falling, clients margin ratio reduced 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.
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.
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
didnt sell EHL. They believed that speculation. But ultimately that didnt 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.
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
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.
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.
The concept of centralization of securities market has not been implemented that
arises technical problems and political infighting.
Bangladesh bank should impose bar or circular on the investment criteria for the
private banks and other financial institutions.
To force the listed companies to publish their annual reports with actual and
proper information that can ensure the interests of investors.
There should be a new regulation for the placement business on the eve of preIPO state.
To force the listed companies to declare and pay regular dividends through
conducting Annual General Meeting.
The department may issue verbal/ written warning to member/s when market
irregularities in the scrip are suspected. The department, through the CEO,
Comments received from the companies are disseminated to the market by way of
online news bulletin.
7.0 Conclusion:
The market is still struggling to be stable. Market is trying to recover from its bearish
mood but we have observed still much confusion, lack of cooperation among 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
Annual report of Dhaka Stock Exchange Ltd