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Executive Summary
In a market economy, the capital market plays a vital role in the efficient allocation of scarce
resources. Well-functioning and developed capital markets augment the process of economic
development through different ways such as encourage savings, draw more savers and users
into the investment process, draw more institution into the intermediation process, help mobilize
non financial resources, attract external resources, bring disciplines in the sick organizations and
invest for organizing production of goods and services and create employment opportunities.
There is a saying that the stock market is the pulse of the economy. There is no doubt that a
vibrant capital market is likely to support economy to be robust but two major catastrophes in the
capital market of Bangladesh within one and half decades do not indicate the existence of a
vibrant market; rather these show a highly risky and unstable capital market. The recent surge in
the capital market has shaken the whole country as millions of people became insolvent within a
very short span of time. It was observed in 2010 that the DSE general index was the highest ever
which made it Asias top performer after China.
But the reverse scenario was scaring investors in the 1st quarter of 2011 as the lowest ever in the
index observed during that period.
Actually, stock market crash is as more than 10% loss within few days in a stock market. But
stock market crash has differentiated from stock market correction where the loss is 10% or less.
Stock market crash is a sharp and unexpected decline of stock market prices for a very short
period of time, usually accompanied with the decline of many other assets prices mentioned by
stock market crashes.net. It causes significant capital losses of investors and speculators. The
market participants become panicked which leads to more losses.
Bangladeshi Stock Market has experienced a big crash twice from its inception. In 1996, the
market was crashed because of speculative bubble whereas; it was an asset bubble in the year
2011. The stock price was overvalued this time. Price was inflated about 500-700 percent
compare to the face value. DGEN Index climbed at point 8918.51 on December 05, 2010 which
signaled a steeper bubble.
This study postulates the present scenario of Bangladesh Stock Market through various
quantitative and qualitative data which are extracted from the secondary sources. Quantitative
data are gathered from the web site of Dhaka Stock Exchange and other qualitative data are
collected from published research journals, newspapers, websites etc. This study has revealed
that, Gap between the Demand and Supply of stock, extraordinary over pricing of stock, market
manipulation, lack of knowledge about the stock market mechanism among the general
investors, price distortion, inefficient regulations, political unrest, etc caused the crash of DGEN
Index in the FY2011. Security and Exchange Commission (SEC) of Bangladesh and government
should encourage more public limited companies to offer more share to meet the current
demands. In order to get back the confidence among the existing investors regulatory body may
introduce Income tax rebate, Injection of Market Stabilization Fund, Mandatory holding certain
percentage of share among the board of directors, short term incentives packages etc.
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.
The recent volatility of the capital market of Bangladesh is an abnormal phenomenon and such
volatility tends to economic instability. I believe it will be interested enough to look into the causes
of the problem. As such volatility affects mass people (many investors), it is essential to try to
minimize such volatility by identifying the causes (esp., Regulatory failure) and solving the
problems.
Introduction:
Stock market is one of the most important financial institutions of any economy as well as
Bangladesh. It opens door for companies to raise huge amount of capital from a lot of individual
investors inside & outside of a country.
Investors participate voluntary to buy ownership of a company in the public market. It is said that
stock market is an intermediary institution to adjust a gap between surplus units and deficit units
of an economy. In these days for millions of middle class educated people in Bangladesh
investing in stocks is more popular than investing in any other investment sectors. For an
investor, stocks are more liquid than any other investment sources as it gives ability to sell and
buy ownership anytime without any hassle.
Since 2007 share prices of Bangladesh stock market have been increasing steadily over the past
four years and it outperformed almost all the worlds markets.
The financial year 2008-09 is known for the global financial and economic crisis. Many developed
and developing countries fall into recession. However, it could not affect Bangladesh economy
greatly. So, the stock market of the country did not see any significant changes or fall. As CPD
(2011) reported, financial year 2008-09 was a volatile year but during this year Bangladesh
economy benefited from low prices of import-able and was able to avoid negative pressure on its
export of goods and services. Consecutive outstanding performance of Bangladesh stock market
in recent years before the crash lured millions of investors to the stock market to invest their little
savings. Before the stock market crash the market had become a route of easy money for too
many new individual investors. That is why millions of fresh investors invest their small saving in
the market during this period. For these fresh investors investing in this market provided a way to
avoid working a job. Even some BO account holders worked as intermediaries of friends,
relatives to invest their money in the stock market.
Finally, the stock market crashed and taught these investors that investing money in the stock
market involves risk too. But the lesson that investors are taught wreaked havoc on the lives of
millions of innocent investors. The crash wiped out billions of taka from the market where fresh,
illiterate investors were the main victim. It has been more than a year since the crash occurred.
Generally market crash occurs because of a sudden dramatic fall of stock prices across a
significant cross-section of a stock market, resulting in a significant loss of paper assets. Crashes
are driven by panic as much as by underlying economic factors. They often follow speculative
stock market bubbles. Stock market crashes are social phenomena where external economic
events combine with crowd behavior and psychology in a positive feedback loop where selling by
some market participants drives more market participants to sell. Generally speaking, crashes
usually occur under the following conditions, a prolonged period of rising stock prices and
excessive economic optimism, a market where P/E ratios exceed long-term averages, and
extensive use of margin debt and leverage by market participants.
Objective of the report
Since the origination of DSE in 1986, it passed through two big market crashes during 1996 and
2011. This repeated crisis made all the small investors empty. Main r objective is to find out the
underlying causes of recent market fall and address some suggestions to get it back in structured
market mechanism. Specifically focuses are to:-
To depict the present scenario and the recent crash in the stock market of Bangladesh through
a chronological analysis of stock market in Bangladesh..
The study tries to examine the reasons that leaded the Bull Run for dramatic increase of
different instruments in Bangladesh stock market and the fundamental factors of the collapse
Tap few guidelines to recover the recent crisis.
Methodology
The report is both descriptive & calculative by nature. The report is based on information
collected from primary as well secondary sources. The indicators which are responsible for recent
crash are measured by calculation. The trend of those indicators has also been measured for last
three years. Statistical approach has also been used in the report.
To find out the critical issues of this sudden drama, we have collected secondary information from
various sources. We have emphasized on quantitative and qualitative data to analyze the recent
share market crash and its prevail crisis in Bangladesh stock market. All the quantitative data are
extracted from Dhaka Stock Exchange website and qualitative data are collected from published
research journals, newspapers, websites etc.
Data Collection:
In order to make the report more meaningful and presentable, two sources of data and
information has been used.
The Primary Sources are as follows-
Practical work exposure
Discussion with the respective executives & officers of the bank.
The Secondary Sources of data and information are-
Annual Reports of DSE.
Various publications regarding DSE.
Analysis:
The main factors of DSE have been analyzed from different perspectives.
SOWT analysis
Regression analysis:
Rationale of the report
The thesis is required for students who are completing Masters of Business Administration (MBA)
from University of Dhaka. It is a three credit hour program with duration of minimum one and half
month. Students who have completed all the required courses are eligible for this program. This
report has been prepared as a partial fulfillment of MBA program authorized by the Department of
Banking. In this program, I was assigned to make report regarding DSE share crash. During
making this report, I have learned about various aspects related to share market. This report has
been prepared according to the topic given by the supervisor.
Scope and limitations
A comprehensive knowledge on stock market crash has come under the scope of the report. The
present study is an attempt to evaluate the stock market of Bangladesh.
The report is limited only to gather knowledge about the determiner of the crash of the share
market of Bangladesh. Here the past history & present condition of Bangladesh share market will
also be taken into consideration.
Limitation
There are some limitations, which act as a barrier to conduct the program and for doing an
empirical research work. The limitations were:
Large scale analysis was not possible due to constraints & restrictions this report is limited
only to the share crash, it does not cover the whole perspectives.
In many cases, up to date information was not published.
In some cases, access to relevant papers & documents were strictly prohibited.
Another Problem was time constraints.
Insufficiency of necessary information, lack of experience and budget constraint.
Chapter contents..
Literature review
About share market volatility many researcher of our country and abroad has worked by applying
different methods and has tried to find out various factors that are actually liable to cause a crash.
Here I have given some of their opinions regarding this topic and finally I have concluded
according to my own.
The United States experienced the NASDAQ bubble in the late 1990s. The fluctuations beliefs
generated by overconfidence among Bangladesh investors led to larger speculative component
in stock prices, and the technical bubble of the U.S. market was identified as the result of
exuberance.
(Shiller, 2000; Chen, Hong, and Stein, 2002). Given that markets in the advanced economies
seemed to be more susceptible to speculative bubbles and crashes, and many emerging markets
also display similar evidence, it seems reasonable that no one should look forward to these
phenomena disappearing from the Bangladesh markets (Ahmed et al., 2006).
In line with Shiller (2000), other researchers also discussed how price movements are led by
social processes in a non stationary environment or irrational market and that individuals value
other persons opinion in assessing probabilities. For example Chen, Hong, and Stein (2002)
analyzed the overvaluation generated by beliefs. The authors conclude that the market
overvaluation was caused by the investors overconfidence.
According to (Zaman, 2011) regarding Bangladesh market it is found that there is a general
tendency among investors to hold onto their shares till the record date so that they get entitled for
dividend, and then sells it off after the record date. This results in an increase in share supply
which might result in price decrease.
Chowdhury & Chowdhury (2010) gathered secondary data of publicly listed companies, traded in
Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), to see the relationship
between capital structure and firm value in Bangladesh. It was observed that by changing its
current ratio, operating leverage, EPS, dividend payout ratio or share capital, a firm may increase
its value in the market. Chowudhury & Abdullah (2011) opines that lack of market regulation, lack
of supply of good shares, presence of syndicate, lack of financial knowledge helped the market
index jumped over 8000 point during December 2011.
I also agree about that some of the factors that have been presented by them are really the
actual reason of market crash. Besides these I have also mentioned some other elements related
to crash among which some are primary issue related and some are secondary issue related and
some are authority regulatory related.
Here I think the Capital Market of Bangladesh have been passing tough times since December
2010 as high volatility is eroding the capital of Thousands of Investors that might turn into social
instability. This fall is caused by many factors that I tried to identify and tried to link up between
causal factors of market crash and regulatory failure.
Primary issue related problems was faulty listing methods and IPO overpricing, few numbers of
new listings, revaluating assets before company listing, high premium in issuance of right
share/Repeat IPO etc. while secondary market related problems was stock splits and stock price
manipulations through block trading, circular trading and insider trading. Investors greed and
irrational behavior played a big rule to make the stock prices sky rocking as they were crazy to
buy shares without judging the company fundamentals. Shares of the companies with closed
operations and big accumulated losses were rising constantly due to investors high risk appetite
that caused them to loss everything. Government had already taken many steps (including SEC
reforms) to stabilize the market but failed as investors confidence is in the bottom level.
Government and regulators should work together to identify the main speculators and should
brought under proper trial to bring investors back to the market. Regulator should make reforms
on Listing procedures and other faulty regulatory frameworks to ensure transparency and
efficiency in the capital market and also should bring clear guidelines regarding Private
Placements, Asset Revaluation, Insider Trading, Dealing with Omnibus Accounts etc.
Chapter 3:
A profile of the DSE.
Chapter contents..
DSE
CSE
Factors FY 2011
DSE 20 3,910
2011 1996
trading was automated trading was not automated
surveillance was strong surveillance was weak
circuit breakers and international protections were in place circuit breakers and international protections were not properly
in place
Being automated there were no forged shares traded and the Being not automated there were no forged shares traded and
kerb market the kerb market
there were also omnibus accounts in the market there were no omnibus accounts in the market
the BO account value was 35 lacs compared to 3 lacs before
2011 crash was an asset bubble the 1996 crash was a result of a speculative bubble
while in 2011 it lost up to 660 points, nearly 10 percent In the end, in 1996 the index lost 232 points,
SWOT analysis:
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying
the objective of the business venture or project and identifying the internal and external factors
that are favorable and unfavorable to achieve that objective. The technique is credited to Albert
Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from
Fortune 500 companies.
A SWOT analysis must first start with defining a desired end state or objective. A SWOT analysis
may be incorporated into the strategic planning model. Strategic Planning has been the subject of
much research.
Strengths: characteristics of the business or team that give it an advantage over others in the
industry.
Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
Opportunities: external chances to make greater sales or profits in the environment.
Threats: external elements in the environment that could cause trouble for the business.
Strength, weakness, opportunity, and threats (SWOT) of Bangladesh Stock Market are given
below:
Strength:
The first and for most thing of strength of Bangladesh stock market is its ability to provide high
return.
Regulatory body of Bangladesh stock market that protects the interest of the investors.
Large number of securities which provides medium for investment.
Large number of Brokers who plays a role of facilitator for investment.
Weakness:
The weak point of Bangladesh stock market is its volatility.
It is a kind of gambling where no guarantee of return and some time it depends on luck also.
Opportunity:
Stock market provides an opportunity to money lender and money seeker to invest and use
money for their plan.
It provides an opportunity to the investor to be the owner of the company and contribute in the
business decision of the company.
Stock market is a kind of indicator of the economic growth of the country where it provides an
opportunity to gain according to the inflation of the country or more than that.
Threats:
There are many competitors of stock market such as post office savings, public provident
fund, company fixed deposits, fixed deposits with bank etc. which provides fixed and assured
returns.
Changing of economic condition.
Capital market instrument is highly risky then money market.
Changing of government rules and regulations.
Speed of growth in Capital Market not complemented by the controlling agency.
Regression analysis
In this analysis, Turnover value and M.Cap are taken as independent variable where DGEN is
taken as dependent variable. Here I try to find out the relationship between the DGEN and
independent variables Turnover value and M.Cap.
Variables Entered/Removed
Model
Variables Variables Removed Method
Entered
1 turnover, M.Capa
. Enter
a. All requested variables entered.
b. Dependent Variable: DGEN
Model Summary
Model
R R Adjusted R Std. Error of the Estimate
Square Square
1
.966a .934 .919 196.91543
a. Predictors: (Constant), turnover, M.Cap
Interpretation of R:
It is the coefficient of correlation. It shows the positive or negative correlation among Turnover
value and M.Cap with DGEN. Here the value of R is .966that indicates that the independent
variables Turnover value and M.Cap are strongly positively related with the dependent variable
DGEN.
Interpretation of R square:
It is the coefficient of determination. If the independent variable is changed by some units then
the dependent variables also became changed and how much changed is done by the
independent variables, is shown by R square. Here the value of R square comes .934 meaning
that 93.4% changes in the dependent variable are happening for the changes of the independent
variables. And the least part (1 .934) = 0.066 is changed by other factors which are not
considered.
Interpretation of Adjusted R Square:
It is the actual coefficient of determination. If another independent variable is added then the R
also became changed and Adjusted R Square shows logically how much value change is
possible and thats why the value of Adjusted R Square is always less than the value of R square.
The value of Adjusted R square is .919. It shows actually how much dependent variable (DGEN
is changed for the changing of independent variables Turnover value and M.Cap.
Interpretation of Standard Error of Estimate:
It shows how much error or variability stands between the predicted result and actual observed
result. Here the value is 196.91543 that show the amount of variability of our predicted result and
the actual result acquired from the real observation.
ANOVA
Model
Sum of Squares df Mean Square F Sig.
1 Regression
4900558.846 2 2450279.423 63.191 .000a
Residual
348981.194 9 38775.688
Total
5249540.040 11
a. Predictors: (Constant), turnover, M.Cap
b. Dependent Variable: DGEN
Coefficients
Model
Unstandardized Coefficients Standardized Coefficients t Sig.
= a +b1 X1+b2X2
= 1203.865 + 2.471E-9X1+3.504E-8X2
In this regression equation, the relationship between DGEN with Turnover value and M.Cap has
been demonstrated.
Dependent Variable = DGEN
Independent Variable X= Turnover value and M.Cap
Here, a is constant and b1 and b2 are the slope of X1 and X2.
If Turnover value and M.Cap is zero then a = = -1203.865
Here, = -1203.865 is Y intercept. It shows that the DGEN of the DSE is negative because the
DSE will have some DGEN without Turnover value and M.Cap in a given year as there may be
some DGEN of previous years.
Now, the value of b1 and b2 or the slope of X1 and X2 are 2.471E-9 and 3.504E-8 it means if the
volumes of Turnover value and M.Cap increase by TK. around tk.2 and 3 then the DGEN
decreases for TK. 2 and 3 points assuming all other variables are constant.
Findings
After preparing this report, it has been come to my mind that only one factor cannot be mentioned
greatly for this share market crash. But it is the collective of various factors who are responsible
for this huge crash. The followings are some findings that are.
Financial institutions are the biggest investors in the market and there aggressive involvement
increased market liquidity manifold in recent years. Financial Institutes could invest more than
10% of their demand and time liabilities to the stock market and greater involvement of financial
institutes increased the liquidity in the market that created a bubble in the stock market.SEC must
be aware about this.
Number of listings in the DSE and the procedures of listings were not fair and square.
Book building method was not followed properly in case of share pricing. For this reason
share price especially IPO pricing was overvalued. It can be said that by taking chance of weak
asset revaluation method companies have overvalued their asset also.
Demand and supply side of stock in the stock market were mismatched which resulted a
great crash in the 55 year history of Bangladesh.
Stock price manipulation and insider trading was very common phenomena in the stock
market in which SEC did not perform its inspection clearly.
Omnibus accounts of ICB and merchant banks as another major reason behind the stock
market debacle. This kind of account made a lot of illegal transactions and manipulation which
was in favorable for the stock market.
Misunderstanding between stock market and stock exchanges was very poor and
irregularities to take actions against the manipulators were also responsible for this crash.
During the time of crash year Block trading, circuit trading and direct listing have also been
noticeable greatly.
Recommendation
All are responsible for crash. So proper activities have to be adopted by everybody from their
own situations to restore the previous situation of the market. Some of them are in the
following.
Recommendations for the Government
There is no doubt that the failure of the government in making various decisions regarding
capital market played role behind the recent crash:-
Government should ensure the supply of fundamentally strong shares in the market to meet
the demand which will make the market efficient as investors would not go for buying junk shares.
For ensuring the supplies of such shares, Government can offload the shares of different
companies which it possesses now. It also can urge the private limited companies to go public by
offering tax benefits through fiscal policy. Even it can offer shares to the public for infrastructural
development work like constructing big bridges, highways and power stations.
Government must ensure the appointment of skilled and capable personnel in different
regulatory bodies and must give punishment to the persons responsible for any kinds of
irregularities.
The responsible persons of the Government should refrain from delivering irrelevant,
irresponsible and sensitive speeches which many of them did before.
Government should ensure more active merchant banks to participate in the smooth building
of a sound stock market.
Government must ensure that the chairman and members of the Investment Corporation of
Bangladesh (ICB) are honest and skilled. Any sort of direct or indirect involvement of any of the
ICB members and officials in the stock market must be stopped in any way.
Government should delegate all power to the SEC to take legal actions against the criminals.
Even if necessary, new Act may be passed in the Parliament in this regard.
Flow of black money in the capital market must be restricted as it can never bring any good
results in the long run other than creating bubble in the stock market the blast of which nothing
but a disaster.
Recommendations for Securities and Exchange Commission (SEC)
SEC as the guardian of capital market should play significant role to make it march forward. It
must ensure the followings:
SEC must ensure that neither of its members nor any of its officials is involved either directly
or indirectly with the transactions in the stock market.
The monitoring and surveillance should be strengthen so that none can get chance to
gamble.
SEC must have its own certified Chartered Accountants to ensure the accuracy of the
Financial Statements of the listed companies and they should give punishment if the books of
accounts are not accurately audited.
SEC must rethink about the rule of disclosure of quarterly financial reports by the companies
because many of the companies misused it as a vehicle of misguiding the investors. In fact, it
became a common practice of most of the listed companies to show high quarterly EPS in its un-
audited quarterly report to bring down P/E ratio. In some cases, it is seen that a few companies
annual audited EPS for the year ended 2010 was lower than its accumulated EPS of three
quarters.
It must ensure speedy disposal of decision for market operation and all the decisions should
be taken considering the long term effect on the market.
To bring fundamentally strong private companies in the capital market, there is no alternative
of Book Building Method of IPO. So, the postponed Book Building Method must be reintroduced
with necessary correction to resist all sorts of manipulation.
It is high time for SEC to take a decision regarding the stocks in the OTC market because
huge amount of money has been blocked due to inefficient OTC market. The companies in the
OTC market should either be de-listed and their assets and liabilities should be settled or these
companies may be brought in the main market through acquisition by the Government or by the
interested entrepreneurs restarting production of those enterprises.
Recommendations for DSE
Dhaka Stock Exchange has important role to play as the monitoring authority of the Broker
Houses. So, it needs to play vital role by ensuring the followings:
It must ensure proper monitoring of the brokerage houses for which more skilled manpower
should be appointed in the Monitoring and Surveillance Team.
Any sort of irregularities in case of trading should be identified promptly and immediate action
should be taken.
The operating software of the stock exchange should be updated as often these fail to take
immediate sale or buy order. So, it must bring new software within the shortest possible time to
bridge a gap between the prices of script in stock exchange
Now there is a common practice by DSE to ask for query for price hike of any script which is
nothing but a routine work. To make such query fruitful, visible action should be taken if any
involvement of sponsor/directors is identified.
To aware investors having no or insufficient skills about the investment in stock market should
be trained through different training programs, seminars and motivating fair.
Last but not the least that the stock exchanges need to be demutualized as it is the demand
of time now to have a new corporate governance structure for more effective conflict
management among market participants, and to make more quick decision with greater flexibility.
Recommendations for Bangladesh Bank
Though Bangladesh Bank is the regulatory body of Money Market; but its decisions are also
reflected in the capital market as the money market and capital market are interrelated. In this
regard it has the following roles to play:
It must ensure that the Banks and Other financial institutions exposures do not exceed the
limit from the very beginning. But in the recent slump it failed to do so as it could not monitor the
involvement in the early periods while it put pressure on the banks to readjust their capital market
exposures at the eleventh hour which accelerate a huge sale pressure from their side.
It must ensure the proper functioning of the Merchant Banks through arranging money from
the parent company to mitigate liquidity crisis.
It should keenly monitor the loan of the commercial banks to industrial sector and take regular
feedback so that no industrial loan may flow to the capital market. It is found that in case of
recent catastrophe, it failed to do so.
Recommendations for Institutional Buyers
Institutional Buyers (Mutual Funds, Merchant Banks etc.) ensure balance in capital market
through reacting according to the interaction between demand and supply. But in recent past they
completely did the opposite as when there was huge sales pressure in the market instead of
buying, they also sold shares in a large scale resulting further decline. Their behavior in that case
was not different from individual investors.
They must show mature behavior to ensure balance in the stock market by buying shares
when there is sale pressure and vice-versa.
In providing margin loan, they must follow the rules as prescribed by SEC as well.
They should advise their client giving emphasis on the benefits of the clients instead of
thinking their own benefits only.
At the time of huge decline they should not be involved in forced/trigger sale of clients shares
without giving them any chance to adjust their loan.
All sorts of transactions through omnibus accounts should be restrained.
Recommendations for Individual Investors
No matter what is the reason of a crash, individual investors are the ultimate losers. Hence, it is
their own responsibility to take care of their own money and they ought to consider the following
things while taking investment decisions.
Before investing in a particular script they must analyze the key factors of that company to
justify whether the company is fundamentally strong. Such factors include EPS, P/E Ratio,
dividend policy, future growth, industry average etc.
In analyzing financial strength of a company they must consider the audited annual reports
instead of quarterly un-audited report as often these information is not accurate or do not reflect
the real position of the company.
They must restrict themselves from buying junk shares and taking whimsical investment
decision.
They must build their portfolio in a way which will involve at least three or four different types
of fundamentally strong shares from different industries. It should also contain shares considering
both long term and midterm benefits.
Instead of being traders, the retail investors need to think of being investors.
They ought to keep some cash for emergency so that they might buy more shares
(fundamentally strong) which they bought earlier when there is a big decline in price.
They should not buy on the basis of rumor or following advices of the persons who do not
possess sufficient knowledge about capital market investment.
They ought to participate in different seminars and training programs relating to stock market
to enhance their knowledge and skill in making stock market investment decisions.
They must know that both gain and loss are the indispensable parts of stock market.
Instead of looking for gain, sometimes they must accept loss with patience so that they may
recover the loss in future through higher gain.
Above all, they must understand that perseverance and patience is the key to success in
investing in capital market.
Conclusion
From our analysis we have found that major indicators of the countrys major stock exchange is
becoming more volatile over time and the regulators are not efficient enough to guard this
volatility. But, for a developing country like Bangladesh, the importance of sound development of
the market cannot be undermined. Although the SEC has been trying to maintain a continuous
flow in the market, very often its role meets the broad economic objectives. In order to make the
market less volatile, SEC itself should be strengthen both in terms of number of manpower and
quality of the professionals involved with special focus on independent research, monitoring
mechanism and prompt decision making.
Security and Exchange Commission (SEC) of Bangladesh and government should take the short
term and long term initiatives to stabilize the market. They should encourage more public limited
companies to offer more share to meet the current demands. Income tax rebate, Injection of
Market Stabilization Fund, Mandatory holding certain percentage of share among the board of
directors, short term incentives packages should be introduced to get back the confidence among
the existing investors. Regulatory bodies of Bangladesh stock market must educate the current
and potential investors about the market mechanism and provide them the accurate information
so that investors trade their shares carefully. Unless, there are any corrective measures,
Bangladeshi stock market will be facing this irrational downward of DGEN Index again in the near
future.
To guide and restore the confidence of individual investor in capital market, the regulatory
authority should take necessary actions to encourage corporate governance rating among listed
companies, which will enable investors to differentiate the good governance companies from the
rest and can then attach higher value to those firms as well. And, without improving the
governance of the market and eliminating scope of manipulation, it will be difficult to attract good
scripts at the desired level. In this endeavor, regulators must adapt continuously to the changes
in the economy and the pressures of globalization.
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Newspapers of Bangladesh
Websites
Central Depository Bangladesh Limited, www.cdbl.com
Dhaka Stock Exchanges, www.dsebd.org
Security and exchange commission, www.secbd.org.26.16