MOLOY RAHA

1. Presentation on Bangladesh Stock Market
By
Team Financial Bees
06 April 2014
Marketing Department
Faculty of Business Studies
Financial Management (506)
MBA (Evening) Program
University of Dhaka
Marketing BeesTeam

2. Summary
Financial BeesTeam
Following are the covering areas of the presentation:
Brief Idea on Bangladesh Stock Market
Regulatory and Administrative Authorities
Market Operational Procedures
Market Efficiency status
Past Success Story
Market Failure and Reasons
Future Measures Could be Taken

3. Summary
Financial BeesTeam
Definition of Capital and Stock Market:
Capital refers to the funds provided by owner and lenders to businesses
to run the business for producing goods or services. Capital is
synonymous with the net assets or equity of the entity.
A stock market is a public body for the trading of companies’ stock or
shares and derivatives at an agreed price. The stocks are listed and
traded on stock exchanges which are entities of a corporation.
Contribution of Stock Market in National Economy:
Raising capital through the stock market certainly plays a vital role in
nation’s economy. One of the most enduring issues in economics is
whether financial development causes economic growth or whether it is a
consequence of increased economic activity. Efficient markets will reflect
future earnings growth in current prices. Since earnings growth should be
closely related to overall economic growth, this will make it look like
increases in market capitalization there is a positive relation between
market capitalization and future economic growth.

4. Regulatory Authorities
Financial BeesTeam
In order to control operation of the stock exchanges and trading of
stocks of listed companies, the government of Bangladesh
established the Securities and Exchange Commission (SEC) of
Bangladesh on 8 June 1993 under the Securities and Exchange
Commission Act, 1993. Prior to its establishment, the market was
regulated under the Capital Issues Act 1947.19 The SEC was
established with the following mission:
Protecting the interest of investors in securities
Developing the capital and securities markets and
Framing of securities rules

5. Regulatory Frameworks
Financial BeesTeam
Functioning of stock market is a complicated matter.There are a number of laws,
rules and regulations which controls the functions of a stock market. In
Bangladesh, the basic statues for the controlling of the listed companies in stock
market are-
 Securities and Exchange Ordinance 1969 (SEO)
 Securities and Exchange Rules 1987
 The Securities and Exchange Commission Act 1993
 Companies Act 1994
 Securities and Exchange Commission (Prohibition of Insider Trading) Rules 1995
 Depository Act 1999
 Securities and Exchange Commission (Issue of Capital) Rules, 2001
 Securities and Exchange Commission (Asset Backed Security Issue) Rules, 2004
 Securities and Exchange Commission (Public Issue) Rules, 2006
 Securities and Exchange Commission (Rights Issue) Rules, 2006
 Dhaka Stock Exchange /Chittagong Stock Exchange (Direct Listing) Regulations 2006
 Listing Regulations of the Dhaka Stock Exchange /Chittagong Stock Exchange Limited 1996

6. Regulatory Frameworks
Financial BeesTeam
Stock Exchanges:
In Bangladesh, following two stock exchanges market exist:
Dhaka Stock Exchange (DSE):
Dhaka Stock Exchange is the main stock exchange of
Bangladesh. It is located in Motijheel at the heart of the Dhaka
city. It was incorporated in 1954. Dhaka stock exchange is the
first stock exchange of the country.
Chittagong Stock Exchange (CSE):
The Chittagong Stock Exchange began its journey in 10th
October of 1995 from Chittagong City through the cry-out trading
system with the promise to create a state-of-the art bourse in
the country.

7. Summary
Financial BeesTeam
Short overview on Bangladesh Stock Market in 2014:
DSE:
Enlisted company number: 532
Average Daily turnover:
BO Account holder number:
Efficiency Status:
Index MAX:
Index MIN:
CSE:
Enlisted company number:
Average Daily turnover:
BO Account holder number:
Efficiency Status:
Index MAX:
Index MIN:

8. Operational Procedures
Financial BeesTeam
Enlistment Procedure:
 Every company intending to enlist its securities to DSE by issuing its
securities through IPO is required to appoint Issue Manager to
proceed with the listing process of the company in the Exchange;
 The Issue Manager prepares the draft prospectus of the company as
per Public Issue Rules of SEC and submit the same to the SEC and
the Exchange(s) for necessary approval;
 The Issuer is also required to make agreement with the
Underwriter(s) and Bankers to the Issue for IPO purpose;
 After receiving the draft prospectus, the Exchange examine and
evaluate overall performance as well as financial features of the
company.
 The Exchange send its opinion to SEC within 15 days of receipt of
draft prospectus for SEC's consideration.

9. Operational Procedures
Financial BeesTeam
Enlistment Procedure:
 After proper scrutiny, SEC gives it consent for floating IPO as per
Public Issue Rule.
 Having consent from SEC, the Issuer is required to file application to
the Exchange for listing its securities within 5 days of issuance of its
prospectus.
 On successful subscription, the company is required to complete
distribution of allotment within 42 days of closing of subscription.
 After 100% distribution of shares/refund warrants and compliance of
other requirements, the application for listing of the Issuer is placed to
the Exchange's meeting for necessary decision of the DSE Board.
 The DSE Board takes the decision regarding listing/non-listing of the
company which must be completed within 75 days from the closure of
the subscription.

10. Operational Procedures
Financial BeesTeam
Trading Policy:
Stock market is actually a place where investors can buy and sell shares of a
particular company. Main aim of all investors is to get the maximum return on
their investment the purpose is to buy the stock before the price goes up and
then to sell it before it goes back down.
Stock markets provide the opportunity for traders to make (and lose) fortunes
speculating on the price of shares and other securities. Savvy traders can interpret
market behavior and try to anticipate movements in price to ride both positive
and negative trends across particular companies and industries, allowing the free-
flowing trade of shares in both directions without the need for physical interaction
or negotiation of contract terms.
Markets trade in real-time throughout the business day, and constantly match
orders on both sides of the table to make fluid trading possible.Traders can either
buy shares in companies they forecast to perform well, or often sell shares they
don't yet own in the anticipation of buying them back at a lower price point
(known as short selling, or 'going short').

11. Efficiency Status
Financial BeesTeam
A fair, efficient and transparent stock market is essential for a country for its
industrialization and economic development. In general terms, the efficient Stock
markets theory is concerned with whether prices of securities at any point in time
fully represent available price sensitive information of those securities.
Abnormal price changes cannot be predicted systematically in an efficient
market. If an investor can gain abnormal/arbitrage profit by systematically
predicting the abnormal price change, the market can be termed inefficient.
By efficient market hypothesis (EMH) efficiency of a market can be determine.
There are three forms of market efficiencies. Firstly, in weak form efficiency,
security prices fully reflect only the history of prices or returns themselves.
Secondly, in semi-strong form efficiency, security prices reflect all publicly available
information.
Finally, in strong form efficiency, security prices reflect all public and private
information. In an efficient market, security prices follow a ‘random walk’ meaning
that period-to-period price changes should be statistically independent.
Therefore, so many analysis have interpreted both Stock Market as “Inefficient”

12. Success Story
Financial BeesTeam
 Helped to quick growth of Industrialization
 Financial utilization of idle capital
 Integration of low income people in the main economic stream
 Helped to create a sustainable economic growth
 Helped to balance the money supply and control in market
 Helped to increase our domestic production using economic
financial resources efficiently

13. Failure and Learning
Financial BeesTeam
Market Crush In 2011:
An abrupt crash of the share market in 2011 had sparked violent protests from the investors. It was the
biggest one-day fall in the Bangladesh stock market's 55-year history. It is estimated that over 3.5 million
(35 lakh) people - many of them small-scale individual investors - had lost their money because of the
sharp plunge in share prices. DSE General Index soared to its highest levels from October to December
2010, with the peak on December 5, 2010 at 8,918 points. DSE's index on January 3, 2010, was at
4568.40 and went up at a staggering 4,350 points - a 95.23 per cent increase! On January 10, 2011,
trading on the DSE was halted after it fell by 660 points, or 9.25 per cent, in less than an hour - the
biggest one-day fall in the 55 years of the bourse. CSE also met the same fate.
Market Crush In 1996:
In 1996 the market experienced a dramatic change and pushed the price index up by 337 per cent.
DGEN Index recorded a high growth from July and stood at 3648.7 points or 280.5 per cent on 5th
November 1996. Besides, Chittagong Stock Exchange experienced the same change and grew by 258 per
cent. Chittagong Stock Exchange index increased from 409 to 1157 points in 1996 within a one year's
time. But the steps taken by the government did not work.The index lost over 233 points on November
6, 1996.After the bubble burst, DGEN index dropped to its lowest point and stood at 957 in April 1997.
 Failed to ensure Integrity and accountability
 Failed to eradicate Corruption and ensure Transparency
 Failed to execute effective regulatory measures
 Failed to build confidence on market

14. Reasons behind failure
Financial BeesTeam
 Price manipulation: It has been observed that the share values of some
profitable companies has been increased fictitiously some items that hampers
the smooth operation of Stock market.
 Delays in Settlement: Financing procedures and delivery of securities
sometimes take an unusual long time for which the money is blocked from
nothing.
 Irregulations in Dividends: Some companies do not hold Annual General
Meeting(AGM) and eventually declare dividends that confused the
shareholders about the financial positions of the company
 Selection of Membership: Some members being the directors of listed
companies of DSE, CSE look for their own interest using their internal
information of share market.
 Improper financial statement: Many companies do not focus real position
of the company as some audit firms involve incorruption while preparing
financial statements. As a result the shareholders as well as investors do not
have any idea about position of that company.

15. Reasons behind failure
Financial BeesTeam
 The concept of centralization of the securities market has not been
implemented that arise technical problems and political infighting.
 The intrinsic values for securities traded are sometimes estimated without
considering the current market prices of the securities.
 The absence of comprehensive legal and supervisory framework.
 Lack of skilled manpower as well as financial and non-financial institutions
involved in the securities market.
 The lack of proper policy framework that provides incentives and protection
to investors.

16. Recommendations
Financial BeesTeam
 There should be diversity in the stock market which might provide opportunity
to raise capital in an alternative way.
 The bond market, which might be a vital source of debt financing, should be
developed. Both national and foreign investors should be encouraged to
participate and raise capital from this market.
 Trading transparency and greater standardization of OTC contracts should be
ensured in the OTC market. Effective measures should be taken to make it
favorite to the investors.
 The requirements of issuing prospectus should be more descriptive.Therefore,
the investors will get the proper information of the company before invest in it.
 Besides traditional ways of issuing and raising capital from the market, various
devices should be introduced by the SEC to provide better opportunity for the
corporations for raising capital in a flexible way from the market.
 Improved regulatory disclosure rules should be helpful for investors and
financial analysts who are participating directly in the stock market.

17. Recommendations
Financial BeesTeam
 Specific law must be drafted to define and to restrain the activities which
amount to ‘market manipulation’.
 Separate funds for Investors Compensation Scheme must be raised to support
the investors suffered loss from the stock market.
 The independent directors must be selected as a representative of the non-
controlling shareholders of the corporations.
 There must be harmony in the corporate and the securities laws. The
regulations must not be scattered. Therefore any one can find the required
regulations easily.
 Skilled officials should be appointed in the SEC to make proper regulations.
The SEC must take its decision rationally rather arbitrarily. Its accountability
must be ensured different activities.
 There must be a separate and unique judicial system for the rapid trial of
stock market related disputes and offences. The investors must be provided
adequate damages for unjust financial loss. Punishment for the offence must be
harsh.

18. References
Financial BeesTeam
Books:
Corporate Finance, by Stephen A. Ross
Journals:
African Journal of Business Management Vol. 5(22), pp. 8891-890, 30
September , 2011
Bekaert, G. and C. R. Harvey (1995), “Emerging Equity Market Volatility,”
NBER Working Paper No. 5307, Cambridge, Massachusetts: National
Bureau of
Economic Research.
Bekaert, G., C. R. Harvey and A. Ng (2003), “Market Integration and
Contagion,”
Journal of Business, Forthcoming. Batra, A (2004),
Statistical Properties of Daily Return from the Dhaka Stock Exchange”,
Bangladesh Development Studies, Vol. XXII, No. 4.
Campbell, J Y, Lo, A W and MacKinaly, A C, (1997), “The Econometrics of
Financial Markets”, Princeton University Press, Princeton, New Jersey
Web:
http://www.dse.com.bd/
http://www.bdstock.com/
http://www.thefinancialexpress-bd.com

19. Group Members in Financial Bees Team
Financial BeesTeam
Serial # Student's Name Student's ID # Batch Signature
1 Md. Mamunur Rasid 41325012 25th
2 Badrul Alam Nayan 41325033 25th
3 Hasnat Mohammad Shahriar 41325043 25th
4 Md. Mohsin 41325083 25th
5 Md. Shorifuzzaman 41325089 25th
6 Jamshed Alam 41426088 26th

20. End of Presentation
Financial BeesTeam
Thank you