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Bangladesh Stock Market: Operation, effecency, success & failureTRANSCRIPT
Bangladesh stock market : Operation, Effeciency, Success & failure
PresentingMd. Taifur Hassan Talukder
#41324032Sal Saad Al Deen Taher
#41324033Syed Navid Jaman
#41324087
DSE, the first stock exchange of the land was incorporated on April 28, 1954, while the second stock exchange – CSE was established in 1995
After independence of Bangladesh, trading activities started in August 1976.
From 1998 automated screen based trading was introduced by both the exchanges through LAN and WAN connectivity and HP non stop trading platform is providing basic architecture.
Structure: Background
The Stock Exchanges are registered as Public Limited Companies under companies Act.
Presently DSE has 250 outstanding shares (members) while CSE has 148 shares outstanding as of year 2013.
The exchanges are Self Regulatory Organizations and their activities are regulated by - Articles of Association- Own set of Rules, Regulations and Bye-laws- Securities and Exchange Ordinance 1969- Securities and Exchange Rules 1987- Other relevant laws.
Structure: Corporate Struture
Public Market : For general tradingSpot Market : For pre-book closer tradingBlock Market : For bulk volume trading Odd lot Market : For odd lot trading
Trading SessionTrading at DSE & CSE is performed through a
non-stop platform in following sessions : Continuous Trading hours :10.00 AM to 2 PM
Trading day : Sunday To Thursday.
Structure: Basic Market
All Securities are Distributed in 16 Sectors :1. Banks 2. Investment3. Engineering4. Food & Allied Products5. Fuel & Power6. Jute7. Textile8. pharmaceuticals & Chemicals9. paper & Printing10. Services & Real Estate11. Cement12. IT13. Tannary Industries14. Ceramic Industry15. Insurance16. Telecommunication17. Travel & Leisure18. Miscellaneous
Structure: Basic Market Statistics
DSETotal Issued Capital of all listed Securities Tk 98,359.42 croreMarket Capitalization of all listed Securities Tk 253,024.60 croreListed Securities As on June, 2013Companies 251, Mutual Fund:42 Debentures: 8 Govt Treasury Bond: 221 Corporate Bond:3Total:525 CSETotal Issued Capital of all listed Securities Tk 42,856.43 croreMarket Capitalization of all listed Securities Tk 191,989.07 croreListed Securities As on June, 2013 Companies 220, Mutual Fund:42 Corporate Bond:3 Total: 265
Structure of Bangladesh Stock Market: Basic Market Statistics
Efficiency of a market can be perceived by The theory of efficient market hypothesis (EMH) proposed by Fama (1965). 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.
Although the EMH is divided into three forms of efficiency depending on the information set to which share prices adjust, it is usually believed that the markets in developing and less developed countries are not efficient in semi-strong form or strong form and so it is very much convenient to test the weak-form of efficiency in such type of a market. Research has been concluded that the stock market in Bangladesh is not efficient in weak-form of efficiency.
The inefficient nature of the functioning of Bangladesh’s capital market is well known and has been reported widely in various studies (Hassan et al. 2000; Mobarek and Keasey 2002; Ahmed and Imam 2007; Uddin and Khoda 2009; CPD 2010).
Normally, in an inefficient market, movement of stock prices fail to adequately reflect the changes happening in the real economy (Beechey et al. 2000).
Ali (2011) found DSE as an ‘informationally inefficient market’; Alam et al. (2011) showed that changes brought about with regard to
the functioning of the DSE did not improve the level of efficiency in the market. Others have argued that, capital market of Bangladesh continues to remain in its
early stage of development and will have to mature further before it attains a semblance of stability (Rahman and Rahman 2011).
Efficiency of Stock Market
Success Of Stock market100% repatriation of capital, dividend and investment profits.
o Reinvestment of repatriable dividend treated as new investment.
o No tax on capital gains
o 10% of all IPOs are reserved for NRBs.
o World’s Bank Investor Protection Ranking for Bangladesh 19th, Pakistan 25th, India 38 th & Sri Lanka 70th.
o Bangladesh was considered as one of the Goldman Sachs Next 11 countries for a high potential of becoming the world’s largest economies in the 21st century along with the BRICs (Brazil, Russia, India and China).
o Easy access to ownership of Infrastructure Development companies, high net worth private banks and companies through Capital Market.
Failure In Stock MarletTHE CAPITAL MARKET SCENARIO IN 1996
There was a huge surge in the stock market in 1996 evidenced by an enormous increase in the market capitalization. Total annual turnover and daily average turnover in DSE general index increased from 775.65 in January 1996 to 3064 in November, 1996. After an increase in the general index of DSE for a short period, the index started to fall down dramatically and in December 1996, the index fell down to 2300.15. The short time ‘game plan’ made the investors to invest more in the capital market but when this ‘game plan’ achieved its goal; the confidence of the investors was significantly damaged because of excessive speculations, allegedly aggravated by widespread irregular activities. This fall down of general index of DSE continued over the calendar year of 1997. In April 1997, the general index of DSE was 957.48 while in December 1997 it fell down to 756.78.
Trend of general index of DSE during capital market clash of 1996
Percentage change in monthly closing index DSE during the nose dive of the capital market in 1996
THE CAPITAL MARKET SCENARIO IN 2011
The trend of general index of DSE during July 2009 to August 2010 shows that the general index of DSE has increased smoothly. In July 2009 the general index of DSE was 2914.53 while in April 2010 it increased to 5654.88. During this time period, there was an increasing trend of general index. In August 2010 the general index of DSE stood at 6657.97 and finally in November 2010, it reached the peak and became 8602.44. After this general index has started to fall down and in February 2011 it reached to 5203.08
The trend of general index of DSE during capital market downturn in 2011
The percentage change in general index of DSE during the capital market downturn in 2011
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