University of Dhaka

Faculty of Business Studies

Department of Marketing
EMBA Program

Financial Management
Sec: A

Stock Market in Bangladesh Challenge and

Prospects
 Table Of Content
1.0 Introduction …………………………………………………………………………………………………………….. 1
2.0 Financial Markets …………………………………………………………………………………………………….. 2
2.1 Types of Financial Markets …………………………………………………………………………… 3
2.2 Overview of Financial system of Bangladesh ………………………………………………… 4
3.0 Capital Market …………………………………………………………………………………………………………. 7
3.1 Instruments of Capital Market ……………………………………………………………………… 8
3.2 Primary Role of Capital Market Instrument …………………………………………………… 9
3.3 Capital Market in Bangladesh ……………………………………………………………………….. 9
4.0 How does Stock Market Operate …………………………………………………………………………….. 12
4.1Types of Stock Market ……………………………………………………………………………………. 14
5.0 Stock Market in Bangladesh …………………………………………………………………………………….. 15
5.1 Dhaka Stock Exchange (DSE) …………………………………………………………………………..
15
5.2 Overview of Dhaka Stock Exchange ………………………………………………………………..16
5.3 Chittagong Stock Exchange (CSE) …………………………………………………………………… 19
5.4 Overview of Chittagong Stock Exchange ………………………………………………………… 20
6.0 Challenges of stock market in Bangladesh ………………………………………………………………. 23
6.1 Stock market scams ………………………………………………………………………………………. 27
6.2 What lessons can be drawn …………………………………………………………………………… 28
6.3 Effects of Covid-19 on stock market in Bangladesh ……………………………………….. 29
7.0 The Potential of Capital Market in Bangladesh ……………………………………………………….. 31
7.1 Opportunities Overlooked …………………………………………………………………………….. 31
7.2 Major future prospects that will change the Stock Market ………………………….... 32
7.3 Suggestions to improve the activities of Stock Market ………………………………….. 33
8. Conclusion …………………………………………………………………………………………………………………. 34
 1. Introduction:
The capital market of Bangladesh is passing with some problems and these are the barriers to the
development and sustainable stock market in the Bangladesh.

However the economists and policymakers had high expectations about the prospects for capital market
development in emerging economies like Bangladesh. This led to significant measures, including policy
formulation and reforms for the stock exchanges, development of regulatory and supervisory
frameworks, automated trading system, electronic settlement of shares transactions, ICT based
development, continuing monitoring activities by investing and compliance department(MIC) for the
development of Bangladesh capital market.

Despite the intense reform efforts because of scamming, turbulence of Loan scams, reserve heists,
unstoppable rise in soured loans, lack of analysts, political influence governing the running of state-
owned banks, issuing licenses on political considerations for new banks to be set up are scars on the
bright face of the banking sector. We are lagging far behind our neighboring countries in technology in
investment management. Although neighboring countries are adept at technology-based trading, we
could not progress in this regard. Trading platforms are very weak for large executions.

We need to reform some agendas and related expectations to take into account that may help us to
gain a better understanding of our possibilities in stock market.

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 2. Financial Markets:
Financial markets refer broadly to any marketplace where the trading of securities occurs, including the
stock market, bond market, forex market, and derivatives market, among others. Financial markets are
vital to the smooth operation of capitalist economies.

Understanding the Financial Markets:

Financial markets play a vital role in facilitating the smooth operation of capitalist economies by
allocating resources and creating liquidity for businesses and entrepreneurs. The markets make it easy
for buyers and sellers to trade their financial holdings. Financial markets create securities products that
provide a return for those who have excess funds (Investors/lenders) and make these funds available to
those who need additional money (borrowers). 

Some financial markets are small with little activity, and others, like the New York Stock Exchange
(NYSE), trade trillions of dollars of securities daily. The equities (stock) market is a financial market that
enables investors to buy and sell shares of publicly traded companies. The primary stock market is
where new issues of stocks, called initial public offerings (IPOs), are sold. Any subsequent trading of
stocks occurs in the secondary market, where investors buy and sell securities that they already own.
World widely we can see - Over-the-Counter Markets, Bond Markets, Money Markets, Derivatives
Market, Forex Market.

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2.1Types of Financial Markets:
Bangladesh currently has two stock exchanges that are growing in tandem with the country’s growth. As
of May 2019, 583 companies are listed on DSE alone with a market capitalization of USD 45.9 billion
(~BDT 3.8 trillion). The government has preferential policies for encouraging companies to list in the
country’s bourses and take advantage of benefits such as tax breaks for sector-specific companies.The
financial market in Bangladesh is mainly of following types:

I. Money Market: 

The money market comprises banks and financial institutions as intermediaries, 20 of them are primary
dealers in treasury securities. Interbank clean and repo based lending, BB's repo, reverse repo auctions,
BB bills auctions, treasury bills auctions are primary operations in the money market, there is also active
secondary trade in treasury bills (up to 1 year maturity).

II. Taka Treasury Bond market: 

The Taka Treasury bond market consists of primary issues of treasury bonds of different maturities (2, 5,
10, 15 and 20 years), and secondary trade therein through primary dealers. 20 banks performing as
Primary Dealers participate directly in the primary auctions. Other bank and non-bank investors can
participate in primary auctions and in secondary trading through their nominated Primary Dealers. Non-
resident individual and institutional investors can also participate in primary and secondary market, but
only in treasury bonds. Monthly data on primary and secondary trade volumes in treasury bills and
bonds and data on outstanding volume of treasury bonds held by non-residents can be accessed
at Monthly data of Treasury Bills & Bonds .

III. Capital market:

The primary issues and secondary trading of equity securities of capital market take place through two
(02) stock exchanges- Dhaka Stock Exchange and Chittagong Stock Exchange. The instruments in these
exchanges are equity securities (shares), debentures and corporate bonds. The capital market is
regulated by Bangladesh Securities and Exchange Commission (BSEC).

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 IV. Foreign Exchange Market:

Towards liberalization of foreign exchange transactions, a number of measures were adopted since
1990s. Bangladeshi currency, the taka, was declared convertible on current account transactions (as on
24 March 1994), in terms of Article VIII of IMF Article of Agreement (1994). As Taka is not convertible in
capital account, resident owned capital is not freely transferable abroad. Repatriation of profits or
disinvestment proceeds on non-resident FDI and portfolio investment inflows are permitted freely.
Direct investments of non-residents in the industrial sector and portfolio investments of non-residents
through stock exchanges are repairable abroad, as also are capital gains and profits/dividends thereon.
Investment abroad of resident-owned capital is subject to prior Bangladesh Bank approval, which is
allowed only sparingly. Bangladesh adopted Floating Exchange Rate regime since 31 May 2003. Under
the regime, BB does not interfere in the determination of exchange rate, but operates the monetary
policy prudently for minimizing extreme swings in exchange rate to avoid adverse repercussion on the
domestic economy. The exchange rate is being determined in the market on the basis of market
demand and supply forces of the respective currencies. In the forex market banks are free to buy and
sale foreign currency in the spot and also in the forward markets. However, to avoid any unusual
volatility in the exchange rate, Bangladesh Bank, the regulator of foreign exchange market remains
vigilant over the developments in the foreign exchange market and intervenes by buying and selling
foreign currencies whenever it deems necessary to maintain stability in the foreign exchange market.

2.2 Overview of Financial system of Bangladesh:

The financial system of Bangladesh is comprised of three broad fragmented sectors:

1. Formal Sector,
2. Semi-Formal Sector,
3. Informal Sector.

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The sectors have been categorized in accordance with their degree of regulation.
The formal sector can again be subdivided into four categories. Microfinance, Insurance, Banks and
NBFIs. As of today, the sector consists of 59 scheduled commercial banks with 3 new banks recently
approved by the Bangladesh Bank, taking the tally up to 62.

The Semi formal sector includes those institutions which are regulated otherwise but do not fall under
the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange Commission or any other
enacted financial regulator. This sector is mainly represented by Specialized Financial Institutions like
House Building Finance Corporation (HBFC), Palli Karma Sahayak Foundation (PKSF), Samabay Bank,
Grameen Bank etc., Non-Governmental Organizations (NGOs and discrete government programs.

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The informal sector includes private intermediaries which are completely unregulated.

Apart from rising debt-based funding, investors may also consider securing equity-based financing from
the country’s capital market.

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 3. Capital Market:
Capital markets are the markets for intermediate- or long-run debt and corporate stocks. The capital
market definition refers to a broad spectrum of tradable assets, as well as the stock market, the bond
market, the foreign exchange market likewise other venues used for trading various financial products.
It permits investors, companies, banking organizations and governments to trade stocks, bonds and
other instruments, either publicly or privately. Capital markets ask for to boost transactional efficiencies.

Capital market is also known as securities market is a trading market that collect capital from investors
and makes them available to companies and the government for development of project. The stocks
and bonds in the capital market are medium-to-long-term that means the investment is usually secured
for quite a year. As stocks are used by firms as a way of raising the required capital, a capital market that
means is that of a venue wherever savings and investments are channeled between the suppliers who
hold capital and those seeking capital. Some capital markets are obtainable to the general public directly
whereas others are closed to everybody except giant institutional investors. Private trading, mostly
between giant establishments with high-volume trades, happens via secured pc networks at terribly
high speeds.

Capital market is structured of primary markets and secondary markets. Primary markets deal with trade
of recent problems of stocks and other securities, whereas secondary market deals with the exchange of
existing or previously-issued securities. Another necessary department in the capital market is made on
the basis of the nature of security traded, i.e. stock exchange and bond market.

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3.1 Instruments of Capital Market

There are two types of instrument that are traded in the capital market and they are

 Bond
 Stock Market

Both stock and bond markets make up a very significant portion of the total volume of capital market
trades.

Bond: A bond is a fixed income instrument that illustrates a loan created by an investor to a borrower
(typically corporate or governmental). A bond may well be thought of as an I.O.U. between the loaner
and borrower that contains the details of the loan and its payments.

Bonds are also known as fixed interest securities. A bond issuer owes the holders a debt and undertakes
an obligation to pay them interest or to repay the principal at a specified date later, known as maturity
date.

Companies issue bonds to lift the capital needed to maintain operations, grow their product lines, or
open new locations. Bonds are either issued on the primary market, which rolls out new debt, or on the
secondary market, in which investors may purchase existing debt via brokers or alternative third parties.

There are four major bond categories available in the markets:

 Municipal bonds
 Corporate bonds
 Government bonds
 Agency bonds

Stock Market: Stocks represent possession of a company. Common stock is the most basic type of
possession and comes with the proper to vote for members of the board of administrators and the
possibility, but not guarantee, of sharing in company earnings through dividends. Common stockholders
usually purchase shares in hopes of the worth of the shares appreciating over time. Common
stockholders may additionally have the proper to select major selections (e.g., mergers) involving the

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corporate. Preferred stock also represents ownership in a company. Unlike common stock, preferred
stock generally does not come with voting rights.

The stock market refers to the gathering of markets and exchanges where regular activities of buying,
selling, and supplying of shares of publicly-held companies take place. Such monetary activities are
conducted through institutionalized formal exchanges or over-the-counter (OTC) marketplaces that
operate beneath an outlined set of rules. There can be multiple stock trading venues in a country or a
region which permit transactions in stocks and different varieties of securities.

Stock markets give a secure and controlled atmosphere wherever market participants will interact in
shares and alternative eligible monetary instruments confidently with zero- to low-operational risk.
Operating under the defined rules as expressed by the regulator, the stock markets act as primary
markets and as secondary markets.

3.2 Primary Role of Capital Market Instrument:

The capital market plays a significant role within the growth of the economy. It permits transfer of funds
from those that have surplus cash or look for higher returns for associate degree investment in
corporations. The primary role of the capital market is as follows:

 The capital market enable the transfer of funds from entities with surplus funds who require it.
 The capital market promotes investments and saving.
 The capital market facilitates a balanced economic growth.

3.3 Capital Market in Bangladesh:

Capital markets have a large role to play in the economic development of the country. An efficient
capital market helps portion capital to businesses expeditiously. Businesses successively use the capital
to grow, generate new ideas, and unfold novel technologies. As a result, productivity improves and also
the overall economy edges.

Bangladesh capital market is one of the smallest in Asia but one of the largest in the South Asian region.
It consists of mainly two full-fledged automated stock exchanges. The Dhaka Stock Exchange generally

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known as DSE is the first and main stock exchange of Bangladesh. It is located in Motijheel at the heart
of the Dhaka city. It was incorporated as East Pakistan Stock Exchange Association Ltd. on 28 April 1954
and started formal trading in 1956. After the liberation war in 1971, the trading was discontinued for
five years. In 1976 trading resumed with only 9 listed companies on DSE board in Bangladesh. Now there
are 415 securities listed on DSE as of 30 December 2009, consisting of 236 companies, 19 mutual funds,
8 debentures, 151 Treasury bonds and 1 corporate bond with a total market capitalization of 27,244
million US dollars. The second stock exchange of the country, the Chittagong Stock Exchange (CSE)
began its journey on 10th October of 1995.

The Securities and Exchange Commission (SEC) of Bangladesh was established on 8th June 1993 under
the Securities and Exchange Commission Act, 1993. The mission of the SEC is to protect the interests of
securities investors, develop and maintain fair, transparent and efficient securities markets and ensure
proper issuance of securities and compliance with securities laws. The main functions of the commission
are regulating the business of the stock exchanges, registering, regulating and training the
intermediaries in the securities market and conducting research and publishing information.

Bangladesh’s capital market, however, has greatly lost the confidence of its investors due to negative
performance in the previous two years and the COVID-19 pandemic crisis. Yet, the country’s capital
market needs these investors now more than ever in order to revitalize the nation’s economic recovery.

Policymakers, in particular, the Bangladesh Securities and Exchange Commission (BSEC) can play an
important role in bringing back investor confidence in the country’s capital market. Confident investors
can then invest in good quality businesses that can improve the latter and the nation’s economy as a
whole.

But according to published news in Dhaka Tribune, in the Covid-19 pandemic, Bangladesh’s securities
market performed well throughout July-September amount of 2020, rising as Asia's best-performing
capital market (Dhaka Tribune- Published at October 12th, 2020).

In terms of gains in the key index, Bangladesh’s stock market performance was also the highest in the
world.

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According to research by Asia Frontier Capital, DSEX, the benchmark index of the Dhaka Stock Exchange
(DSE), posted a double digit growth by 24.4% in Q3 (July-September), of 2020, the highest gain in key
index among the world’s top performing stock exchanges.

Very attractive valuations, lower interest rates, smothered economic reopening after the shutdown to
stop the spread of the coronavirus, better remittance inflow and recovery in export earnings have
largely contributed to this rally, the report findings show.

Bangladesh’s exports earnings in July rose 44% to $3.91 billion, from $2.71 billion in June, while
remittance inflows continued to rise and reached $2.60 billion in July.

Earlier, according to a Bloomberg report, the stock market of Bangladesh in August rose the highest
among Asian stock markets and also performed the best in the world with a 15.8% gain in key index.

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 4. How does Stock Market Operate:
Stock market is a market where buyers and sellers engage in trade of financial securities like bonds,
stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions. The key
factor is the stock exchange – the basic platform that provides the facilities used to trade company
stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is
the meeting place of the stock buyers and sellers.

The concept behind how the stock market works is pretty simple. Operating much like an auction house,
the stock market enables buyers and sellers to negotiate prices and make trades. Investors can then buy
and sell these stocks among themselves, and the exchange tracks the supply and demand of each listed
stock.

 Stock: To know about how stock market works first we need to know what is stock or share; it
is a financial instrument that represents ownership in a company or corporation and represents
a proportionate claim on its assets and earnings.

 Why a Company Issues Shares: Companies issues share because of raise capital. This money
is then used by companies for the development and growth of their businesses. To expand
business and survive in the market company need huge amount of money. They can raise such
capital either by selling shares or borrowing money. When a company establishes itself, it may
need access to much larger amounts of capital than it can get from ongoing operations or a
traditional bank loan. It can do so by selling shares to the public through an initial public offering
(IPO). When company issue shares it become public limited company. Company issues different
types of shares namely; preference shares, ordinary shares, shares without voting rights or any
other shares as are approved under the law. These allow the shareholders a stake in the
company's equity as well as a share in its profits, in the form of dividends, and the aptitude to
vote at general meetings of shareholders.

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 Stock Exchange: Stock exchanges are secondary markets, where existing owners of shares can
transact with potential buyers. It is important to understand that the corporations listed on
stock markets do not buy and sell their own shares on a regular basis. So when you buy a share
of stock on the stock market, you are not buying it from the company, you are buying it from
some other existing shareholder. Likewise, when you sell your shares, you do not sell them back
to the company—rather you sell them to some other investor.

 How Share Prices Are Set: The prices of shares on a stock market can be set in a number of
ways, but most the most common way is through an auction process where buyers and sellers
place bids and offers to buy or sell. A bid is the price at which somebody wishes to buy, and an
offer (or ask) is the price at which somebody wishes to sell. When the bid and ask coincide, a
trade is made.

 Process of trading Stock market: So to trade in the stock market in Bangladesh people need
to open a Beneficiary Account or BO Account. This BO account will be linked to their bank
account where they will deposit their funds to facilitate smooth transfer of money and shares.
Trade through online. Mobile trading system will help buy shares online with sheer ease and
convenience. To buy shares, log in to your trading account using your User ID and Password.
People also trade in stock market through broker house. There are many broker houses that
trade on behalf their clients. They are also work as an investment advisor.

 Stock Market Supply and Demand: The stock market also offers a fascinating example of the
laws of supply and demand at work in real time. For every stock transaction, there must be a
buyer and a seller. Because of the immutable laws of supply and demand, if there are more
buyers for a specific stock than there are sellers of it, the stock price will trend up. Conversely, if
there are more sellers of the stock than buyers, the price will trend down.

 Regulations of Bangladesh Stock Market: The Bangladesh Securities and Exchange

Commission (BSEC) is mandated to oversee the secondary and primary markets in Bangladesh
since 1993 when the Government of Bangladesh established it as the regulatory body of stock
markets. BSEC has the responsibility of both development and regulation of the market. It

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 regularly comes out with comprehensive regulatory measures aimed at ensuring that end
investors benefit from safe and transparent dealings in securities. Its basic objectives are:

 Protecting the interests of investors in stocks

 Promoting the development of the stock market
 Regulating the share market
 Conducting research and publishing information.

4.1Types of Stock Market

Stock markets is a public venue where individual and institutional investors come together to buy and
sell shares. Share market consists of primary markets and secondary markets.

Primary Market:

Primary markets deal with trade of new issues of stocks and other securities. This where a company gets
registered to issue a certain amount of shares and raise money. This is also called getting listed in a stock
exchange. A company enters primary markets to raise capital. If the company is selling shares for the
first time, it is called an Initial Public Offering (IPO). The company thus becomes public.

Secondary Market:

Once new securities have been sold in the primary market, these shares are traded in the secondary
market. This is to offer a chance for investors to exit an investment and sell the shares. Secondary
market transactions are referred to trades where one investor buys shares from another investor at the
prevailing market price or at whatever price the two parties agree upon. Normally, investors conduct
such transactions using an intermediary such as a broker who facilitates the process.

Stock Market

Primary Secondary
Market Market

Initial Public Share 14

Offering (IPO) Exchange
 5. Stock Market in Bangladesh:

Bangladesh has two stock exchanges, Dhaka Stock Exchange (DSE), established in 1954 where trading is
conducted by computerized automated trading system and Chittagong Stock Exchange (CSE),
established in 1995 which is also conducted by computerized automated trading system .

5.1 Dhaka Stock Exchange (DSE):

Dhaka Stock Exchange Limited was consolidated under the organization's act.1913 named as the East
Pakistan stock trade affiliation ltd on 28.04.1954. As open organization on 23.06.1962 the name was
overhauled to East Pakistan stock trade ltd. Again on 14.05.1964 the name of East Pakistan stock trade
restricted was changed to "Dhaka stock trade ltd."

The Bangladesh Stock Market has seen many ups and down all through its excursion from 1952 to 2020.
The greatest stun of ongoing decade was the 2011 Market Crash. It was the greatest drop in the wake of
making the most elevated top on DSEX at Taka 8770. After this fiasco, the cost has never gone to retest
its value high of the last 9 years. Bangladesh’s prime trade house, the Dhaka Stock Exchange, recorded a
negative list return of - 17.3% among other Asian Stock Exchanges. In 2019, Dhaka Stock Exchange saw
the most reduced Price to Earnings Ratio which remained at 12.4 before the year's over.

Stock speculators started 2019 bearing in mind the end goal of an upward market heading. The post-
political decision circumstance coordinated their desires as the DSEX went up to 5,992 inside a month in
January from 5,386 toward the start of the year. But since of macroeconomic headwinds, declined
banking area wellbeing, diminishing asset stream from the currency market, slow corporate profit
development and falling apart financial specialists' assessments, the year finished on noticeable market
discouragement.

Throughout the year no area separated from non-disaster protection and IT created positive returns for
speculators, as a profit changed return table by EBL Securities uncovers. The two areas returned positive
because of their uplifting viewpoint in the current circumstance. Low cap wonders additionally helped
the stocks to pick up cost in a discouraged financial exchange, experts have said.

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5.2 Overview of Dhaka Stock Exchange:

Figure: Dhaka Stock Exchange Limited Sector wise performance 2019

In June 2020 monstrous fall in its turnover today observes the Dhaka Stock Exchange to dive to its most
minimal situation in 13 years. Turnover, a significant marker of the liquidity of the portions of
organizations exchanging the securities exchange, plunged 72 percent to Tk 42.97 crore today. The past
least was Tk 40.39 crore on April 24, 2007. The everyday turnover of Dhaka Stock Exchange (DSE) on July
2020 crossed Tk2,500 crore-mark, the most noteworthy in the last 9.5 years. It additionally turns out to
be the greatest single-day exchange since December 6, 2010, when the turnover totaled a record
Tk2,710 crore.

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 Figure: Dhaka Stock Exchange Limited turnover between 2009 to October 2020

Because of the floor value set by the securities exchange controller, speculators can't exchange their
offers at the market constrained cost, said a top intermediary. In this manner, turnover has tumbled to
an authentic low position, despite the fact that the market is open yet it has become nearly illiquid
because of the floor cost. Bangladesh Securities and Exchange Commission set the floor cost by
considering normal cost of the past five exchanging days on March 19 to stop further fall of list in the
midst of the Covid-19 pandemic.

The Bangladesh DSE General Index expanded 464 focuses or 10.42% since the start of 2020, as indicated
by exchanging on an agreement for contrast (CFD) that tracks this benchmark list from Bangladesh.

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 Figure: Dhaka Stock Exchange Limited between 2015 to October 2020

In 2020 the Dhaka Stock Exchange Limited will follow the continuous downtrend over the primary
portion of the year as the pointers they are following are probably not going to improve. Nonetheless,
the creators of the report are hopeful about deal trackers, when purchasing increments as costs hit
absolute bottom.

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 Figure: Dhaka Stock Exchange Limited turnover in 2020

The normal profit yield of Bangladeshi stocks is 3.7 percent now, which implies financial specialists are
getting a normal of 3.7 percent money profit yearly from recorded organizations. The proportion is like
that in Sri Lanka, better than in Vietnam, Thailand, and far superior to in India.

5.3 Chittagong Stock Exchange (CSE):

The Chittagong Stock Exchange (CSE) is a philanthropic making association. It was consolidated on first
April 1995 as a restricted organization by ensure. Following a half year, on10th October 1995 story
exchanging was begun with an open shout out closeout framework. In the setting of a solid need to
initiate a powerful mechanized and straightforward stock trade in the nation, seventy presumed
business characters under the administration of. Amir Khosru Mahmud Chowdhury MP, the organizer
president set up this bourse in the business capital Chittagong. Just 30 protections were recorded on the
main day exchange when market capitalization remained at US$ 0.2 Billion. Presently CSE is a totally
computerized trade with screen put together exchanging office with respect to a countrywide
correspondence organization. The Chittagong stock trade will make a viable, effective, and
straightforward market of global guidelines to spare and put resources into Bangladesh so as to
encourage the business visionaries to raise capital and quicken mechanical development for the general
advantage of the economy.

CSE keeps up successful market reconnaissance to recognize and forestall unscrupulous, unordinary, and
unlawful practices in the market. The trade Compliance and Surveillance5epartment are principally
liable for the everyday market observation, oversight, and consistence checking of exchanging exercises,
including audit of estimating of orders. When any bizarre market activity happens, it is accounted for to
the administrator, Compliance, and reconnaissance. As a rule, by checking with Surveillance, the director
will attempt to follow the explanation behind the activity to a particular reason, for example, as of late
uncovered data, or gossipy tidbits. The market reconnaissance may likewise check representative firms
with regards to the source and purpose behind action coming from their specific firms. On the off
chance that no clarification of the uncommon movement is uncovered trade may make a very to the
Company to decide if they know the reason for the activity. On the off chance that the activity has all the

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earmarks of being inferable from talk or report or material data that has not been freely scattered, the
Company is mentioned to make suitable restorative move and might be encouraged to end exchanging
until such move has been made. From the beginning to 2020 the Chittagong Stock Exchange (CSE) had
seen ups and down due to various reasons.

5.4 Overview of Chittagong Stock Exchange:

The day by day turnover of the Chittagong Stock Exchange (CSE) on Sunday outperformed one of the
Dhaka Stock Exchange (DSE) for the third time. Expanded square market exchanges in the midst of frail
public exchanging because of the current floor valuing technique prompted this. We have some better
proposals to have enormous exchanges. Relationship promoting additionally helped us draw in certain
customers of our business firms," the CSE Managing Director Mamun Ur-Rashid said. As the securities
exchange resumed on May 31, following two-month-long cross country general occasions, the CSE
vanquished the chief bourse on June 9 and 25 and yesterday. Nonetheless, at the CSE more than 95
percent turnover originated from the square market – where the purchasers and merchants executed
their recently concurred bargain, bypassing the offering and asking measure in the public market. Of the

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CSE block exchanges, an unfamiliar exchange of British American Tobacco Bangladesh's offers
established nearly the entire part. For every exchange, the CSE charges its agents 0.023 percent of the
turnover esteem which boils down to 0.004 percent in the event of mass exchanges – as extensive as
Tk50 lakh – in a solitary exchange. Additionally, the bourse has an unfamiliar exchanging window its
framework to pull in exchanges where unfamiliar financial specialists are either on the purchase or sell-
side or both.

Figure: CSE: Trade: Advance from May 1999 to Sep 2020

Bangladesh's CSE: Turnover: Volume information was accounted for at 347.766 Unit in Sep 2020. This
records an expansion from the past number of 275.473 Unit for Aug 2020. Bangladesh's CSE: Turnover:
Volume information is refreshed month to month, averaging 118.257 Unit from May 1999 to Sep 2020,
with 256 perceptions. The information arrived at an unequaled high of 736.302 Unit in Jan 2017 and a
record low of 0.897 Unit in May 2000. Bangladesh's CSE: Turnover: Volume information stays dynamic
status in CEIC and is accounted for by Chittagong Stock Exchange.

Declined information was accounted for at 174.000 Unit in Sep 2020. This records an expansion from the
past number of 116.000 Units for Aug 2020. Bangladesh's CSE: Trade: Declined information is refreshed
month to month, averaging 61.000 Units from May 1999 to Sep 2020, with 256 perceptions. The

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information arrived at a record-breaking high of 200.000 Units in Jan 2018 and a record low of 2.000
Units in Feb 2004. Bangladesh CSE’s Declined information stays dynamic status in CEIC and is accounted
for by Chittagong Stock Exchange.

In September 2020 the benchmark record CASPI at the Chittagong Stock Exchange (CSE) has expanded
32.86 focuses to close at 14,227. Of the issues exchanged till at that point, 108 increased, 71 declined,
and 33 issues stayed unaltered with Tk86 million in turnover. After a month, the Chittagong Stock
Exchange likewise finished higher with its All Shares Price Index (CASPI)— increasing 60 focuses to close
at 14,587 and the Selective Categories Index – CSCX propelling 29 focuses to close at 8,768. Of the issues
exchanged, 144 increased, 90 declined and 48 stayed unaltered on the CSE. The port city bourse
exchanged 13.90 million offers and shared asset units with a turnover estimation of Tk 352 million.

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 6. Challenges of stock market in Bangladesh:

Capital market provides an important alternative source of long-term finance for long-term productive
investments. This helps in diffusing stresses on the banking system by matching long-term investments
with long-term capital. In Bangladesh, the capital market has the opportunity to provide equity capital
and infrastructure development capital for strong socio-economic benefits -- roads, water and sewer
systems, housing, energy, telecommunications, public transport, and so on.

IPO (Initial public offering):

In Bangladesh, companies raise money from the primary market through IPO (initial public offering) and
rights offer. Robi, the second largest mobile operator in Bangladesh, is seeking to raise Tk 5.2 billion
from the capital market through an initial public offering (IPO). It plans to offload about 523.8 million
shares at 10 TK each on the Dhaka and Chittagong stock exchanges, Robi's parent company Axiata Group
Berhad announced in a Malaysian stock exchange filing on Friday.

The proceeds from the proposed listing will be used to fund Robi's capital expenditures and enhance its
profile as one of the leading mobile telecommunication services in Bangladesh, according to Axiata.

The move will also provide an opportunity for Bangladeshi and global investors, including eligible
directors and employees of Robi to become its shareholders and participate in the future performance
of the firm by way of direct equity participation. Robi, has appointed IDLC Investments Ltd as the issue
manager for the IPO.

The process of listing and IPO is expected to be completed by the fourth quarter of 2020, Axiata said.

Robi's subscriber base currently stands at 46.9 million, representing 29.9% of the subscriber market
share. Malaysia-based Axiata owns a 68.9 percent stake in the mobile network operator.

Challenges:

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One of the challenges is an absence of regulatory measures or incentives to bring new companies in the
market with strong fundamentals. Discovery of price also becomes very difficult due to a lack of analysts.
Sometimes small companies face difficulties due to large pre-IPO capital rules. Weak activities of
merchant banks are also to blame. Distribution in Bangladesh is uneven. Only retail investors can
participate in the IPO, whereas, institutional investors and foreign investors can participate in the IPO in
fixed price method like general investors. Retail investors hold IPO shares for a very short period of time.

Bangladesh is an agro-based economic country. Our country is not economically strong and industrially
developed. GDP and per capita income are also very low here. Most of our people are illiterate and they
are not aware to invest in the stock exchange. For a variety of reasons, stock exchanges are not
functioning well. Some of the reasons are as follows:

 Low per capita income

Our per capita income is much lower. For this reason, cannot come from our agro-hawed sectors to
invest in the stock exchange. So investment is lower on the stock exchange and is not performing well.

 The lower rate of dividend

Companies in our country often declare the lower rate of dividend per share that create a negative
impression in the public regarding stock exchange and the companies. The companies provide low
dividend on the share that’s investors are reluctant to invest in the stock exchange.

 Low savings

Due to low income and lack of awareness, savings is not substantial. Besides we are a very ravenous
nation. We like to consume currently. Because of such problems we can save little that is not enough to
invest in stock market.

 Lack of awareness

Most of our population is illiterate. They live from hand-to-most. How could they be aware of share
market? Our whole society is not aware of investing in the securities market. Many educated people are
not aware of the stock exchange, though they have enough savings.

 Lack of institutional investment

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Institutional investors constitute a huge part of the stock market. But the tendency of such institutional
investors is not always positive toward the stock exchange. But if they would invest more in individual
investors, the stock exchange could supply a huge capital to the industries.

 Lack of loan facilities

Commercial banks are not willing to disburse much loan for investing in stock market and even they
give a limited amount of loan that is not enough to form a substantial amount for capital required in
industrial sectors.

 Few registered companies

The number of reregistered or public limited companies is not enough in our country those who are in
the stock market. Not having enough companies, the stock market is also failing to draw the attention of
general mass. If the government policy is friendly the more and more companies can be formed and the
capital flow in stock exchange could be healthy.

 Speculation and manipulation

Some clever traders or share market deceit the tender investors and gain more from the stock market.
They make the artificial shortage of stocks and leave the price level high and sell their shares at the
higher price. Again the lower the price and buy the huge number of shares. By their speculative power,
they always collect more profit from stock market where the individual investors lose the profit.

 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.

 Lack of Professional Portfolio Management

The institutional investors bring stability through non-speculative long-term investments. However, the
ratio of institutional-to- retail investors remains low

 Information Asymmetry

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The access to credible information is strictly restricted for general investors. Most of the retail investors
are forced to look to brokers for advice that may consist of market rumors.

 Valuation Disparity

Value of stocks is subject to speculative trading rather than sound fundamentals, resulting in market
volatility.

 Delays in Settlement

Financing procedures and delivery of securities sometimes take an unusual long time for which the
money is blocked from nothing.

 Irregular in Dividends

Some companies do not hold Annual General Meeting (AGM) to declare dividends on a regular basis
that confused the shareholders about the financial positions of the company

 Improper Financial Statement

Many companies did 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 clear
perception about position of that company.

 Little knowledge of retail investors

Most of the retail investors in Bangladesh have a very little knowledge about stock market. Most of
them take their investment decision based on rumor. Since stock market is not a place of gambling,
rather it is a place of knowledge-based game. So many of them behave irrationally in the market.

 Quality Research and Analysis

There is no qualitative research based organization operated by SEC or DSE. Quality research and data
analysis is essential to the stakeholders of the market to cope with the present state of the market.

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6.1 Stock market scams:

The 2010-11 Bangladesh share market scam was a period of instability stock market from 2009 to 2011;
the turmoil was in the two Bangladeshi stock exchanges, DSE and CSE. The market went up 62% in 2009,
and 83% in 2010, but then went down 10% in January 2011, and a further 30% in February 2011.The
crash is deemed to be a scam and exacerbated due to government failure.

The stock market was in turbulence throughout much of 2009, with the long bullish trend starting to
turn grim. The bullish trend was initiated by the end of the two-year political crisis and re-emergence of
democracy when Awami League won the December 2008 polls, and was largely unaffected by the BDR
Mutiny. The market was heavily aided by the entrance of Grameen phone into the capital market, when
the index rose by 22% over a single day on 16 November 2009.Share prices continued to fluctuate,
reaching the annual high in mid-2009 before plummeting by the end of 2009, with retail investors
threatening a hunger strike. Notable that, Bangladesh also faced such a stock market crash in 1996.
Coincidentally, Awami League have been at government during both of the crashes.

The market continued to be turbulent throughout 2010, with the DSE hitting its all-time high revenue
and the largest fall in a single day since the 1996 market crash, within the space of a month.

By the end of 2010, it was well known that the capital markets of Bangladesh well overvalued and
overheated. The central bank had taken measures to cool the market down and control inflation by
putting a leash on the liquidity.

On 24 January 2019, the DSE index was on top with 5,950 points and the capital was Tk 4,200 billion.
The index declined to 4,782 points on Wednesday and the capital stood at Tk 3,600 billion.

Out of 319 companies, the prices of 46 companies are under the face value which is only Tk 10 each
share.

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The price of 73 per cent of shares among the transitioned companies on Wednesday fell in Dhaka Stock
Exchange. The index fell by 40 points whereas the index fell by 91 points in Chittagong Stock Exchange.

Loan scams, reserve heists, unstoppable rise in soured loans, political influence governing the running of
state-owned banks, issuing licenses on political considerations for new banks to be set up are scars on
the bright face of the banking sector.

More than Tk22,000 crores were lost due to loan scams, forcing the government to infuse around
Tk20,000 crores to reduce capital deficit of the state-owned banks that fell sick following the loan scams.

The largest cyber heist made it clear how vulnerable the IT system of the country's banking sector is.
Unfortunately, people engaged in the plundering of the banks have remained beyond the pale of justice.
This gave the wrong signal to people, leading to an erosion of popular confidence in the banking sector.

6.2 What lessons can be drawn:

If one wants to have a share market one cannot control interest rates. The 13% cap on lending rates
brought disaster.

Inflation rates of 8-10% are devastating to a modern economy. High inflation helped drive investors to
the share market. This means broad money growth should generally be limited to not more than 12-
13% per annum. Bangladesh Bank faces great difficulty in getting the inflation rate down, but so far it
has failed to achieve its stated goals. An expansionary monetary policy often leads to stock market
booms and busts.

Share valuation is not the business of the SEC. It should set principles and then stay away. The press
should refrain from looking silly by holding forth on share valuation.

The SEC should have a steady hand, increase and improve the quality of its senior staff and work harder
and faster. Of course it should be independent of the Ministry of Finance. It should be free to set its
staffing levels, sets its compensation subject to parliamentary approval, and have a source of revenue
independent of the budget.

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The SEC should be an independent regulatory agency reporting to Parliament not the Ministry of
Finance. The Executive should appoint the members of the Board and perhaps recommend legislation
but no more.

Those who committed security fraud should be brought to trial and if the facts support the accusation
they should be found guilty and appropriately punished.

6.3 Effects of Covid-19 on stock market in Bangladesh:

Financial markets worldwide are responding abruptly to the on-going coronavirus pandemic. The Covid-
19 pandemic is likely to produce widespread impacts on financial markets and institutions in almost
each affected country. Bangladesh is no exception. Although the stock market is yet to prove its
dominance in the market for capital financing in Bangladesh, the Covid-19 pandemic is not likely to
spare it.

The already rattled stock market in Bangladesh has begun to reflect adverse impacts of the coronavirus
pandemic since February 2020. During the pandemic period from February 27, 2020, to June 10, 2020,
the market value of equities tumbled by 11.50 per cent along with daily market volatility (standard
deviation) of 2.20 percent. The Dhaka and Chittagong stock exchanges resumed operations on May 31,
2020, after a prolonged lockdown period since the last week of March 2020. Yet, the situation so far
doesn't seem to offer much hope.

After resuming the market, investors appear shaky and worried about overall economic and financial
uncertainty, reflected by a sharp decline in trading activities. The trading value of the leading bourse was
at 13-years low at Tk 430 million on June 5, 2020. Given the unprecedented level and nature of
uncertainty triggered by the Covid-19 pandemic, the stock market in Bangladesh could see complex and
severe consequences in the coming days.

Bangladeshi regulators should be more proactive in developing derivative and a vibrant bond market.
Alternative products like derivatives would not only facilitate us in better risk management but also
create job opportunity for growing investment professionals.

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For a vibrant bond market and better diversification of individual portfolios, bond listing in the market
should be increased.

Despite having favorable economic factors and a positive market outlook, foreign participation in equity
market is very low. Weak corporate governance, less transparent market structure, low level of financial
disclosure and a lack of research remain as bottlenecks. Bangladeshi corporate houses are yet to grow a
culture of investor meetings. Even, they do not have any formal investor relationship department. While
allowing foreigners, local institutions should also build capacity for better investment management.

We are lagging far behind our neighboring countries in technology in investment management.
Although neighboring countries are adept at technology-based trading, we could not progress in this
regard. Trading platforms are very weak for large executions.

It is true that as long as the pandemic persists, the primary focus of the whole nation remains fighting
the pandemic, keeping healthy and safe, and saving lives, and thus, all resources are to be diverted
towards fighting the pandemic. This means there may be lesser scope for the government to
concentrate on stock market recovery with specific and targeted responses. Yet, investors are hopeful
about the role of the newly formed BSEC commission in rebuilding the market fundamentals even in the
times of the pandemic.

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 7. The Potential of Capital Market in Bangladesh:

The capital market is the engine of growth for an economy, and performs a critical role in acting as an
intermediary between savers and companies seeking additional financing for business expansion.
Vibrant capital is likely to support a robust economy. While lending by commercial banks provides
valuable initial support for corporate growth, a developed stock-market is an important pre-requisite for
moving into a more mature growth phase with more sophisticated conglomerates. Today, with a $348
billion economy and per capita income of roughly $2173, Bangladesh should really focus on improving
governance and developing advanced market products, such as derivatives, swaps etc. 

Despite a challenging political environment and widespread poverty, Bangladesh has achieved
significant milestones on the social development side. With growth reaching 8.2 percent in 2019, the
economy has accelerated to an impressive level. It is noteworthy that the leading global investment
banks, Citi, Goldman Sachs, JP Morgan and Merrill Lynch have all identified Bangladesh as a key
investment opportunity. The Dhaka Stock Exchange Index is at a 10-year high, however, the capital
market in Bangladesh is still underdeveloped, and its development is imperative for full realization of the
country's development potential. 

It is encouraging to see that the capital market of Bangladesh is growing, albeit at a slower pace than
many would like, with market development still at a nascent stage. The market has seen a lot of
developments since the inception of the Securities and Exchange Commission (SEC) in 1993. After the
bubble burst of 1996, the capital market has attracted lot more attention, importance and awareness,
that has led to the infrastructure we have in the market today.

7.1 Opportunities Overlooked

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  BICM: Bangladesh Institute of Capital Management (BICM) is the national institution for
imparting capital market education, training, and conduct international standard research and
publications in the relevant fields. An institution like BICM can help to educate people regarding
stock market, but barely people know about this institution. The reasons behind this are lack of
publicity, lack of people’s interest for getting educated about stock market, myths about stock
market and so on.

 Technological Advancement: There are huge gap of technological advancement in the stock
market. In many countries, trading is being performed in mobile apps and in a very easy trading
data. There are several apps like TD Ameritrade, Fidelity, TradeStation and so on, where trading
is very simple and easy to manage. Calculating the nearest country like India, the government is
influencing the mass people to be a part of the trading as India is a very growing market across
the globe. There are many apps online Zerodha KITE App, Upstox PRO App, 5Paisa Mobile App,
FYERS Market App in India where trading is completely broker free and it’s very easy to handle
the account. Moreover, app like Upstox has facilities like following other trading pattern if
someone is not so sure about trading. These apps also support the facilities of trail period along
with tutorials. And a huge promotion is getting done by these apps, which formulated the mass
people to invest their money in the stock. We don’t have any app like this.

7.2 Major future prospects that will change the Stock Market: 

 Within 3 to 6 months 8 large profitable government enterprises are going to be listed

under Direct Listing Method adding value worth another 1 billion Dollar. 
 The Telecom Giants in Bangladesh are finalizing their offers for IPO in the market. 
 Power and energy sectors demand for capital is 5 to 10 billion dollars within short time
to meet the immediate needs of 5000 MW power demand. 
 A deep sea port requiring 1 billion dollars is going to start with a policy decision that it
will also be listed. 
 The Pharmaceutical sector and API enjoying WTO benefit is growing sharply. 
 Textile sector as backward linkage to thriving export-oriented garments industries is
booming. 

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  Export oriented food processing industry needs huge capital and technical capacity to
meet the growing standards in global market for marine food, fruits and poultry. 
 IT sector with our talented developers, yet to demonstrate the massive potentials of
software industry of the country. 

7.3 Suggestions to improve the activities of Stock Market 

 To introduce automated monitoring system that may control price manipulation, malpractice's
and inside trading. 
 To introduce full computerized system for settlement of transactions.
 To force the listed companies to publish their annual reports with actual and proper information
that can ensure the interests of investors.
 To control and abolish Kerby market form premises of stock market.
 To take remedial action against the issues of fake certificates. The composite Quotation System
(CQS) should be introduced and implemented that available the exchange specialist bid-ask
quotes to the subscribers.
 To make arrangement to set-up merchant banks, investment banks and floatation of
more mutual funds particularly in the private sectors.
 O Banks, insurance companies and other financial institution should be encouraged deal in  share
business directly.
 The brokers should not be allowed to deal in the Scripps on their own accounts.
 The management of DSE and CSE should be vested with professionals and should not in any way
be linked with the ownership of stock exchange and other firms. 

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 8. Conclusion:
To expedite the market development process, it may be a good idea to decide on certain milestones and
link them to the disbursement of Development Credit Support of the World Bank. The government is
making good progress in other sectors, including monetary management, corporatization of public
sector banks and others through this linkage. 

The missing link between the SEC, Bangladesh Bank, Bangladesh Telecom Regulatory Commission and
other regulatory bodies is now getting established. Individually, they were not serving each other’s
interests, and there was no effective coordination among them, hence the country was deprived of
great initiatives. A dedicated financial market cell at the Ministry of Finance could be formed to
coordinate with these regulators as well as other ministries. 

In terms of creating market depth, more profitable state-owned-enterprises should be listed. The supply
of securities can be increased if the SOEs are allowed to operate through the stock exchanges. Floatation
of SOE scrips is expected to expand the market by couple of times. Corporatization of SOEs will bring in
transparency as well as confidence on the government financial system 

The Bangladesh capital market still has a long way to go. The recent measures taken by the transitional
government have already begun to positively impact the markets. If more investor friendly policy
reforms were to be implemented, the capital market will undoubtedly play a critical role in leading
Bangladesh towards being the next Asian tiger with growth comparable to India, Vietnam and the other
most dynamic economies in the region.

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