What is Capital Market?

Capital Market is a financial market in which both individuals and business

entities engage in trade of financial securities like bonds, stocks. This market is a
key source of funds for who are in need of capital.
There are two types of capital market.
1. Primary Market
2. Secondary Market

Government also use capital market to raise funds, typically through the issuance
of long-term bonds. Governments do not issue shares, and so cannot issue
equity securities.

After the freedom, foundation of Dhaka Stock Exchange (previously East

Pakistan Stock Exchange) started the pathway of capital market go-betweens in
Bangladesh. In 1976, arrangement of Investment Corporation of Bangladesh
opened the entryway of expert portfolio the executives in institutional structure.
In most recent twenty years, capital market saw number of institutional and
administrative headways which has come about differentiated capital market
intermediaries. At present, capital market intermediaries are following typ es:

1. Stock Exchanges: Two stock exchanges situated in Bangladesh. Dhaka

Stock exchange(1976), Chittagong Stock exchange(1995).
2. Central Depository: The solitary storehouse framework for the exchange
and settlement of monetary protections, Central Depository Bangladesh
Ltd (CDBL) was shaped in 2000.
3. Stock dealer/Broker: Under SEC(Stock Exchange Commision) Stock
Dealer, Stock Broker and Authorized Representative Rules 2000, these
elements are authorized and they will undoubtedly be an individual from
any of the two stock trades. As of now, DSE and CSE have 238 and 136
individuals separately.
4. Merchant Banker & Portfolio Manager: These foundations are authorized
to work under SEC Merchant Banker and Portfolio Manager Rules 1996.
45 establishments have been authorized under this principles up until
now.
5. Asset Management Companies(AMCs): AMCs are authorized to act as
issue and portfolio manager of the mutual funds. There are 15 AMCs in
Bangladesh at present.
6. Credit Rating Companies(CRCs): There are 5 CRCs accredited by SEC.
 7. Trustee/Custodians: As indicated by rules, all resource sponsored
securitizations and shared assets should have a licensed trusty and
security overseer. For that reason, SEC has authorized 9 organizations as
Trustees and 9 establishments as Custodians.
8. Investment Corporation of Bangladesh(ICB): ICB is a specific capital
market delegate which was set up in 1976 through the appointment of The
Investment Corporation of Bangladesh Ordinance 1976. This mandate has
engaged ICB to perform a wide range of capital market intermediation that
fall under jurisdiction of SEC.

There are two sorts of Capital market.

1. Primary Market: The Primary market is the place where securities are made.
It's in this market that organizations sell or float (in money language) new stocks
and securities to general people for the first time. Primary market has free entry to
specific investors who buy securities straight forwardly from the responsible
organizations. These securities are viewed as primary offerings or initial public
offerings (IPOs). Organizations and government elements sell new issues of
common and preferred stock, corporate bonds and government bonds, notes, and
bills on the primary market to subsidize business enhancements or grow activities.
The key characterizing for an primary market is that securities on it are bought
straightforwardly from an issuer —rather than being purchased from a past buyer
or investor, "second-hand" as it said.
2. Seconadry Market: The secondary market is the place where investors
purchase and sell securities they effectively own. It is the thing that the vast
majority generally consider as the "stock market," however stocks are also sold on
the primary market when they are first given. Issuing companies do not have a part
in the secondary market.

Functions of Capital Market:

 It acts in connecting investors and savers.
 Works with the development of funding to be utilized greater benefit and
gainfully to boost the national income.
 Works with exchanging of securities.
 Speedy valuations of monetary instruments.
 Improvement in the viability of capital designation
 It offers a range of venture roads to all financial backers which empower
capital creation.
Category of Listed Company: There are 5 Category of listed company in
Bangladesh.
 A Category companies: Companies which are regular in holding the Annual
General Meetings (AGM) and have declared dividend at the rate of 10
percent or more in a calendar year. (Mutual fund, debentures and bonds are
being traded in this category).
 B Category companies: Companies which are regular in holding the AGM
but have failed to declare dividend at least at the rate of 10 percent in a
calendar year.
 G Category Companies: Greenfield companies.
 N Category Companies: All newly listed companies except Greenfield
companies will be placed in this category and their settlement system would
be like Category companies.
 Z Category Companies: Companies which have failed to hold the AGM or
failed to declare any dividend or which are not in operation continuously for
more than six months or whose accumulated loss after adjustment of
revenue reserve, if any is negative and exceeded its paid up capital.
Sector wise company list:

No Industry Quantity
1 Bank 31
2 Cement 7
3 Ceramics Sector 5
4 Corporate Bond 2
5 Debenture 8
6 Engineering 42
7 Financial Institutions 23
8 Food & Allied 20
9 Fuel & Power 22
10 Insurance 50
11 IT Sector 11
12 Jute 3
13 Miscellaneous 14
14 Mutual Funds 37
15 Paper & Printing 4
16 Pharmaceuticals & Chemicals 31
17 Services & Real Estate 4
18 Tannery Industries 6
19 Telecommunication 3
20 Textile 56
21 Travel & Leisure 4
22 Treasury Bond 221
Total 604
Trading System:
Bangladesh Bank started to computerize the way toward exchanging and
settlement of Government securities exchanges in October 2011. The secondary
market of Government securities of Bangladesh is contained Over the Counter
(OTC) and Trader Work Station (TWS). Both the method are the vital pieces
of Market Infrastructure Module (MI Module)- the mechanized auction and
trading foundation of government securities.

Over the counter: In OTC market members are needed to submit deal/purchase
request in the OTC stage while counter gathering adjust the request. When they
complete the trading process and the framework acknowledges exchanges, the
information naturally streams to Core Banking System (CBS) for clearing and
settlement of assets for clearance of the settlement of assets in CBS. Further, the
exchanging securities have been moved naturally to the purchaser securities
account in MI.

Trade Work Station: Bangladesh Bank has introduced the Trader Work Station
(TWS)- an Order Matching system. The TWS is an electronic, screen based,
order driven trading system for dealing in Government securities. In addition,
the platform highlights the existing facility of Over-The-Counter (OTC) market
in Government securities. Further, the TWS brings transparency in secondary
market transactions in Government securities. Members can place bids (buy
orders) and offers (sell orders) directly on the TWS screen. The system is order
driven that matches all bids and offers focusing price/time. In particular,
among the similar price orders, it matches the order on first come and first serve
basis. The TWS facilitates Straight-Through-Processing (STP) system. In that
system, trades that are automatically sent to the CBS for settlement.
Capital Market scenario of Bangladesh(2021)-
Bangladesh's stock market was the best performing value market in Emerging
Asia with a return of 21.3 %. This was a great recuperation after the market
closure for 66 days in Q2 because of Covid lockdown and the market finished
2020 28.1% off the lows for the year. Normal every day turnover expanded
from BDT 3,864 mn in the main half year to BDT 8,233 mn. The normal
turnover for 2020 all in all, of BDT 6,489 mn. They anticipate that the rally
should proceed with a focal objective of 7,000 mn.
Regional P/E Comparison As of Nov 2020

Source: DSE, AT Capital

DSE keeps on revitalizing with an objective of 7,000mn on list

 Continuous solid fiscal and monetary help.

 BD P/E proportion low 12.8 times versus India 24.8x… Only Sri Lanka
less expensive.
 Expect a huge ascent in worldwide investors to some extent in view of
solid BD economy, low worldwide rates and costly created markets
seeing rotation to EM and furthermore high quality IPO like Robi and
Energypac … quality just as amount… will draw in more foreign
investors.
 The opening of the API by the DSE which permits brokers to offer their
own cell-phone and PC based trading stages will probably trigger an
increment in web based trading and an increment in turnover and the
quantity of market members.
 Banking area will profit with strong full scale strategy and guidelines
 Telcos will be upheld by solid data interest and ongoing far off working.
2021, Bangladesh Risks and Opportunities
 Recommended Stocks Fundamental Summary
Market
Stock Year end Cap (BDT Price EPS NAVPS PE PB
Mn)

2019 2020*

BRACBANK December 61,653 47 4.0 2.7 32.9 17.4x 1.4x

GP December 502,717 372 25.6 26.5 28.4 14.0x 13.1x

RECKITTBEN December 19,132 4,049 131.1 121.9 142.6 33.2x 28.4x

BATBC December 220,968 1,228 51.4 64.6 198.9 19.0x 6.2x

SINGERBD December 17,737 178 10.4 8.7 32.0 20.5x 5.6x

CITYBANK December 27,138 27 2.6 4.1 24.1 6.6x 1.1x

IDLC December 28,015 74 4.5 5.7 37.2 13.1x 2.0x

BERGERPBL March 66,144 1,426 44.1 52.2 204.2 27.3x 7.0x

SQURPHARMA June 195,462 221 16.0 15.8 91.6 13.9x 2.4x

RENATA June 109,961 1,128 46.6 45.3 245.7 24.9x 4.6x

IBNSINA June 7,539 241 10.8 12.6 56.9 19.2x 4.2x

OLYMPIC June 38,928 195 9.4 10.1 41.2 19.2x 4.7x

BSCCL June 27,077 164 3.6 5.8 40.9 28.3x 4.0x

MARICO June 69,703 2,213 64.2 84.0 44.1 26.3x 50.2x

Problems of Capital Market:
In the capital market a few issues are obstructing the smooth running of the
equivalent; subsequently, the capital market can't considerably contribute
towards the GDP of this country. There are four interested groups in the capital
market and they are Issuer, Investor, Intermediaries and Securities Exchange
Commission(SEC). Without the joined commitment of them the situation of
capital market can no longer be developed.
The Issuer Organizations can't contribute well due to the less numbers, in
consistencies in holding AGM and declaration of dividend or inadequate
dividend, facing loss, corruption, awful connection between the lower
management and top management, awful effect of Trade Unionism and so forth.
The part of the investors isn't praiseworthy, in light of the fact that they have
no adequate information about this market, they become scared of contributing
their capital, they feel better in speculation of saving certificates or in little and
medium business and so on.
The Intermediaries like banks and other monetary organizations, issue houses
some way or another become connected something else. For instance, business
banks include in creating uncommon credit program or become hesitant to
permit credit for share market without sound securities, the merchant banks
accomplish no work appropriately.
The gatekeeper, Securities and Exchange Commission (SEC) can't play
legitimate part as it could do. It can't attract the investors, particularly the small
investors presenting some worthwhile bundles like least profit of investment,
keeping away from the hazard, training centre , proper supervision on the
market; it can't likewise establish friendly climate for the bigger as well as
Foreign direct Investment (FDI).

Conclusion and Suggestion:

Obviously the Government of Bangladesh has made some positive steps with
respect to the reinforcing of SEC impressive some necessary terms on the
intermediaries and developing the activities of banks and financial institution.
In any case, to overhaul the capital market, as such, to create the capital market
for smooth financing for the partners, the accompanying ideas could assume the
productive part:

A. The presence of the monetarily strong foundations is irrelevant in the

market. In this way, lots of Companies which are financially strong should
approach towards this market. For example, Grameen Phone Company, has
showed up in this market, Again, cautious consideration ought to be given for
ordinary holding of AGM of the Companies, arrangement of budget reports
alongside the review answers as indicated by the Accounting and Auditing
standards.

B. The bridge financing exercises are not agreeable, here 'Consortium body'
(ICB, BDBL) ought to be more dynamic in assuming their part for 'Bridge
Financing;

C. The monitoring phenomenon is some how frail, subsequently, Merchant

Bank which has been coordinated under the control of SEC should be
observed chance to time whether it is appropriately working for the interest of
participators in the said market;

D. The inflation rate is fluctuating and it must be kept stable so the worth of
cash couldn't be debased;

E. Sufficient preparing and different alternatives are not to be noticed,

accordingly. SEC should direct a grounded Preparing Center where the new
comers could have information in regards to their associations in this market.
Simultaneously, there ought to be a plan of workshops, conferences and
television shows for the advancement of the investors;

F. To guarantee the accessibility of loans alongside low interests for the

investors just as participators (particularly for the Small and Medium Scale
Enterprises, SMEs) Bangladesh Bank should make positive strides through the
schedule banks either open or private whatever they are;

G. The arms for control of the capital market like 'Circuit Breaker','Surveillance
with On-Line and Of-Line instrument' etc must be dynamic all the more with
the goal that someone couldn't take the risk in any case.

H. Additionally, harmonious climate must be made for Foreign Direct

Investment (FDI) to expand the Foreign Cash-In-Flows;

 There should be an arrangement for SEC that it can straightforwardly buy

and sell the securities with the parties concerned so they could keep them
out of the monetary cricies;
  Tax facilities should be expanded for the enrolled organizations
alongside different offices like tax holyday, tax-exempt trades, reduction
of the excise and duties by which different foundations could be urged to
partake in the said market;

 Research activities should be led to discover the lacks just as efficiencies

related with this market which could add to the accomplishment of Gross
Domestic Product and Gross Public Product up until now.

Sources:

https://www.accountingtools.com/articles/what-are-capital-markets.html
https://www.bb.org.bd/fnansys/capmarket.php
https://www.investopedia.com/terms/p/primarymarket.asp
https://www.karvyonline.com/knowledge-center/beginner/capital-market-and-its-types
https://www.cse.com.bd/company/listedcompanies
https://www.dsebd.org/company_listing.php
https://www.bb.org.bd/fnansys/govsecmrkt/secondarymrkt.php
https://www.ijsr.net/archive/v1i3/IJSR12120313.pdf