1. Capital Market
Capital Market mainly refers to the Stock and Share market of the country. When banking system
cannot totally meet up the need for funds to the market economy, capital market stands up to
supplement it. Companies and the government can raise funds for long term investments via the
capital market. The capital market includes the stock market, the bond market, and the primary
market. Securities trading on organized capital markets are monitored by the government; new
issues are approved by authorities of financial supervision and monitored by participating banks.
Thus, organized capital markets are able to guarantee sound investment opportunities. This paper
reveals the various aspects of the Capital Market in Bangladesh.
History of Capital Market
Bangladesh capital market is one of the smallest in Asia but the third largest in the south Asia
region. It has two full-fledged automated stock exchanges namely Dhaka Stock Exchange (DSE)
and Chittagong Stock Exchange (CSE) and an over-the counter exchange operated by CSE. It also
consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it
implements rules and regulations, monitors their implications to operate and develop the capital
market. It consists of Central Depository Bangladesh Limited (CDBL), the only Central
Depository in Bangladesh that provides facilities for the settlement of transactions of
dematerialized securities in CSE and DSE. First incorporated as East Pakistan Stock Exchange
Association Ltd on 28 April 1954 and started formal trading in 1956. It was renamed as East
Pakistan Stock Exchange Ltd on 23 June 1962. Again renamed as Dacca Stock Exchange Ltd on
13 May 1964. After the liberation war in 1971 the trading was discontinued for five years. In 1976
trading restarted in Bangladesh, on 16 September 1986 DSE was started. The formula for
calculating DSE all share price index was changed according to IFC on 1 November 1993. The
automated trading was initiated on 10 August 1998 and started on 1 January 2001. A Central
Securities Depository System was initiated on 24 January 2004. As of 16 November 2009, the
benchmark index of the Dhaka Stock Exchange (DSE) crossed 4000 points for the first time,
setting another new high at 4148 points. In 2010, the index crossed 8500 points and finally crashed
in the first quarter of 2011. Millions of investors lost their money and came out onto the street
blaming the speculators and regulators for the bubble that finally burst in what became known as
the 2011 Bangladesh share market scam. Currently there are total 22 industrial sectors in DSE
which accommodates 553 listed companies The history of the Dhaka Stock Exchange (DSE) dates
back to 1952 when the local government deemed it necessary to establish a stock exchange because
Pakistani shares and securities were prohibited from being bought or sold on the Calcutta Stock
Exchange (CSE). Up until this point, Pakistan had been trading quite profitably on the CSE and
had no need to establish their own stock exchange department. In response to the prohibition the
Provincial Industrial Advisory Council made the decision to establish a stock exchange in Eastern
Pakistan. Initially it was suggested that instead of creating an independent stock exchange, a
branch of the Karachi Stock Exchange be opened at Dhaka. However this proposal was very
unpopular with representatives from East Pakistan who felt that it was necessary to create a
completely new stock exchange in Dhaka. This is what eventually happened with different
members of the stock exchange purchasing membership cards at the price of RS.2000. There were
2. two proposed locations for the stock exchange – Dhaka and Chittagong – but in the end it was
decided that Dhaka was the most suitable location. An organizing committee was established to
further set up the DSE and invitations were sent out to determine what sort of interest there would
be in the proposed stock exchange. The response was overwhelming and on the 7th of July 1953
a meeting was held with roughly 100 interested persons attending. Of these, eight men were
selected to promote the stock exchange the DSE was officially formed shortly afterwards. The
DSE was moved to its current location in 1959. Currently the main functions of the Dhaka Stock
Exchange are the listing of companies, the settlement of trading, the providing of a screen based
automated trading of listed securities, market administration, market surveillance, market control,
the production of a monthly review publication, the granting of approval to transactions, the
monitoring of activities of listed companies to ensure that they stay in line with listing regulations,
the investigation of grievances, the announcement of information about listed companies and the
maintenance and use of the investors protection fund.
Structure of the Capital Market in Bangladesh
Board of Directors
Sl
No.
Name Designation
Commission
01 Dr. M. Khairul Hossain Chairman
02 Professor Md. Helal Uddin Nizami Commissioner
03 Dr. Swapan Kumar Bala FCMA Commissioner
04 Khondoker Kamaluzzaman Commissioner
Capital Market of
Bangladesh
Dhaka Stock
Exchange (DSE)
Chittagong Stock
Exchange (CSE)
Stock and
Securities
Exchange (SEC)
Others
3. Vision of the stock exchange/Capital Market:
Regulating the market structure through proper rules and strict compliance by members.
Expansion of CSE trading network to cover 504 thanas.
Introduce Book Building system in Bangladesh capital market.
Introducing derivative market
Continuous promotion of stock investment throughout the country.
Create opportunity to cross border trading with SAFE countries.
Introduce global depository receipts (GDR)
Mission:
To create an efficient and transparent market facilitating entrepreneurs to raise capital so that it
accelerates industrial growth for overall benefit of the economy of the country.
Objectives
Capital market, being an essential element of today’s economy, demands an intensive and special
attention. The objective of this study is to look into every aspect of Bangladesh capital market and
identify its various pros and cons along with some recommendations to overcome the existing
problems. The specific objectives of this study are:
To give an overall idea about the capital market-its structures, functions, importance, etc.
To identify the current situations of our capital market of Bangladesh.
To compare the relative conditions of Bangladesh capital market to other countries of the
world.
To sort out the problems associated with our capital market.
To suggest some practicable solutions to these problems.
Functions/Operation of Capital Market
The functioning of an efficient capital market may ensure smooth flotation of funds from
the savers to the investors. When banking system cannot meet up the total need for funds
to the market economy, capital market stands up to supplement. To put it in a single
sentence, we can therefore say that the increased need for funds in the business sector has
created an immense need for an effective and efficient capital market. It facilitates an
efficient transfer of resources from savers to investors and becomes conduits for channeling
investment funds from investors to borrowers. The capital market is required to meet at
least two basic requirements: (a) it should support industrialization through savings
mobilization, investment fund allocation and maturity transformation and (b) it must be
safe and efficient in discharging the aforesaid function. It has two segments, namely,
securities segments and non-securities segments.
4. Features of the Capital Market
1. Link between Savers and Investment Opportunities: Capital market is a crucial link
between saving and investment process. The capital market transfers money from savers
to entrepreneurial borrowers.
2. Deals in Long Term Investment: Capital market provides funds for long and medium term.
It does not deal with channelizing saving for less than one year.
3. Utilizes Intermediaries: Capital market makes use of different intermediaries such as
brokers, underwriters, depositories etc. These intermediaries act as working organs of
capital market and are very important elements of capital market.
4. Determinant of Capital Formation: The activities of capital market determine the rate of
capital formation in an economy. Capital market offers attractive opportunities to those
who have surplus funds so that they invest more and more in capital market and are
encouraged to save more for profitable opportunities.
5. Government Rules and Regulations: The capital market operates freely but under the
guidance of government policies. These markets function within the framework of
government rules and regulations, e.g., stock exchange works under the regulations of
SEBI which is a government body.
Description of Dhaka Stock Exchange
(Generally known as DSE) is the main stock exchange of Bangladesh. It islocated in Motijheel at
the heart of the Dhaka city. It was incorporated in 1954. Dhaka stock exchange isthe first stock e
xchange of the country. As of 31 December 2007, the Dhaka Stock Exchange had 350listed com
panies with a combined market capitalization of $26.1 billion.
It first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 andstarte
d formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June1962.
Again renamed as DaccaStock Exchange Ltd in 13 May 1964. After the liberation war in1971 th
e trading was discontinued for five years. In 1976 trading restarted in Bangladesh. In 16Septemb
er 1986 DSE All Share Price Indexwas started. The formula for calculating DSE allshare price in
dex was changed according to IFC in 1 November 1993. The automated trading was initiated in
10 August 1998. In 1 January 2001DSE 20 Index was started.Central Depository Systemwas initi
ated in 24 January 2004. As of November 16 2009, the benchmark index of the Dhaka Stock Exc
hange (DSE) crossed 4000 points for the first time, setting another new high at 4148 points.
Major functions of DSE
1. Listing of companies
2. Market administration and control
5. 3. Settlement of trading
4. Market surveillance
5. Monitoring activities of listed companies
6. Investors protection funds
7. Publication of Monthly Review etc.
Mission of DSE
Contributing to country’s economic growth through creation of wealth, facilitating access
to capital market
Providing highest standard of service through efficiency improvement and introduction of
new products.
Superior corporate governance to enhance confidence of investors, regulators, issuers and
intermediaries.
Vision of DSE
To be the leading exchange in the region and a key driver of economic growth with state-of-art
technology and world class service to ensure highest level of confidence among stakeholdes .
Objectives of DSE
Achieve a sustainable average daily turnover of BDT 25 billion.
Attract more foreign investments to attain a steady level of 30% of the total market
capitalization.
Double the total number of listed securities.
Increase depth and liquidity of depth.
Enhance knowledge of general investors to ensure aware and educated investor base.
Ensure effective separation of regulatory function from commercial operation.
Ensure continuous learning for employees through effective training.
Ensure optimum organizational structure.
Management of DSE
The management and operation of Dhaka Stock Exchange is entrusted on a 25 members board of
directors. Among them 12 are elected from DSE members, another 12 are selected from different
trade bodies and relevant organizations. The CEO is the 25th ex officio member of the board. The
following organizations are currently holding positions in DSE Board:
6. Bangladesh Bank
ICB – Investment Corporation of Bangladesh
President of Institute of Chartered Accountants of Bangladesh
President of Federation of Bangladesh Chambers of Commerce and Industries
President of Metropolitan Chambers of Commerce and Industries
Professor of Finance Department of Dhaka University
President of Dhaka Chamber of Commerce & Industry.
Description of Chittagong Stock Exchange (CSE)
Background of CSE
The Chittagong Stock Exchange (CSE) began its journey on 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.
Founder members of the proposed Chittagong Stock Exchange approached the Bangladesh
Government in January 1995 and obtained the permission of the Securities and Exchange
Commission on February 12, 1995 for establishing the country's second stock exchange. The
Exchange comprised of twelve Board members, presided by Mr. Amir Khosru Mahmud
Chowdhury (MP) and run by an independent secretariat from the very first day of its inception.
CSE was formally opened by then Hon'ble Prime Minister of Bangladesh on November 4, 1995.
Mission
Aspire a global standard transaction place of securities and financial product.
Vission
Practice a set of core values to build competency in compliance, diversification and technology so
that an accessible platform, market confidence and wealth maximization scope can be ensured.
Core Values
Value for people
Transparency
Excellence
7. Harmony
Commitment
Integrity
Objectives
Increase business turnover
Modernize trading system
Ensure effective relationship management
Achieve high level of confidence & professionalism
Engage in product and market diversification
Contribute to capital market policy development
Ensure exchange related quality services
Legal Basis of CSE
After demutualization the Chittagong Stock Exchange Ltd (CSE) is registered as a Public Limited
company under Companies Act, 1994. The Board, headed by elected Chairman from the
Independent Directors, consist of 13 members comprising 7 Independent Directors, 5 Shareholder
Directors including Strategic Investor and the Managing Director.
CSE activities are regulated by its own Memorandum & Articles of Association, regulations and
by laws along with the rules, order and notifications of the Bangladesh Securities and Exchange
Commission (BSEC).
Regulatory Structute Overview.
8. Management:
1. M. Shaifur Rahman Mazumdar, FCA, FCMA
Managing Director
2. Mr. Mohammad Shamsur Rahman
Chief Regulatory Officer (CRO)
3. Mr. Md. Ghulam Faruque
Deputy General Manager, Head of Business Development Department and In-Charge Dhaka Office
4. Mr. Mohammed Mazbah Uddin
Deputy General Manager, Head of Information Technology Department
5. Ms. Sonia Hossain
Deputy General Manager and Head of Legal Affairs
6. Mr. Md. Mortuza Alam
Deputy General Manager and Head of Surveillance and Market Operations
7. Mr. Mohammad Monirul Haque
Deputy General Manager and Head of Clearing and Settlement, Listing and Prelisting
8. Mr. AKM Shahroze Alam
Deputy General Manager and Head of Marketing
9. Mr. Md. Nahidul Islam Khan
Deputy General Manager, TREC Holder Affairs
10. Mr. Hasnain Bari
Deputy General Manager, Head of IT Services
11. Mr. Arif Ahmad
Assistant General Manager, Head of Training and Development
12. Mr. Kanan Barua
Assistant General Manager, Head of Network and Technology Support
13. Mr. Maksud-ur-Rahman
Assistant General Manager and Head, International Relations
14. Mr. Rajib Saha
Assistant General Manager and Company Secretary
15. Mr. Md. Karimullah
Manager and Head of General Services
16. Mr. Minhaz U. A Chowdhury
Manager, General Services
17. Mr. Md. Khaled Hamidi
Manager, Head of Publication
18. Mr. Adnan Abdur Raquib
Manager, TREC Holder Affairs
19. Mr. Md. Rubaiyat Rahim
Manager and Head of System Administration and Technology Development
20. Ms. Israt Jahan
Manager, Listing
21. Mr. Imtiazul Islam
Manager, TREC Holder Affairs
9. 22. Mr. Mohammad Ashraf Uddin
Manager & Head of Finance
23. Mr. Mohammad Barkat Shafi
Head of Internal Audit
24. Mr. Mohammed Nurul Huda
Manager, Clearing and Settlement
25. Mr. Shafiqul Hayat
Manager, System Administration and Development
26. Mr. Mohammed Morshed Alam
Manager, IT Services
27. Mr. Mohammad Shahidullah
Manager, Research and Product Development
Types of Share
A Public Limited Company (PLC) is a legal corporation structure in the UK that is
essentially similar to a publicly traded company in USA. A PLC is allowed to issue many
different kinds of stock. These are:
1. Ordinary Shares
This is the most commonly issued share type , essentially the same as common stock in
U.S. equities. Ordinary shares carry voting rights , but not usually any special rights beyond
that.
2. Cumulative Preference Shares
This share type roughly corresponds to preferred stock shares of U.S. companies . Like
U.S. preferred stock, they come with the stipulation that cannot be paid when due are
carried forward and must be paid before the can pay out ordinary share dividends.
3. Preference Shares
This is a slightly less preferred share type. Preference Shareholders have the right to be
paid dividends prior to dividends being paid for other share types. Preference shares do not
typically carry voting rights.
4. Bearer Shares
Bearer Shares are most commonly in the form of warrants- a legal document certifying that
the bearer is entitled to own the shares designed in the warrant. The warrant6s usually come
with vouchers enabling the bearer to claim any due dividends. Warrants are completely
transferable.
5. Redeemable Shares
10. Redeemable shares come with an agreement that the company can buy them back a future
date –this can be at a fixed datr or the choice of the business. A company cannot issue only
redeemable shares, so they must ensure that they also issue non- redeemable shares.
6. Non –Voting Shares
These shares are like ordinary shares except they carry ni voting rights. This type of share
is usually issued to employees so that part of their compensation can be paid in the form of
dividends.
Categorization of listed company:
Category: A, B, N & Z
Category DSE CSE
A
217 213
B
12 12
N 7 7
Z 15 15
Note: this information is collected from the current markets which are currently trading both in
DSE and CSE. There are lot other companies in Z category which trading occur in OTC market.
Total number of listed securities and its name including OTC market:
# Name of the Industry Quantity
1 Bank 30
2 Cement 5
11. 3 Ceramics Sector 5
4 Corporate Bond 2
5 Debenture 8
6 Engineering 21
7 Financial Institutions 21
8 Food & Allied 13
9 Fuel & Power 11
10 Insurance 44
11 IT Sector 5
12 Jute 2
13 Miscellaneous 9
14 Mutual Funds 31
15 Paper & Printing 1
16 Pharmaceuticals & Chemicals 19
17 Services & Real Estate 4
18 Tannery Industries 4
19 Telecommunication 1
20 Textile 22
21 Travel & Leisure 1
22 Treasury Bond 186
Total number of stock 245
Classes of Companies Operating in Stock Exchange
Here is a complete picture of the settlement system for all Instruments categories as A, B, G, N
and Z which are traded in DSE.
A-Category Companies: Companies which are regular in holding the annual general meetings
and have declared dividend at the rate of ten percent or more in the last English calendar year.
B-Category Companies: Companies which are regular in holding the annual general meetings
but have failed to declare dividend at least at the rate of ten percent in the last English calendar
year.
12. G-Category Companies: Green-field companies of which shares are listed with the DSE before
the company goes into commercial operation and prior to listing the said company declares the
year of first declaration of dividend.
N-Category Companies: Newly listed companies except green-field companies which shall be
transferred to other categories in accordance with their first dividend declaration and respective
compliance after listing of their shares.
Z-Category Companies: Companies which have failed to hold the annual general meeting when
due or have failed to declare any dividend based on annual performance or which are not in
operation continuously for more than six months or whose accumulated loss after adjustment of
revenue reserve, if any, exceeds its paid up capital.
Provided that the Managing Director of the Exchange may bring any other company under this
category, if deemed necessary, with the prior written consent from the Commission.
A Company Operating Stock Exchange
A stock exchange, securities exchange or bourse,[note 1] is a facility where stock brokers and
traders can buy and sell securities, such as shares of stock and bonds and other financial
instruments. Stock exchanges may also provide for facilities the issue and redemption of such
securities and instruments and capital events including the payment of income and
dividends.[citation needed] Securities traded on a stock exchange include stock issued by listed
companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often
function as "continuous auction" markets with buyers and sellers consummating transactions at a
central location such as the floor of the exchange.Many stock exchanges today use electronic
trading, in place of the traditional floor trading.
The 11 broad sector used in company operating stock exchange
Energy
Materials
13. Industrials
Consumer Discretionary
Consumer Staples
Health Care
Financials
Information Technology
Telecommunication Services
Utilities
Real Estate
So,we will discuss about the operating stock exchange sector used in company :
Energy :
The energy sector is a category of stocks that relate to producing or supplying energy. This sector
includes companies involved in the exploration and development of oil or gas reserves, oil and gas
drilling and refining, or integrated power utility companies including renewable energy and coal.
Materials :
The basic materials sector is a category of stocks for companies involved in the discovery,
development and processing of raw materials. The sector includes the mining and refining of
metals, chemical products and forestry products. The basic materials sector is sensitive to changes
in the business cycle.
Industrials:
The industrial sector of the economy is one that make finished products which can then be utilized
viz. construction and manufacturing industry. Industrial sector is also known as secondary sector.
Industrial sector or secondary sector is one of the 3 sectors that make up a country's economy. The
other two are the primary sector (includes agriculture, fishing, and mining) and service sector
(includes hospitality, consultancy and nursing). Secondary sector is one that makes a complete
product which can then be utilized. Examples of industrial sector are manufacturing industry and
construction.
Consumer Discretionary :
Consumer discretionary is the term given to goods and services that are considered non-essential
by consumers, but desirable if their available income is sufficient to purchase them. Consumer
discretionary goods include durable goods, apparel, entertainment and leisure, and automobiles.
Consumer Staples :Consumer staples are essential products, such as food, beverages, tobacco and
household items. Consumer staples are goods that people are unable or unwilling to cut out of their
budgets regardless of their financial situation. Consumer staples are considered to be non-cyclical,
meaning that they are always in demand, no matter how well the economy is performing. People
tend to demand consumer staples at a relatively constant level, regardless of their price.
14. Health Care:
The healthcare sector is made up of many different industries – from pharmaceuticals and devices
to health insurers and hospitals – and each has different dynamics. Investments in this sector are
affected by many variables, including positive trends related to demographics and negative trends
related to reimbursement.
Healthcare investing requires a multifaceted approach to understand the underlying drivers.
Investors can profit from investments in both the overall sector and/or its industries. This article
will detail the differences among the various healthcare industries and which metrics investors
should follow before making an investment.
Financials :
The financial sector is a category of the economy made up of firms that provide financial services
to commercial and retail customers. This sector includes banks, investment funds, insurance
companies and real estate. Financial services perform best in low-interest-rate environments.
Information
Technology :Information technology has positively impacted countless industries by increasing
efficiency and organization, which allows for more sophisticated processes and thus more
productivity and advancement. The stock exchange isn’t an exception; it’s evolved along with
information technology since it’s very dependent on computer data and calculation.
Telecommunication Services :
The telecommunications sector comprises companies that make communication possible on a
global scale, whether it is through the phone or the Internet, through airwaves or cables, through
wires or wirelessly. These companies created the infrastructure that allows data in words, voice,
audio or video to be sent anywhere in the world. The largest companies in the sector are wireless
operators, satellite companies, cable companies and Internet service providers.
Utilities :
The utilities sector is a category of stocks for utilities such as gas and power. The sector contains
companies such as electric, gas and water firms, and integrated providers. Because utilities require
significant infrastructure, these firms often carry large amounts of debt; with a high debt load,
utilities companies become sensitive to changes in the interest rate.
Real Estate :
The main segments of the real estate sector are residential real estate, commercial real estate and
industrial real estate. The residential sector focuses on the buying and selling of properties used as
homes or for non-professional purposes. The commercial sector consists of real estate used for
15. business purposes; common types include retail and office space. Industrial real estate is comprised
of properties used for manufacturing and production: factories, plants, etc.
The different segments have different metrics that investors and analysts use to gauge the health
of the real estate industry. All three segments feature publicly traded real estate investment trusts,
or REITs, portfolios of properties whose stock prices investors frequently use to determine and
analyze industry trends.
REITs in the residential sector include Essex Property Trust Inc. (NYSE: ESS) and National Retail
Properties Inc. (NYSE: NNN). Home prices also serve as a gauge for the health of this segment.
In the commercial real estate sector, the largest REITs include Simon Property Group (NYSE:
SPG) and Rouse Properties (NYSE: RSE). Investors in this sector also look at sales data for office
buildings and retail developments and lease price trends for office and retail space.
ProLogis (NYSE: PLD), Rexford Industrial (NYSE: REXR) and PS Business Parks (NYSE: PSB)
are some of the most well-known REITs in the industrial real estate segment. Apart from REIT
stock prices, leading indicators for the industrial real estate sector include goods consumption,
industrial production, port traffic and truck tonnage.
Problems of Capital Market of Bangladesh:
Securities markets in Bangladesh encountered problems both from supply side issues and
demand side issues. The status and development of Bangladesh stock market has to be examined
when to diagnose the problems and perceive their causes. Some problems of the Capital Market
of Bangladesh are mentioned below:
Lack of infrastructure and physical facilities
Existence of only dealer-broker-members (no specialist/market maker)
Market dominated largely by unsophisticated investors
Lack of diversity in products' availability in the market
Inefficient capital market—both operational and informational
Lack of proper and adequate disclosures
Certifiers of financial statements and property evaluators of the company are the
same/identical
Management and Owners (Councilors) of DSE are entwined
Lack of enforcement with the compliance of rules and regulations
Corporate governance—sponsor-owners are managing the firm. In al-most all cases, no
professional managements are hired to run the affairs of the listed company.
Lack of ethical orientation, education about capital & securities markets.
Lack of trust, self-respect among interest groups. These are important preconditions for
building up a healthy and investment friendly market atmosphere.
16. Lack of potential securities and narrow options for the investors.
Disclosure problem-inadequate disclosure, concealment of facts or some-times fabricated
disclosures appear in the annual reports.
Measures to Be Taken to Resolve the Problems
Capital market development is related with the financial deepening, which in turn, depends on
effective financial intermediation as well as on the availability of a wide variety of financial
instruments. So now a days in respect of socio economic condition in Bangladesh it is a burning
needs to overcome or resolve the problem of capital markets. The following measures can be
undertaken for the development of capital market:
The listed companies that pay regular dividend should be given tax incentives and tax
rebates as well.
The mode of privatization of industries will be implemented through public issue of
shares. This will deepen the securities market, diffuse ownership and bring in market
disciplines.
The government should off-load its equity holdings in SOEs and MNCs through stock
market. This will improve the supply of securities in the market.
Bond market needs to be developed. The implementation of government securities with
medium-term and long-term maturities will also broaden the base of bond market.
Establishment of a separate judicial security tribunal for dealing with cases related to
securities market.
Disclosure of information to the public in the fullest possible dissemination system can
make the people aware about the latest situation.
Prospects/Opportunities of Capital Market
The capital markets in Asia are getting more and more focus with the growing corporatisation of
the Asian economies. Eastern Asia has progressed a lot with respect to attracting westerncompan
ies to get listed in Asian bourses as well as supporting innovative instruments, andSoutheast Asia
is also coming up with India leading the way. Comparing the local marketscenario with that of t
he rest of the region, Bangladesh is in pretty good shape as we have mostof the infrastructure in
place. Our market capitalisation is relatively smaller and it currentlystands at $9.3 billion, which
is just over 13 percent of GDP. Higher liquidity is skewed towards ahandful of scrips, while a sta
gnant situation exists for few less profitable issuers.At present, the government is heavily focusin
g on developing a debt capital market. Suchmeasures are certainly welcome as Bangladesh lacks
a proper secondary market for bonds. Themarket is yet to support short-
term capital requirements of corporations. Commercial Paper (CP)has not yet been tried primaril
17. y due to interest rate volatility and illiquid risk-
free instrumentsthat can be used as benchmark neither for short-term and hardly for long-
term financing. It can,therefore, be said that we have a somewhat flat yield curve in Bangladesh
at the moment.Debut trading of state-
owned oil companies like Jamuna Oil Company Ltd and MeghnaPetroleum Limited on the local
bourses in January 2008 has spurred a lot of encouragementamong investors. This initiative take
n by the government to list SOEs will increase marketcapitalisation and improved liquidity.SEC i
s also contemplating the introduction of the book-
building method in the valuation of IPOsin order to ensure a fair price within this year. This will
encourage companies with soundfinancial health to come into the market.Regulatory pressures ar
e mounting on telecom companies to get listed. It is estimated that thelisting of the top telecom c
ompanies will attract more foreign investment, increase the marketcapitalisation by few folds, an
d bring about higher standards of corporate governance.There is still huge potential in the market
for securitisation and other debt instruments likecommercial papers and corporate bonds, and de
rivatives, which will help foreign investors hedgetheir exposure.
Conclusion
In Bangladesh we have a capital market that is yet to be further nurtured to get the fruit out of it.
Without doing this we cannot undergo heavy industrialization and other capital based
development. We have various problems like the market has been suffering from inadequacy of
good scripts. Out of around three thousands public companies, only two hundred and twenty have
issued securities keeping` a large number away from the securities market. It is further observed
that Government is still holding lion portion of many blue chip company shares. We must
overcome these sort of problem to strengthen our capital market. Various methods and policies
may be adapted regarding this, but the investors’ mindset is one of the most important thing that
must be changed to ensure the development of the market. If we can strengthen the market
properly, it is only then we can have a sound economy in terms of capital and related developments
in our country.
