1.0 INTRODUCTION11.0 Introduction: Stock market is a mechanism to flow fund from the hands of small savers (individuals andinstitutions)at lowcoststothoseentrepreneurswhodoneedfundtostart businessortobusiness. In2010, Banladeshstockmarket was considereda boon!ear for investors,althouh a record fall in "ecember created massive panic amon those who had put theirmone! in stocks. #here was hardl! an! investor who made losses in 2010. #he stock marketwitnessed a manifold boom $the price inde%, turnover, market capitali&ation and its ratio to'"( (ross domestic product), and the number of new arrivals both in terms of issues andinvestors. #he "haka market ranked third loball! in terms of performance, accordin to ananal!sis of )ankaBanla Securities. Banladesh stock market e%perienced the fall in the first *uarter of 2011. #he bullish trend ofmarket suddenl!turnedtobearishthat ismorethane%pectedwhichultimatel!madethemarket plummet and reduced confidence level that adversel! affected to the tradin behaviorand attitude of retail investors.#he development of stock market has been receivin heihtened attention from the polic!+makers in recent !ears. ,ne e%planation lies in the fundamental shift of development strate!reflectedinthenearl!universal embraceoftheprivatesectorasanenineofeconomicrowth. #heovernments inbothdevelopedanddevelopincountries, the internationalfinancial institutionswhiche%erttremendousinfluenceonthepolic!+makinapparatusofdevelopin countries and, to a reat e%tent, the intellientsia have all -oined toether as ardentadvocates of private entrepreneurship. Stock market can pla! an important role inacceleratin economic development throuh efficient intermediation of savins intoproductive investments and in fosterin the rowth of private entrepreneurship. 21.1 Origin of the Report: #hisreporthasbeenoriinatedasthecoursere*uirement oftheBB. proram./iththediscussion of m! supervisor, I decided to prepare report on the overview of Banladesh stockmarket. I am interested to work on this topic because in the !ear 2010 stock market was oneof the most discussed topics in the print media for bullish sin throuhout the !ear and at thebeinnin of the 2011 it started to have bearish sin and individual investors or public loseconfidence fromthe stockmarket.#his work helpsme alottoather enouhknowledefrom practical field. I have iven m! best effort to suitabl! appl! m! potentialit! and theoretical knowlede tomake the report reliable and information worth!. I hope m! sincere effort will be rearded assuccessful if this dissertation fulfills the ob-ective of the proram. 1.2 Objectives of the Report: #he main ob-ective of the stud! is to et an idea about the stock market scenario and thepresent condition of stock market. It will specif! the reasons for recent stock market crash. Inthis reports the followin ob-ectives will be persuades01. #o present the current scenario of Banladesh stock market2. #oappraise the overviewof "haka Stock 1%chane ("S1), 2hittaon Stock1%chane (2S1) and Securities and 1%chane 2ommission (S12) in BanladeshStock 3arket 4. #o present the Banladesh Stock 3arket in 20105. #o identif! the factors for recent stock market crash 20116. #o present the prospect and problem of Banladesh Stock 3arket7. Suestions to overcome the present crisis of Banladesh stock market31.3 Scope:I am ver! fortunate that I could work on the topic 8overview of Banladesh stock market9. Ihavetoobservetheoverall performanceofBanladeshStockmarket fromthelast eihtmonths for preparin the report. It helps me to ather practical knowlede on stock marketand enhance m! anal!tical abilit! and research approach. #he area of concentration of thisreport isconfinedininvestiatindifferent aspectsofthestockmarket likeperformance,problems, and prospects of the stock market. #his stud! will e%plore the stock market in 2010, present crisis in the stock market, stockmarket crash in 2011, reasons behind the crash, problem and prospect of the stock market andsuestions to overcome the crisis. 1.4 Methodolog:.nal!sis has been made on the basis of the ob-ectives mentioned before in the conte%t of AnOverviewof Bangladesh Stock Market.#his report has beenwritten onthe basis ofinformation collected from primar! and secondar! sources. 1.4.1 !ri"#r $#t#: #he primar! information has been collected from the traders andsome eneral investors who have investment in the stock market. Some opinions and ideashavebeenincorporatedinthepaper throuhinteractivesessions andinterviewwiththeindividual investors.1.4.2 Second#r $#t#: :or the completion of the present stud!, secondar! data hasbeen collected. #he main sources of secondar! data are0 /ebsite of "haka Stock 1%chane ("S1), 2hittaon Stock 1%chane (2S1),Securities and 1%chane 2ommission (S12). ;ews (aper articles. (rovide an investment opportunit! for small and lare investors> .ttract non+resident Banladeshis to invest in Banladesh stock market> 2ollect preserve and disseminate data and information on stock e%chane>11 "evelop a research cell for anal!&in status of the market and econom!.&eg#l 5#sis of /S,: .s leal entit! 2S1 is a not+for+profit public limited compan!. .ll of its 12B membersare corporate bodies. It has a separate secretariat independent of polic!makin Board.#he Board comprises of brokers and non+brokers directors with e*ual proportion toensure the transparenc!. #he Board constituted 2ommittees to deleate such functions and authorit! as it ma!deem fit. #here is an independent secretariat headed b! a full time 2hief 1%ecutive,fficer. 2S1 activities are reulated b! it9s own reulations and b!e laws alon withthe rules, orders and notification of the S12.Source0 http0AAwww.cse.com.bdAinde%2.phpKoptionLcontentGpaeL4 122.2.3 Overvie) of Securities #nd ,-ch#nge /o""ission 0S,/1#heSecuritiesand1%chane2ommission(S12)isthereulator ofthestockmarket ofBanladesh, comprisin"haka Stock 1%chaneand2hittaon Stock 1%chane. #heSecuritiesand1%chane 2ommission (S12) was establishedon Cth there is ample scope of rowth of ourstock market. ,ur market capitali&ation, accounts for a lower share of our '"( in acomparative reional perspective. /ith the help of upcomin issues (I(,) we are ver!optimistic that the market capitali&ation is reach a hiher level within a short span oftime. .utomation and introduction of 2entral "epositor! helped our capital market torow considerabl!. #he reulator! bod!, namel! Securities and 1%chane2ommission, is continuousl! facilitatin our stock market with its internationalstandardsurveillance andmonitorin. #he continuous endeavor of the S12hasresulted in our stock market to be free from fraudulent and manipulative activities.#hus presenceof theS12has impactedsinificantl!inthedevelopment of the%4market. Jowever, considerin our market si&e, the S12should emplo! moreprofessionals from private sector. /ould brin more d!namism to the market. .bsence of capital ain ta% is the most attractive reason for forein investors (:I) toinvest in Banladesh stock market, which is not ver! common in emerin economiessuchasBanladesh. Inadditiontohihreturnandsinificant dividend!ield, :Isshould be attracted to our stock market because of the eas! and hassle free repatriationof funds. :rom the present point of time the future seems briht, not onl! because of our vibrantstock market but also of our room for new products. /ith the introduction of directlistin and possible book buildin method, our primar! market is improvin in linewith the secondar! market. #he market cap will row sinificantl! within ne%t few!ears and turnover shall reach an international level. 3oreover, institutional clients,namel! banks are enterin the market with their hue li*uid fund causin the stockmarket to row ver! rapidl!. "omestic and international banks have started not onl!toinvest inthestockmarket butalsotooperatebrokeraeandmerchant bankinwin. 2rossbordertradinandinde%tradinareideaswemiht adopt infuture,which will result in li*uidit! and new avenues for investment and minimi&e our cashmarket risk. #he Banladesh stock market still has a lon wa! to o. #he recent measures taken b! thetransitional overnment have alread! beun to positivel! impact the markets. If more investorfriendl! polic! reforms were to be implemented, the stock market will undoubtedl! pla! acritical role in leadin Banladesh towards bein the ne%t .sian tier with rowthcomparable to India, Rietnam and the other most d!namic economies in the reion.Source0 http0AAwww.thefinanciale%press+bd.comAmore.phpKnewsQidL122404GdateL2011+01+0Bhttp0AAwww.thefinanciale%press+bd.comAmore.phpKnewsQidL12477CGdateL2011+01+24http0AAwww.thefinanciale%press+bd.comAmore.phpKnewsQidL12D0C7GdateL2011+02+26%%%'(.0 s)ggestions 'or ang!a"es# stock market %.1 Suggestion for Regul#tor 5odiesC of Stoc( M#r(et:Securities and 1%chane 2ommission (S12), in collaboration with other relevant aencies,can initiate several steps with a view to enhancin the confidence of the investors, increasinthe *uantit! and variet! of instruments, and improvin the functionin of the market. Some ofthemeasurestohelpinsustainablemarket conditionandimprovedperformanceofstockmarket are as follows> It is e%pectedthat stockmarket has its ownnature andif reulator!bod!andrespective parties perform their role perfectl! then this unwarranted situation can beover. #he S12should protect investors? interest and create anefficient marketenvironment for issuers. It must emplo! more resourceful, competent and *ualifiedpeople. #heS12ma!thinkofimposinapermanent polic!forthemarinratiorather than fre*uent e%periments. 3erchant bankers and brokerae houses canorani&e reular awareness proram for investors. #he! can also motivate investors toinvest infundamental basedshare andavoidrumors basedinvestment. Besides,brokerae houses should stop comments about speculation of share price. 'overnment can improve its uidelines for stock market. .t present there are morethan 4700 arments in Banladesh with stron financial backround. #hese armentsindustries should be encouraed to be listed. Innovative financial products and h!bridsecuritiesneedstobeintroducedtoenrichourstockmarket.. separatecorporatebondmarket canbe introduced. )ess time+consumincompliances of numerousformalities, low cost of initial public e*uit! offerins, elimination of double ta%ationwill be helpful to e*uit! market improvement. S12should initiate awareness, educational and promotional prorams throuhinstitutional trainin for a vibrant market with active presence of issuers andinvestors. BanladeshBankneedstostrictl!monitor theactivitiesofcommercial%*banks speciall! their activities leadin to stock market e%posure. Stockmarket cannot befunctional without investors. Sotheactivitiesofinvestorshave hih influence on market movement. #he decisions reardin the market shouldbe taken considerin behavioral ps!cholo! of the investors. ;ow lon term polic!,appropriate uideline b!BanladeshBankfor commercial banks toad-uststockmarket e%posure, support of bi institutional investors and easin of rules, reulationsare necessar! to restore confidence of retail investors. :inall! there should be a propercoordination betweenall market pla!ers +S12, "S1, 2S1, merchant banks andovernmentso thatstockmarketcan pla!a vitalroleefficientl!forthe economicdevelopment of the countr!. "urin downtrend, it has been observed that most of the eneral investors came to thestreet, show protest and then suddenl! prices o up. #his indicates the e%istence ofs!ndicates and market manipulators in the stock market. 3arket e%perts believe thatthe bearish trend is a result of market correction. It is true that a correction is neededbut it should be in a proper wa!. If the correction destro!s the market and confidenceof the investors then there is no need such t!pe of correction. It has been observed that M cateor! shares offerin more capital ain than . cateor!eventhesearever!muchrisk!. #hisattractsnewinvestorsandthe!invest inMcateor! share which increase the risk of loss. #he number of M cateor! shares isabout 100 or about 50 per cent of the total shares listed with the market. #hese sharesare floated mostl! b! companies of the manufacturin sector. .lthouh a few of theselabor+intensiveunitshavereal problems, thema-orit!ofthecompanieshavebeenconsistentl! showin losses artificiall! in their balance sheets. #heir conditions arenot as bad as the! used to claim or show in calculation. #he boards of directors ofthese companies are doin so onl! to siphon off capital from the companies and evadecorporate ta% to be paid to the overnment. .s a result, the net asset value of thesecompanies has been decreasin ever! !ear, leadin to abnormal fall in the prices ofshares.#heSecuritiesand1%chane2ommission(S12)shouldpla!theroleofawatchdoontheseMcateori&edcompan!toprotect theinterestsofthecommon%+investors. In order to make the market more attractive, the corporate ta% bracket can be loweredin order to encourae sponsors to list their companies in the e%chanes. /e can alsointroduce :uture and ,ption 3arket and help our alread! e%istin bond market to bemore vibrant leavin the investors with more instruments..lthouh we have somemutual funds (3:) currentl! tradin in the secondar! market, but it is une%pected thatthese close end mutual funds are traded below the face value.Fsuall! most of theinvestors invest in mutual funds to reduce investment risk but traded below the facevalue incur them loss. =ecentl! there is an announcement about floatation of a #aka 60 billion open+endedmutual fund to be called Banladesh :und (B:). #he timin of its floatation has notalsobeenspecified. Inthis conte%t, theannouncement about thefundis clearl!purportedto ivea positivesinaltothe smallinvestorsabout the-ointeffortsofsevenstate+ownedfinancial institutions, includinthe Investment 2orporationofBanladesh(I2B), four commercial banks andtwoinsurancecompanies, tohelpimprove the demand+side situation in the countr!?s stock market,in the midstof aturmoil, if not a collapse. ,ffloadin this fund with in a short period of time can makethe stock market stable. #he reulator! bodies9 fre*uentl! chanin polic! and rules that is not ood for themarket stabilit!.:ore%amplemarinloanratio. ;ostockmarket reulatorinan!countr! fi%es loan marin ratio but that was done in Banladesh. ,n :ebruar! 01,2010, S12, as a bolt from the blue, fi%ed loan marin ratio at 101.6.