WELCOMEPRESENTATION ON BANGLADESH SHARE MARKET CRASH

SAEED AHAMADB1304048

IDEA ABOUT-Bangladesh Stock Market

• Platforms for raising fund• Intermediary role between SBU and DBU• Considered more liquid than any other investment choice•Wasn’t affected by global recession 2007-2008• Since 2007, stock prices started increasing• Lured investors with small savings and small to no knowledge about market •Market crashed in 2011

TIME LINE OF STOCK MARKET CRASH

TIME LINE OF STOCK MARKET CRASH

DGEN gained its all-time highest 8, 918.51 point whose market value was 36.8 billion taka

3/12/20104/12/20105/12/2010 6/12/20107/12/20108/12/20109/12/201010/12/2010 13/12/2010 14/12/2010 15/12/2010 18/12/2010 19/12/2010 20/12/2010 21/12/2010 7/1/2011 8/1/2011 9/1/2011 10/1/2011 11/1/2011 12/1/2011 18/1/2011 19/1/2011 20/1/201125/1/201110/2/201112/2/201113/2/201114/2/201115/2/201116/2/201117/2/201118/2/201119/2/2011

THE ARTICLEARTICLE TITLE: Share Market Crash And The Reasons Behind The DisasterPUBLISHED : Tuesday, 16 October 2012AUTHOR: Md Noor Solaiman Jewel, Senior Executive, the Premier Bank Limited (Brokerage Division), Chittagong

ARTICLE ANALYSIS (CONT’D)•The biggest one day fall in the 55 year history of Bangladesh stock market•Grameenphone’s market entry And price hike•Panic of small investors led to more losses•Liquidity crisis in the financial and non-financial institutions•Share market was overvalued

TO AGREE OR NOT TO AGREEReasons for share market crash

Agree/Disagree

Why

1. Role played by SEC, DSE and CSE Agree

• Overvalued market• Heavy manipulation• Lack of proper investigation• Failing to monitor and control the

market• Computation of non-tradable

shares as tradable & creating loophole (directors’ share)

• Dishonest employees

2. Faulty IPO & asset valuation procedure Agree

• Entrance of GrameenPhone hiked price up

• Pre IPO and Post IPO manipulation• Overvaluation of Assets• Issuance of Bonus shares against

unrealized gain of revalued asset price

Reasons for share market crash

Agree/Disagree

Why

3. Omnibus accounts of major market players

Agree

• Each omnibus account can have 3000 to 10000 BO accounts

• Are not under the surveillance of SEC

• Used in illegal and unethical transactions and causing price hike

5. Insider trading Agree • Creation of artificial active trading environment

6. Margin call Agree • 10 times the average amounts

of margin calls for firms and it created liquidity crisis

TO AGREE OR NOT TO AGREE

TO AGREE OR NOT TO AGREEReasons for share market crash

Agree/Disagree

Why

1. Conservative monetary policy of Bangladesh Bank

Disagree

• Increased CRR by 0.5%• Restricted more than 10%

investment of deposited money in the share market for commercial banks

• Less like a reason and more like a consequence

• Double digit inflation• Real industry growth was

hamperedSome one had to take extreme measure sooner or later to control the market.

2. Trust issue of small investors Disagree

• Trust is earned• Previous history of market bubble

creation and the fall• Analysts’ report about overvalue

market• Little or no knowledge about the

market

ARGUMENT- Flaws in the DGEN Index

• Counted the index for IPO shares on the very first day though it didn’t show the real price• DSE did not follow the correct

method of index calculation while incorporating new securities under direct listing rules• Other technical errors regarding

right shares and bonus shares

THANK YOU