RESEARCH PROPOSAL

ON

DETERMINANTS

OF

STOCK MARKET DEBACLE

IN

BANGLADESH

2010-2011

SUBJECT:

Business Research Methodology

COURSE NO. : F-510

SUBMITTED TO:

Dr. M. Khairul Hossain

Professor

Department of Finance

University of Dhaka

SUBMITTED BY:

Falguni Chowdhury

ID No: 19015

Department of Finance, MBA Program (Evening)

Date Of Submission: July 21, 2011

Acknowledgement

It is my great pleasure to prepare a research proposal on “Stock Market Debacle in Bangladesh

2010-2011”. I have found great help from many people during the preparation of it. At first,I

would like to express my gratitude to the Almighty to give me strength to complete this proposal

and then to my subject teacher Dr. M. Khairul Hossain, Professor, Department of Finance,

University of Dhaka on this regard.

Also I am thanking other people for their help to prepare this report.

Thanking You

Falguni Chowdhury

ID- 19015

INTRODUCTION

Stock Market in any country is considered as the hub of making equity investment. Stock Market

also reflects the economic condition of any country. Moreover, in any financially developed

country stock market is considered to be one of the alternatives to financing. Investors get into

the stock market primarily with a return seeking motive. The reform brought by the financial

liberalization and Financial Sector Reform Program open up new dimension to the equity

investors to invest in the stock market to earn return as a prime field of investment in

Bangladesh. Development of stock market is required to have persistent return from the

Investment as well as to have diversified field of equity investment. It is a growing interest to

the domestic as well as international investors to find potential return from the undervalued stock

in an emerging market like Bangladesh. This initial enthusiasm by the domestic and foreign

investors calls for additional cash inflow to the stock markets of Bangladesh. However, during

mid 90s response from the investors got a large shock due to sudden debacle of the stock market

of Bangladesh. Since then initiatives taken by Securities & Exchange Commission, Dhaka Stock

Exchange, Chittagong Stock Exchange and Board of Investment helped much to get the investors

confidence back to the market. Different regulations like lock in provision, circuit breaker,

prohibition of insider trading etc has been enacted to control the bad moves of the market. With

all these initiatives investment in Dhaka Stock Exchange & Chittagong Stock Exchange is still

considered to be risky. Part of the risk is associated with the political, economic and social

turmoil of the country. Elimination of the elements of risk is not possible by the regulators of

these markets alone because risk in the stock market sometimes sourced from the investors’

erratic behavior also. Investors’ don’t always rely on the fundamental features of the stocks for

their investment decision rather they tend to rely on the irrational herding behavior

leading to kind of contagion effect on the whole investment environment. These contagion

results in irrationalhike in stock price which is impossible to predict by the stock fundamentals

hence out of control of the policymakers. All the sectors of stock investment in Bangladesh are

however not similarly prone to risk. They tend to show different attitude to change in the

fundamentals as well as irrational behaviors.

BACKGROUND OF THE STUDY

The recent debacle in the stock market is an issue of debate. Confirming all fears that the

share market of the country is on a downhill course, the General Index (GI) of the Dhaka Stock

Exchange (DSE) came down by 660 points and the Chittagong Stock Exchange (CSE) by 851

points on 10th January. This was the highest over recorded fall in the GI index of the two main

bourses of the country in a single day. Prior to this, a nearly similar fall was witnessed in the

DSE and the CSE the day before . The happenings in the other two bourses of the country were

not much different.

There is a major difference between two debacles of share market in 1996 and 2011. The former

happened in secondary market but this time the manipulation happened during valuation and

fixation of offered price of share and in side trading by different stake holders. It happened

behind the screen. Even Investment Corporation of Bangladesh (ICB) also played in the game.

They have purchased share of Tk 8.0 billion through 15 Omnibus accounts in October and

November, 2010. They of course played the game for some influential officials in the

government.

The problem was created for a simple reason that there is a gap between demand and supply of

stocks in the market. The primary reason is that the regulator could not stop manipulation rather

the officials of SEC were involved in trading and other unfair practices. The other agencies

andinstitutions having stakes in the share market possibly failed to perform the need of oversight

functions.

The share market experienced bullish trend in most part of the last year because of the

overexposure of some commercial banks and other financialinstitutions. They had invested

beyond the limit of 10 per cent of their deposit. This is also unethical to invest depositor's money

risking the investment and even without their benefit. 

Commercial banks have been involved heavily in the stock market business during the last few

years. Bangladesh Bank has found involvement of eleven banks over investment in the share

market. One of the commercial banks made profit of Tk 10.40 billion last year. Of this amount of

profit, Tk 4.40 billion came during the last month by investing in share market. Bangladesh Bank

has set capital market exposure limit of 10 percent of the deposit for the commercial banks after

their involvement in the market with deposit of clients. 

The country's common people and hundreds of thousands of unemployed youths have entered

into the overheated market as a record 1.57 million Beneficiary Owners (BO) accounts, more

than half of the total investors, entered into the market in 2010.

The relatively heavy investment has an impact in massive surge in share prices besides other

reasons. They were advised to conduct merchant banking or brokerage house business without

formation of subsidiary companies for the purpose. Allegations have been found that bank

officials provided false loan to fake clients for investment in the share markets. The Bangladesh

Bank also investigated allocation of Tk 24 billion industrial loans by a bank to its clients last

year.

Bangladesh Bank was not much aware about banks' exposure to the stock market. Because,

surprisingly, banks profit from share business seemed to be negligible according to their income

statement or balance sheet although there is a wide perception that banks are making handsome

profits from investing in shares and debentures. Proper data on their exposure to thecapital

market remained unknown, which is a failure from the part of the central bank as a supervisory

agency. The internal and external auditors help out the manipulation.

Moreover, almost all policies to minimise the exposure of banks were taken in the second-half of

2010, when the stock index had reached an alarming level. For example, the situation worsened

when it was made mandatory for all banks to maintain their investment in the stock market

equivalent to 10 percent of their total deposit and to comply by December, 2010, when in reality,

the ratio was much higher than this level. Bangladesh Bank had a policy to contain inflation and

channel credit to other real sector and may be to safeguard the interest of invest of depositors. 

Bangladesh Bank has taken some steps to reduce inflation and also reduce risk of financial

institutions. The steps included statutory cash ration reserve of schedule banks from 5 per cent to

6 per cent. This also has a small impact on cash flow in the capital market.

The central bank decided to deal with only the banks, not subsidiary companies as per the new

provisions and SEC will look into the functions of the subsidiary banking companies. This

transition of authority over the merchant banks overburdened the SEC while they were unable to

perform some other responsibilities. Allowing business by some merchant banks has exaggerated

the situation. They became the key player in the stock market. In the recent stock plunge some

merchant banks deliberately sold off shares of the investors at a throw-away price without even

taking consent of the affected clients. The omnibus account with haze background players is a

matter of investigation to know the source of money and impact of this money in the stock

market and economy.

SEC has taken some decisions regarding these merchant banks and also changed those within

very short time. They allowed loan against stock use to be fixed by SEC and they have changed

the margin ratio on many occasions. They issued rule of loan margin of 1:1 and cancelled the

order. Again they withdrew the embargo within 6 weeks. 

The management of listed companies was busy to make easy money. The listed companies have

withdrawn about Tk 170 billion from the market through private placement, issue of preference

share and direct listing at the initial stage of listing with stock market. The private placement

could reason unfair transaction. Companies sold their share to civil, military bureaucrats and also

to other influential persons. Directors of Companies also benefited from direct listing.

Another manner of manipulation was revaluation of assets and issue of bonus share which has a

link to manipulation of market. It happened in many cases in Z category companies who either

do not pay dividend to shareholder, or, do not meet at Annual General Meeting, or are unable to

comply with other rules of SEC. Those Z category companies issued right share to the members

and again sold those shares in the peak market. SEC did not give attention to Z category

companies for preventing increase of price of share and find out the reason, stopping them to

issue right share to the members. No proper vigilance and enforcement function was visible. 

It is found that the directors of some listed companies sold their share amounting Tk 60 billion.

Most of those companies are banks, insurance companies and some manufacturers. These

Directors are awarded bonus shares through revaluation, and also there was no ground to selling

out the controlling share of own companies and banks. The auditors and issue managers, and

valuation companies also manipulate the information and SEC approved the reports in opaque

manner.

In 2010 SEC issued 81 orders but could not regulate the market. Its officials were also involved

in corruption and manipulation. This may be a surprise action of a regulator to act in such a

manner in a period of one year. There activities were very opaque and some time in collaboration

with manipulators. 

There was a huge in flow of capital and the shares were not sufficient and government could not

enlist 26 state companies to float shares as committed. 

Most of the stocks listed for the last few years offered initial public offerings IPO at unbelievable

high price and the SEC approved premium price without any valid ground. 

There was a serious malpractice during change of face value of share from Tk 100 to Tk 10.

There was no dissemination of information and rather artificial maneuver to manipulate the

fixation of new price of share. This malpractice accelerated through two prices of shares of

different companies in the market.

There is haze area in transaction of omnibus accounts. The name of persons behind the account

shall be known to authority. Thirty six merchant banks maintain omnibus account. One Omnibus

account may include 3,000 to 12,000 account holders. This is a channel for investment of black

money in the market for profit and safe investment. The management of 2 stock markets should

be separated from ownership to stop inside trading and manipulation. All the stakeholders must

be transparent in future to avoid such debacle in future. 

OBJECTIVES

To fulfill the requirement of this proposal some objectives have to be determined. These are

given below.

1. To find out the determinants that caused the stock market debacle in Bangladesh.

2. To sort out the origin of this debacle.

3. To identify the affect of this debacle.

METHODOLY

The unexpected rise and fall in share prices mostly followed from the general confidence of the

investors about political stability, euphoria of investment in shares, prospect of quick capital

gains, a vacuum in respect of institutional presence in the share market, monopolistic dominance

of member brokers, inefficiency of the SECS to cape with the developments, existence to Kerb

market , absence of proper application of circuit breaker etc. Delivery versus payment

mechanism was used as one of the main vehicles of manipulation. Kerb market gave birth fake

and forged share certificates. Although there are increasing trends in all the indicators, DSE,

CSE are not free from problems. The problems of DSE, CSE is to be identified and measures

should be taken to escape from these problems.

HYPOTHESIS OF THE STUDY

Capital is the lifeblood of business and industry and capital market is the main source for raising

capital. It provides long-term fund for industries and creates investment scope for the mass.

Capital market plays a vital role in industrial, and thus overall economic, development of a

country. Though our capital market was established long ago it gained momentum in the late '80s

and early '90s. Overcoming the debacle of 1996, the capital market started functioning smoothly

again, but has started behaving irrationally in the recent years.

In the last two years, the market index increased from 2,795 points in December 2008 to 8,290

points at the end of 2010. On January 9, the index fell 600 points, and 600 points again the next

day. The index increased by almost 1,000 points on the following day. Such ups and downs are

totally unusual, abnormal and unexpected. Some of the reasons identified behind such ups and

downs are:

* Allowing investment of black money in the share market;

* Reduction of bank interest on deposit;

* Imposition of tax on savings certificate;

* Lack and instability of regulatory framework. It appears that stock market related regulations

are imposed on trial and error basis. For example, in 2010 margin rule was changed on 12

occasions;

* Irrational behaviour of both individual and institutional investors;

* Lack of the central bank's oversight of the activities of commercial banks and financial

institutions. In recent years it has been observed that some banks, instead of performing their

prime activity, i.e. financing industrialisation and business, paid more attention towards share

market investment, which heated the capital market irrationally. Such activities of commercial

banks should have been controlled in time;

* Bangladesh Bank's instruction to reduce exposure in share within a specified time;

* Withdrawal of big, especially institutional, investors from the market;

* Failure in bringing the culprit of '96 stock market debacle to law.

Smooth development of stock market and its stability is a must for overall economic

development of our country. The following initiatives may have positive effect in this regard:

* Lack of confidence of investors is the main problem of the market today. The prime task at this

moment should be restoration of confidence at any cost. Implementation of recommendations of

the investigation committee phase by phase, and setting of priority can restore confidence.

* SEC must be reconstituted immediately with required manpower having adequate knowledge

and moral integrity;

* More detailed investigation to be carried out so that the masterminds behind the share market

debacle can be identified properly and punishment can be ensured to the responsible ones;

* It is claimed that the persons suspected to have caused the share market debacle were not

involved in anything illegal. The claim may be true (!), interestingly. Even though their deeds

may not have been illegal, they were immoral.

* Sometimes immoral doings may be more harmful than illegal doings;

* Bangladesh Bank may relax its recent policies regarding commercial banks' exposure in share

market; institutional investors may be motivated or compelled if necessary to increase their

investment in the market at least at that level of their participation before the crash of the market.

It may not be possible to restore confidence in the market if the institutions remain inactive. CRR

may be reduced and liquidity support by the central bank may also be considered for the time

being so that commercial banks can inject more funds in investment of shares;

* The condition of the market is very sensitive now. Any adverse comment at this stage will

affect the market seriously. So, we all must be careful in making comments regarding share

market;

* One basic principle for investment in shares is that you have to invest in shares of good

fundamentals, and the men behind the company should be good also. If you buy good shares and

price falls subsequently, do not panic, rather be patient and hold the shares, price will increase in

course of time. Share market investors should follow these basic principles;

* There must be an active checking point/unit (CDBL) so that at any time the trading flow can be

specifically tracked;

* SEC must ensure adequate, stable and long-term policies because frequent change of policies

adversely affects stability of capital market;

* From the investigation it became clear that there are specific loopholes in the law and

regulatory organisations. These regulatory loopholes must be identified and removed;

* Activities of listed companies and market players must be monitored constantly. It must be

ensured that related regulations are properly complied, AGMs are held and dividends are paid

regularly by listed companies;

* Now, virtually both SEC and Bangladesh Bank regulate the share market simultaneously. So,

there must be co-ordination in their supervisory activities;

* In 1996, almost 100 companies were de-listed. It is alleged that the persons behind these de-

listed companies are again coming into the market by floating new companies. We must be

careful about them;

* Tax on capital gain (10%) for banks may be revised because tax on their core business in

42.50%, whereas tax on profit from shares is 10%.

One of the most optimistic aspects of our share market is mass participation of investors. Almost

33 lac investors are involved. More than 99% of them are general investors. They have invested

most of their savings in the capital market. We have to do everything to retain these huge

investors in the market. If normalcy and confidence cannot be restored in the market, it will

severely affect industrialisation and the overall economy of the country, and its adverse political

DESCRIPTIVE ANALYSIS

The small investors with the least staying power in the market were blamed for all the ills. But

this was an oversimplified explanation. For the bubble situation in the market has been in the

making for the last nearly two years . The Securities and Exchange Commission (SEC) and the

Bangladesh Bank (BB) are both governmental institutions with the most regulatory role to play

in the share market. If the helmsmen of these two bodies were wary of the market's skewed

development and acted well in time to head off the crisis that had been in the making, then

probably it could be offset or turned into a manageable one. The failure of the regulators as

governmental bodies, thus, lent credence to the view that the crash in the market was

considerably due to inadequate policies or no policies on the part of the regulators .

Government was also supposed to offload in the market its own shares of entities owned and

operated by it . If this step was taken, depth would be created in the market and the

problems posed by scarcity of good shares, could be much less. 

Thus, government cannot absolve itself that it had no role or was powerless to prevent the slide

in the market. Even now, government can help powerfully to rebuild the market by acting with

hindsight and foresight. This would crucially involve not repeating the same mistakes and

promoting mainly institutional investors. 

Probably it could happen only in the context of Bangladesh that the country's premier bourse,

DSE, that lost over 2,000 points in succession during trading in a couple of days from 10th

January, could rebound so spectacularly as it did from 13th March. This outcome was the result

of hurried attempts on the part of the SEC and the BB. Both organizations under the government

moved with extraordinary speed as if to revitalize the market overnight with a magic wand. BB

reportedly gave Taka 2 billion to the Investment Corporation of Bangladesh (ICB) instantly after

the January 10th debacle to buy shares and supplied 13 banks with Taka 75 billion with the same

objective. Side by side, the SEC took some unusually liberal decisions in loosening its earlier

controls on the market. Thus, as a cumulative effect of all these measures, the sagging market

has turned bullish again.

The above steps could extend a fresh lease of life to the bubble market for a while. But sooner or

later the bubble will have to burst but at that time the fall outs would be much worse. The way

the authorities are trying to save a bubble share market from busting could end up by hitting hard

the real or wider economy. The BB's initiative to prevent the banking sector from getting too

exposed to a very risky share market has been now withdrawn. The banks could, therefore,

become the victims of their overexposure to the share market sooner rather than later. A

breakdown in the banking sector ultimately from this factor could deal a very severe blow to the

economy as a whole. The BB also wanted squeezing money supply to the non productive share

market to tame inflation. But from its latest decisions, inflation will be encouraged afresh. The

SEC with its control measures aspired for the development of a share market on proper lines. But

that hope will now be shattered as it retreats from its immediate past course.

It appears that the market regulators are surrendering to the populist mentality on the part of the

country's political supremos inviting, thus, havoc to the country's real economy in the longer

term or even in the mid term.

It is high time that someone made all categories of investors in the sharemarket of Bangladesh

supremely aware of the nature of this market. Investing in such a market in all countries and all

situations, involves risks as well as gains. The share market is not a place where investors can

only expect all gains and no losses like the government guaranteed saving instruments and

bonds. The ones who come to this market should come with the mind and preparations that they

can be either winners or losers, any time, depending on the unavoidable ups and downs in such a

market and ought not to ventilate their wrath on anybody or any authority for their misfortunes. 

But such a mature mentality is not seen among our small and individual investors and this was

evident from their riotous behaviour and agitation in front of the DSE building recently. They

were protesting the slide in the market for some days in succession and blaming it on the

regulatory activities of the DSE and the SEC. If these investors here could have their way, they

would probably want to do away with any regulation of the market --whatsoever-- for their

temporary gains notwithstanding that the same could create a bigger artificial bubble market that

would ultimately pave the way for its worse crash in the future.

Our small investors for their own good need to make themselves more educated about playing in

the share market. First of all, they should grasp that they must, first of all, invest truly wisely in

shares with good fundamentals and not in ones which are but only superficially attractive. They

should be ready to better learn the ropes in order not to suffer crashes. Many of them need to

essentially change their mentality that they can make a one time big kill by coming to the market

and then withdrawing from it. They should be guided to the market more prudently to build up

gradually their investment values brick by brick and maintain the same in the mid and longer

terms. 

The regulatory authorities on their part need to disseminate information and underline the point

repeatedly that investors must not come to the market with the spirit and instinct of gamblers but

as truly informed and able investors. To that end, the stock exchanges and the SEC should go on

conducting repeated educative and awareness building campaigns for a period of time.

CONCLUTION

The global economy is in a constant flux. In order to do well in this environment, both the

government and the business community must have a good knowledge of the recent economic

trends and developments. They must also have an adequate understanding of the processes that

give rise to these trends and developments. Only then they can devise appropriate responses in

order to ensure that Bangladesh does not lose out in the fierce global competition for market

share. Such an understanding can be gained only through painstaking study and research on the

subject by qualified professionals.

REFERENCES

1. http://www.thefinancialexpress-bd.com/more.php?news_id=140904&date=2011-06-28

2.  http://www.thedailystar.net/newDesign/news-details.php?nid=191840

3.  http://www.thedailystar.net/newDesign/news-details.php?nid=192175

4.  http://www.thefinancialexpress-bd.com/more.php?news_id=141070&date=2011-06-30

5.  http://www.daily-sun.com/index.php?view=details&type=daily_sun_news&pub_no=265&cat_id=1&menu_id=3&news_type_id=1&news_id=55446

6.  http://www.daily-sun.com/index.php?view=details&type=daily_sun_news&pub_no=265&cat_id=1&menu_id=3&news_type_id=1&news_id=55454

7.  http://www.thefinancialexpress-bd.com/more.php?news_id=141421&date=2011-07-03

 

There is a major difference between two debacles of share market in 1996 and 2011. The former

happened in secondary market but this time the manipulation happened during valuation and

fixation of offered price of share and in side trading by different stake holders. It happened

behind the screen. Even Investment Corporation of Bangladesh (ICB) also played in the game.

They have purchased share of Tk 8.0 billion through 15 Omnibus accounts in October and

November, 2010. They of course played the game for some influential officials in the

government.

The problem was created for a simple reason that there is a gap between demand and supply of

stocks in the market. The primary reason is that the regulator could not stop manipulation rather

the officials of SEC were involved in trading and other unfair practices. The other agencies

andinstitutions having stakes in the share market possibly failed to perform the need of oversight

functions.

The share market experienced bullish trend in most part of the last year because of the

overexposure of some commercial banks and other financialinstitutions. They had invested

beyond the limit of 10 per cent of their deposit. This is also unethical to invest depositor's money

risking the investment and even without their benefit. 

Commercial banks have been involved heavily in the stock market business during the last few

years. Bangladesh Bank has found involvement of eleven banks over investment in the share

market. One of the commercial banks made profit of Tk 10.40 billion last year. Of this amount of

profit, Tk 4.40 billion came during the last month by investing in share market. Bangladesh Bank

has set capital market exposure limit of 10 percent of the deposit for the commercial banks after

their involvement in the market with deposit of clients. 

The country's common people and hundreds of thousands of unemployed youths have entered

into the overheated market as a record 1.57 million Beneficiary Owners (BO) accounts, more

than half of the total investors, entered into the market in 2010.

The relatively heavy investment has an impact in massive surge in share prices besides other

reasons. They were advised to conduct merchant banking or brokerage house business without

formation of subsidiary companies for the purpose. Allegations have been found that bank

officials provided false loan to fake clients for investment in the share markets. The Bangladesh

Bank also investigated allocation of Tk 24 billion industrial loans by a bank to its clients last

year.

Bangladesh Bank was not much aware about banks' exposure to the stock market. Because,

surprisingly, banks profit from share business seemed to be negligible according to their income

statement or balance sheet although there is a wide perception that banks are making handsome

profits from investing in shares and debentures. Proper data on their exposure to thecapital

market remained unknown, which is a failure from the part of the central bank as a supervisory

agency. The internal and external auditors help out the manipulation.

Moreover, almost all policies to minimise the exposure of banks were taken in the second-half of

2010, when the stock index had reached an alarming level. For example, the situation worsened

when it was made mandatory for all banks to maintain their investment in the stock market

equivalent to 10 percent of their total deposit and to comply by December, 2010, when in reality,

the ratio was much higher than this level. Bangladesh Bank had a policy to contain inflation and

channel credit to other real sector and may be to safeguard the interest of invest of depositors. 

Bangladesh Bank has taken some steps to reduce inflation and also reduce risk of

financial institutions. The steps included statutory cash ration reserve of schedule banks from 5

per cent to 6 per cent. This also has a small impact on cash flow in the capital market.

The central bank decided to deal with only the banks, not subsidiary companies as per the new

provisions and SEC will look into the functions of the subsidiary banking companies. This

transition of authority over the merchant banks overburdened the SEC while they were unable to

perform some other responsibilities. Allowing business by some merchant banks has exaggerated

the situation. They became the key player in the stock market. In the recent stock plunge some

merchant banks deliberately sold off shares of the investors at a throw-away price without even

taking consent of the affected clients. The omnibus account with haze background players is a

matter of investigation to know the source of money and impact of this money in the stock

market and economy.

SEC has taken some decisions regarding these merchant banks and also changed those within

very short time. They allowed loan against stock use to be fixed by SEC and they have changed

the margin ratio on many occasions. They issued rule of loan margin of 1:1 and cancelled the

order. Again they withdrew the embargo within 6 weeks. 

The management of listed companies was busy to make easy money. The listed companies have

withdrawn about Tk 170 billion from the market through private placement, issue of preference

share and direct listing at the initial stage of listing with stock market. The private placement

could reason unfair transaction. Companies sold their share to civil, military bureaucrats and also

to other influential persons. Directors of Companies also benefited from direct listing.

Another manner of manipulation was revaluation of assets and issue of bonus share which has a

link to manipulation of market. It happened in many cases in Z category companies who either

do not pay dividend to shareholder, or, do not meet at Annual General Meeting, or are unable to

comply with other rules of SEC. Those Z category companies issued right share to the members

and again sold those shares in the peak market. SEC did not give attention to Z category

companies for preventing increase of price of share and find out the reason, stopping them to

issue right share to the members. No proper vigilance and enforcement function was visible. 

It is found that the directors of some listed companies sold their share amounting Tk 60 billion.

Most of those companies are banks, insurance companies and some manufacturers. These

Directors are awarded bonus shares through revaluation, and also there was no ground to selling

out the controlling share of own companies and banks. The auditors and issue managers, and

valuation companies also manipulate the information and SEC approved the reports in opaque

manner.

In 2010 SEC issued 81 orders but could not regulate the market. Its officials were also involved

in corruption and manipulation. This may be a surprise action of a regulator to act in such a

manner in a period of one year. There activities were very opaque and some time in collaboration

with manipulators. 

There was a huge in flow of capital and the shares were not sufficient and government could not

enlist 26 state companies to float shares as committed. 

Most of the stocks listed for the last few years offered initial public offerings IPO at unbelievable

high price and the SEC approved premium price without any valid ground. 

There was a serious malpractice during change of face value of share from Tk 100 to Tk 10.

There was no dissemination of information and rather artificial maneuver to manipulate the

fixation of new price of share. This malpractice accelerated through two prices of shares of

different companies in the market.

There is haze area in transaction of omnibus accounts. The name of persons behind the account

shall be known to authority. Thirty six merchant banks maintain omnibus account. One Omnibus

account may include 3,000 to 12,000 account holders. This is a channel for investment of black

money in the market for profit and safe investment.

The management of 2 stock markets should be separated from ownership to stop inside trading

and manipulation. All the stakeholders must be transparent in future to avoid such debacle in

future. 

PURPOSE OF THE STUDY

HYPOTHESIS OF THE STUDY

SIGNIFICANCE OF THE STUDY

METHODOLOGY

OUTCOMES

CONCLUTION