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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.



Capital market, being an essential element of todays 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.

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Ch[pt_r 1

Secondary data and information were used in preparing this seminar paper, and these were collected through teamwork by adopting the following processes: Visiting in person, the following organizations and respective key personnel: Dhaka Stock Exchange (DSE) Dhaka Chamber of Commerce (DCC) Bangladesh Bank (BB) Monetary Policy Department (MPD), BB Consulting books from different libraries of: Bangladesh Institute of Development Studies (BIDS) Dhaka Chamber of Commerce (DCC) Bangladesh Bank (BB) Other Books


Literature review

Keeping the objectives in mind of the present study, we had reviewed the existing literatures. The Capital Market Development in Bangladesh: problems and prospects (Mahmood Osman Imam, October 5, 2000), Capital Market: An Overview (Md. Hasan Imam, 2005), An Overview of Bangladesh Capital Market (AZM Nazimuddin, 2007), Emerging Stock market and the Economy: The Case of Bangladesh (Ahmed, M. Farid, 2000), Equity Market Performance in Bangladesh: An Evaluation Savings and Development (Ahmed. M.Farid, 1998), The Stock market and the Economy: The Indian Experience (Mookerjee. R., R., 1981), Foreign Portfolio Investment: Return. Growth, Determinants and Monitoring - A Critical Analysis (Nafisa H., 1998), Financial deepening in Economic Development (Shaw. E., 1973), Fostering Investor Confidence in the Asian and Pacific Capital Markets (Tarumizu, K., 1993). Dhaka Stock Exchange Monthly Review, (September, 2011), Financial Markets and Institutions (Jeff Madura, 2008) are some of the studies that helped us. However, although these studies offered various insights into the dynamics of the current capital market of Bangladesh, their extent of point of discussion are different and reviewed from different aspects. In this paper we have tried to compile and explain all the relevant information to make the paper successful.

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While conducting the study, we were confronted with the following limitations: There was a little scope for research on this crucial subject as all the data was secondary and no way to collect primary data was available. Lack of a wider coverage due to time constraint. We did not have much time to visit all the relevant places and meet respective personnel. Only secondary data was used, but there is no alternative of primary data to ensure the accuracy and effectiveness of the study.

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Limitations of the study




Capital market can be termed as the engine of raising capital, which accelerates industrialization and the process of privatization. In other words, capital market means the share and stock markets of the country. It is a market for long term fund. With the emergence of the need for infrastructural development projects, for setting up of new industries for entrepreneurial attempts-now there are more frequent needs of funds. Participants in the capital markets are many. They include the commercial banks, saving and loan associations, credit unions, mutual saving banks, finance houses, finance companies, merchant bankers, discount houses, venture capital companies, leasing companies, investment banks & companies, investment clubs, pension funds, stock exchanges, security companies, underwriters, portfolio-managers, and insurance companies.



The functioning of an efficient capital market may ensure smooth floatation 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.

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Ch[pt_r 2

The SEC classified firms in terms of A, B, G, N and Z categories that had not only guided retail investors to know weak shares but also helped reducing netting and gambling done by a few hidden consortia. 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 B-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.


Importance of Capital Market in the economy

The capital market is the market for long-term loans and equity capital. Developing countries in fact, view capital market as the engine for future growth through mobilizing of surplus fund to the deficit group. An efficient capital market may perform as an alternative to many other financing sources as being the least cost capital source. Especially in a country like ours, where savings is minimal, and capital market can no wonder be a lucrative source of finance. The securities market provides a linkage between the savings and the preferred investment across the business entities and other economic units, specially the general households that in aggregate form the surplus savings units. It offers alternative investment windows to the surplus savings units by mobilizing their savings and channe- Page | 5 -


Classification of companies

individuals, irrespective of their means, to share the increased wealth provided by competitive enterprises. Moreover, the stock market also provides a market system for purchase and sale of listed securities and thereby ensures liquidity (transferability of securities), which is the basis for the joint stock enterprise system. (The existence of the stock market makes it possible to satisfy simultaneously the needs of the firms for capital and of investors for liquidity.) Especially at times when the banking sector of the country is facing the challenge of bringing down the advance-deposit ratio to sustainable level, the economy of the country is unfolding newer horizon of opportunities. Due to over-exposure level of the financial system the securities market could play a very positive role, had there been no market debacle. Due to the last market crash and follow through events, it will be difficult to utilize the primary market to raise significant volume of funds. Thus the greatest economic importance of securities market at this point can be understood from the opportunities being lost. Bangladesh having its target to become a middle income country must have significant level of rise in investment, which at the present state of banking system cannot be met. The securities market could play the key role in meeting these huge investment demands if the secondary market would remain stable. The capital market also helps increase savings and investment, which are essential for economic development. An equity market, by allowing diversification across a variety of assets, helps reduce the risk the investors must bear, thus reducing the cost of capital, which in turn spurs investment and economic growth. However, volatility and market efficiency are two important features which will ultimately determine the effectiveness of the stock market in economic development. If a stock market is inefficient due to insufficient informational supply, investors face difficulty in choosing the optimal investment as information on corporate performance is slow or less available. The resulting uncertainty may induce investors either to withdraw from the market until this uncertainty is resolved or discourage them to invest funds for long term. Moreover, if investors are not rewarded for taking on higher risk by investing in the stock market, or if excess volatility weakens investors confidence, they will not invest their savings in the stock market, and hence deter economic growth. The emerging stock markets offer an opportunity to examine the evolution of stock return distributions and stochastic processes in response to economic and political changes in these emerging economies.

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lizes them through securities into optimal destinations. The stock market enables all

Bangladesh capital market is one of the smallest in Asia but within the south Asian r region, it is the third largest one. It has two full fledged automated stock exchanges full-fledged namely Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and an OTC exchange operFigure 1: Structure of Capital Market of Bangladesh

ated by CSE. It also consists of a dedicated

Capital Market of Bangladesh

regulator, the Securities and Exchange Commission (SEC), since, it implements rules and regulations, mon tors their implications to o monitors operate and develop the capital. It consists of Central Depository Bangladesh Limited (CDBL), the only Central Dep Depository in Bangladesh that provides facilities for the settlement of transactions of dematefacilities d rialized securities in CSE market and DSE.
Dhaka Stock Exchange (DSE) Chittagong Stock Exchange (CSE) Stock and Securities Exchange (SEC)



Bangladesh Stock Market

Amid all the formidable obstacles our countrys securities market has been gaining obstacles, momentum. Even in the backdrop of Global Financial Crisis 2008 when the stock ma markets in almost all the developed and developing countries crashed and Governments of Gover those countries spent thousands of dollars to rescue the markets. Both depth and d to dimension in Bangladesh capital market has been becoming gradually strong and secur securities market registered significant growth at the initial stage and later market fell a little bit. The reason is might be that the amou of foreign portfolio in Bangladesh securities amount lio market is more or less only two percent. But lack of supply of fundamentally sound et percent. shares has been causing overheating situation and circumstance like overpricing has been a common phenomenon here in recent times. Transaction has risen from a daily Tk. of 250 crore two years ago to Tk. 2,500 crore now and DSE General Index has risen to record 8,918 from 2,400 two years back. But demand and supply should match at a certain point to the tune of bringing time und balance in the securities market. time-bound


Structure of the Capital Market in Bangladesh

Figure 2: Dhaka Stock Exchange

Dhaka Share Market consists of the Dhaka Stock Exchange or DSE, the main share market of Bangladesh. ket Dhaka Share Market is still at its infant i stage and has to walk a long way for coming into the radar of the Global FiF nancial Market. The Chittagong Stock Chitt Exchange (CSE) began its journey in change

10th October of 1995 from Chittagong City through the cry-out trading system with the ber cry out sy promise to create a state-of-the art bourse in the country. On April 28, 1954 the DSE was first incorporated as the East Pakistan Stock E Exchange Association Limited. However, formal trading began in 1956 with 196 secur securities listed on the DSE with a total paid up capital of about Taka 4 billion. On June 23, 1962 it was renamed as Dhaka Stock Exchange (DSE) Limited. After 1971, the tra ing activities of trading the Stock Exchange remained suppressed until 1976 due to the liberation war and the ration economic policy pursued by the then government. The trading activities resumed in 1976 with only 9 companies listed having a paid up capital of Taka 137.52 million on the stock exchange. As of 30th June, 1999 there were 230 Securities listed on the DSE with a market capitalization of Taka 50,748 million. ization The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its a activities are regulated by its Articles of Association and its own rules, regulations, and by-laws along with the Securities and Exchange Ordinance, 1969; the Companies Act, 1994; and the Securities and Exchange Commission Act, 1993 (DSE, 1999). Trading is done through automated on line system every day except Friday and other on-line ot government holidays. There are four markets in the system: (1) Public Market: Only markets trading of market lot share is done here through automatic matching. (2) Spot Market: Spot transactions are done here through automatic matching which must be settled within 24 hours. (3) Block Market: A place wher bulk quantities of shares are traded where through pick and fill basis. (4) Odd Lot Market: Odd lot scripts are traded here based on pick and fill basis. All transactions in public market of a day, after netting, are settled ne ting, and cleared through the DSE Clearing House due on 3rd and 5th working day respectiv Clearin respectively, calculated from date of trading. Members shall be allowed to carry out transaction of


DSE and CSE: core capital markets of the country

the member through the custodian bank within the fifth day subsequent to the trading day, in respect of the transactions carried out on each trading day with intimation to the clearing house. The total number of tradable securities increased by 1.97 % but the issued capital of all listed securities declined by 5% during this period. However, both total turnover of securities and total traded amount of securities has increased enormously compared to that of the previous year. The total Market Capitalization of all listed Securities in the DSE amounted to US$ 1046.36 million in 1999 compared to US$ 1283.79 million in 1998 representing a decline in market capitalization by 22%. The Market Capitalization declined during the period of 1998-99 due to: i) listing of lesser number of new Issues, ii) absence of rights and bonus issues, and iii) impact of decrease in all share price index (SEC, 1999). The all share price index of the DSE declined from 676.47 to 546.79 during this period. Special incentives are provided to encourage nonresident Bangladeshis to invest in the capital market. Moreover, they can buy newly issued shares/debentures of Bangladeshi companies and can maintain foreign currency deposits (styled as NFCD account) in special accounts for up to five years. A quota of 10% reserved for nonresident Bangladeshis in primary shares (IPO) has also been initiated.


Main Board as on August 2011

Main Board as on August 2011

Table 1: Total capital exchange of DSE in August 2011:

Total Number of Listed Securities Total Number of Companies Total Number of Mutual Funds Total Number of Debentures Total Number of Treasury Bonds Total Number of Corporate Bonds Total number of Shares/Certificates: Total Number of Shares & Mutual Fund Certificates of All Listed Securities* Total Number of Shares of All Listed Companies Total Number of Certificates of All Listed Mutual Funds Total Number of All Listed Debentures

493 231 36 8 215 3 (No. in millions) 19,877 17,046 2,817 (No. in '000) 409

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foreign buyers and/or seller involving a custodian bank to be settled directly between

Total Number of All Listed Corporate Bonds Total Issued Capital of : All Listed Securities All Companies Shares All Mutual Funds All Debentures All Listed Govt. T-Bonds All Listed Corporate Bonds Total Market Capitalization of: All Listed Securities All Listed Companies Shares All Listed Mutual Funds All Debentures All Listed Govt. T-Bonds All Listed Corporate Bonds Conversion Rate: BDT against USD

7,069 (Figure Tk. in millions) (Figure US$ in mns) 843,058 272,199 26,269 140 537,381 7,069 11,305.47 3,650 352 2 7,206 95

(Figure Tk. in millions) (Figure US$ in mns) 2,906,135 2,326,597 34,915 576 537,381 6,666 74.57 38,971 31,200 468 8 7,206 89

* Total No. of Shares/Share Capital/Market Capital includes Bonus/Right of shares.


Sectoral Performance

Table 2: Sectoral performance of DSE in August 2011:

DSE Sectoral Performance - August 2011

Sector Financial Sector Banks Financial Institutions Insurance Mutual Funds Total Manufacturing Foods Pharmaceuticals Textile Engineering 51,810.32 175,334.69 71,598.61 120,787.26 53,035.70 199,033.89 96,488.97 128,407.03 2.18 7.38 3.01 5.08 2,419.52 7,838.09 9,516.58 6,491.74 7,075.12 19,365.83 31,038.42 24,764.06 2.73 8.84 10.74 7.32 716,595.95 274,619.30 136,417.38 34,915.01 1,162,547.64 721,832.69 288,529.80 150,538.81 41,101.33 1,202,002.63 30.17 11.56 5.74 1.47 48.94 18,157.46 5,532.49 6,493.71 5,038.45 74,944.68 29,312.32 25,206.93 11,778.13 20.48 6.24 7.33 5.68 39.73 Market Capitalization in millions May April % of % of Turnover Tk. in millions total total Mkt Cap Turnover May April

35,222.10 141,242.07

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Total Number of All Listed Gov. T-Bonds


Tannery Paper & Printing Jute Cement Total Fuel & Power Service & Real Estate IT Telecommunication Travel and Leisure Miscellaneous Total Bond Corporate Bond Total Grand Total

14,663.75 917.70 784.49 85,851.62 558,243.37 292,329.13 19,134.66 4,522.42 242,648.91 7,218.08 82,085.73 647,938.94 6,666.40 6,666.40 2,375,396.36

15,257.08 1,043.10 793.55 80,704.11 613,544.91 310,776.16 21,916.06 4,912.58 256,016.88 11,334.08 77,306.25 682,262.02 6,653.96 6,653.96 2,504,463.52

0.62 0.04 0.03 3.61 23.50 12.31 0.81 0.19 10.22 0.30 3.46 27.28 0.28 0.28 100

261.56 9.21 14.12 6,084.83

1,136.08 27.51 59.95 12,889.56

0.30 0.01 0.02 6.86 38.46 9.85 0.84 0.57 2.84 2.85 4.78 21.72 0.09 0.09 100

34,093.76 102,628.09 8,731.00 741.06 505.78 2,514.92 2,527.47 4,236.80 19,257.04 75.74 75.74 24,056.30 2,489.72 1,750.18 7,273.96 7,698.74 10,974.66 54,243.55 59.29 59.29

Service & Miscellaneous

88,648.65 298,172.99

Table 3: Sectoral performance of DSE in September, 2011: :








* Values are in million taka

Value and quantity of Turnover of DSE in September, 2011

29/09/2011 28/09/2011 27/09/2011 26/09/2011 25/09/2011 22/09/2011 21/09/2011 20/09/2011 19/09/2011 18/09/2011 15/09/2011 14/09/2011 13/09/2011 12/09/2011 11/09/2011 08/09/2011 07/09/2011 06/09/2011










Brief History

Bangladesh capital market has achieved some major milestone events in the recent past. The capital market operations in this part of the country started in mid fifties with the establishment of East Pakistan Stock Exchange Association in 1954, which started trading in 1956. Initially it was a mutual organization (cooperative body) which was corporatized in recent activity of the Dhaka Stock Exchange (DSE) in term of turnover in the name of Dacca Stock Exchange Ltd. During those early periods until 1971, all trades in the exchange were conducted using trading data collected over telephone from Karachi Stock Exchange. After independence of Bangladesh, the operations of the stock exchange remained suspended until August 1976. At that time market trading started with only 14 listed companies having market value of only taka 90 million. The trade volume was very thin and could not attract investors. Over time some reform initiatives were taken to strengthen the market. First time Tk. 1 crore daily trades were recorded in April 1992. Government adopted the Securities and Exchange Commission Act 1993 and established the SEC as the regulatory authority for the market and the Securities and Exchange Commission (SEC), established in 1993 under this Act, as the central regulatory agency oversees the activities of the entire capital market including issue of capital, monitoring the issue of stocks and operation of the stock markets including regulating of portfolio market.


Present context

3.1.1 Current economy of Bangladesh

Bangladesh today is the 48th Largest Economy with US $225 billion GDP on the basis of purchasing power parity. In nominal terms, the per capita income is US $750 with a GDP size of nearly US $90 Million, Bangladesh is the 70th largest exporter and the 4th

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Ch[pt_r 3

Impressive growth of 5% and above in the last two decades have indeed taken the economy to a new growth trajectory contributed by steady agricultural production, inTable 4: Regional capital market comparison
Regional Markets-September, 2011 Country Index DSE-20 Index DSE General Index All Share Price Index BSE 30 BSE 100 Karachi 100 CSE All Share Index SET KLSE Composite Taiwan Weighted Hang Seng Composite Straits Times P/E 13.28 15.51 15.58 18.36 17.76 8 17.58 11 16 13 14 11 12 1.55 3.2 3.2 4.5 2.7 2.8 3.5 Yield 3.74 3.14 3.11 1.51 1.44 Interest Rate (%) 12.4 7.25 13.5 7 3.5 3 1.88 0.5 6.56 0.02

creased export earnings, healthy remittance and vibrant demands.


Bangladesh India Pakistan Sri Lanka Thailand Malaysia Taiwan Hong Kong China Singapore

The steady growth of GDP during recent

global recessions has demonstrated the resilience of our economy, adding that the economy has strong fundamentals. Bangladesh is passing

Source: The Wall Street Journal (September 23-25, 2011) Trading Economics (Global Economic Research, as on August-2011) Weighted Average Interest Rate As of June, 2011)

through unique times just as many of the countries in the region passed through in the recent past. Several International banks and risk analysts have given strong recommendation to Bangladesh's steady growth recently. They recognized that Bangladesh has:

The world's two top credit rating agencies, Standard and Poors (S&P) and Moody's Investor Service, for the first time, assigned sovereign credit ratings to Bangladesh. S&P assigned BB- and Moody's Investors Service assigned Ba3 to Bangladesh and termed the countries macroeconomic outlook stable, putting Bangladesh at par with Philippines, Vietnam and Turkey. In the South Asian context, Bangladesh is positioned higher than Pakistan and Sri Lanka.

Several global financial institutions have also identified Bangladesh as one of the
potential economies of the world, heading US investment bank Goldman Sachs has included Bangladesh as one of the Next 11 (N1l) countries, after the BK1C nations of Brazil, China, India and Russia as one of the rising economies of the world. Similarly JP Morgan, another global leader in investment banking has included Bangladesh in its 'JP Morgan frontier Five'. And in a recent update of their 2006 report on "The World in 2050-Price Waterhouse Coopers" extended their
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largest RMG exporter in the world, Bangladesh is also the 21st fastest growing economy.

new ' PWC 30 list' as one of the long term potential growth economics by 2050.

JP Morgan in its "Ho Chi Minn Trial to Mexico" research report states that it is
the demographics that justify the inclusion of Bangladesh in the "JP Morgan Frontier Five". Their report identifies that:

1. The country ranks fourth in growth in economically active population. 2. Five year economic growth is strong at 6.1% per annum. 3. Progress has been made over the last few years to reduce poverty, increasing literacy levels and moderating population growth to a more sustainable level.

4. There is an assertive judiciary, 5. An active civil society, 6. A relatively free media which has increased public accountability.
Over the past two decades, privates sector has been contributing hand in hand with the state-owned industries. The policy makers are taking initiatives for the private sector to grow even further while dynamic entrepreneurs joined the race with their inimitable ideas. There is also an inflow of qualified and matured professionals in the service industry including the financial sector.

3.1.2 Capital Market development in Bangladesh

Bangladesh stock markets have grown significantly during the last decade. Still, the size of the market is relatively small compared to other Asian Markets. Size and liquidity of the companies provide some distinguishing features of developing markets. The market capitalization ratio, defined as the value of listed stocks divided by GDP, is used as a measure of stock market size. It has got economic significance because market size is positively correlated with the ability to mobilize capital and diversify risk. Total market capitalization of DSE was US $ 1.049 billion in 1994 compared to US $ 127.515 billion in India, US $ 12.263 billion in Pakistan, US $ 191.778 billion in South Korea and US $ 199.276 in Malaysia. This market is also small relative to the size of the economy. Market capitalization in Bangladesh was only 4.07 per cent of GDP in 1994 against 25.77 per cent in Pakistan, 24.03 per cent in Sri Lanka, 104.14 per cent in Thailand and 294.56 per cent in Malaysia. This ratio for Bangladesh is 0.075 in June 1997 and 0.05 in June 2000.
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analysis to include 13 other emerging economies including Bangladesh in their

than 70% of which are general investors. The total market capitalization of all shares and debentures of the listed securities stood at USD 49.4 billion by the end of 2010, indicating an 84% growth from the year before. The total turnover has increased from USD 0.13 billion to USD 0.25 billion at the end of 2010 which indicates a 91% growth. However, the capital market has been exposed to greater risk since PE ratio rose from 19.9% to 29.71% from January, 2010 to November, 2010. Dematerialization may be successful in stimulating the further growth of Bangladesh capital market, but to ensure the success of such an initiative, it will be necessary to ensure that the regulatory framework and authority are sufficiently strong, in order to strike a balance between the interests of both the members of stock exchanges and the public. On a long-term basis, it may be important for a successful bond market to be built in Bangladesh. This can assist in creating more instruments for investors and, at the same time, creating some depth in the capital market. Bond markets can also be utilized by the government in raising necessary funds, and can serve as an efficient method of financing in large projects.

3.1.3 Market Capitalization

Market statistics shows that the total market capitalization at the countrys prime Bourse-Dhaka Stock Exchange Limited stood at Tk. 2700.74 billion on 30 June, 2010 against Tk. 1,241.34 billion on 2009. In comparison with the market capitalization of 2009-10 with the corresponding period (2008-09) we see that total market capitalization rose by 117.57 percent and by the amount of Tk. 1459.40 billion. 30 June,
Figure 3: Market Capitalization in 2009-2010

Almost 33 lakh investors are now involved in the capital market at the moment; more

20.19 per-cent on 30 June, 2009. But after a huge transaction volume market capitalizacent transa lume c tion has risen to a record high in recent time to Tk. 3,680.71 billion on 05 December, 2010 and subsequently market capitalization to GDP also rose to 53.30 per y percent marking significant record.

3.1.4 Graphical Presentation

From the graphical presentation it is seen that market capitalization of all the listed s securities at the Dhaka Stock Exchange Limited increased
Figure 4: Market Performance from 2006-05 to 2009-10 05 2009

very significantly to Tk. 2700.74 billion on 30 June, 2010, which was Tk.

1,241.34 billion on 30 June, 2009

showing a 117.57 percent rise over a one year period only. The most sign cent significant point about the rising trend of market capitali capitalization is that market capitalization has increased to a highest ever Tk. 3680.71 billion on 05 December, 2010 which is 53.30 per-cent to GDP.

3.1.5 Analysis of the emerging markets

Despite having idiosyncrasies of each emerging market, it is possible to offer a broad description of several phases common to all equity markets. These emerging ma markets are found in different phases of development associated with the stages of ec economic development process and political stability of a particular country. At the initial phase, velopment equity prices tend to rise. With the implementing process growth oriented policies and growth-oriented attaining some degree of economic and political stability, the market started to gain the confidence of domestic investors and become more widely accepted as an investment a cepted alternative to bank deposits and often to short short-term government bonds. Equity markets ernment of Belarus, Kazakhstan, Ukraine of the former USSR may be considered in this p phase. The second phase relates to the deregulation of capital markets for easy access by the international investors and for cheaper capital funding by the domestic investors since the equity markets have gained some degree of credibility at this phase. As market li-

Again the market capitalization to GDP rose to 39.12 percent on 30 June, 2010 against tion percent

the diversification benefits if investing in these markets. The markets of Brazil, India, Pakistan, the Philippines, Bangladesh and the like have entered this phase. The third phase is concerned with expansion. The markets offer prospect of higher return value less volatility and the investors easily absorb new issues of stocks and corporate bonds. These lead to increased trading activity, more effective intermediation, while the growing need for a risk transfer mechanism spurs the development of equity and currency-risk hedging instruments such as derivatives and index products. Argentina, Indonesia, Malaysia. Thailand and Turkey may be considered in this stage. Finally, the market depicts the phase of maturity. As equity risk premium falls to internationally competitive levels relative to government treasury bill rates or equivalent short-term money market rates, the equity market begins to achieve the stable growth that marks a nature of developed state. Such condition can be found in Hong Kong, Korea, Singapore and the like. Studies have mentioned three reasons for the lack of confidence on the part of individual investors in securities of emerging markets. First, there is a dearth of appropriate financial and other relevant information about the domestic security market in general and listed securities in particular. Second, there is the inadequacy of the accounting and auditing of financial reports. Third, there is the inability of the regulatory authorities to effectively monitor and supervise the market and thereby protect investors against market manipulation and other market abuses. In order to overcome such inefficiencies, credit markets need to be supplemented by a well-functioning equity market.


Debacles in Bangladesh Capital Market

The capital market of Bangladesh had two major debacles which occurred in 1996 and 2010, creating some bad impacts upon the countrys total capital market.

3.2.1 Debacle during 1996

During 1996 some local and foreign initiatives succeeded in drawing some international attention which was followed by an international conference in 1994. The conference followed by some regional as well international market destabilizing events, some hedge fund managers started investing in the local capital market. The market was nei- Page | 17 -

quidity increases and risk-adjusted returns rise, international investors begin to reap

demand both at home and abroad. Consequently within a very short tenure (from July to October of 1996) the market price level soared to a record level (of that time) height with the index rising from 894 levels lo 3627 level. The market P/E ratio of all the listed securities reached to the level of 66.5 within a short period of 4 months. The 'cry-out' auction based trading system of DSE could not handle the huge demand coming from several thousand investors who crowded the Motijheel thoroughfare. Consequently street based curb market took over the legal trade executed through stock market system. Unsuspecting inexperienced new entrant investors allured by very quick profit potentials were buying anything without understanding substance, legality and validity of their investment. Unscrupulous market players (which even include some issuers) were minting fortunes by selling fake securities to the crowd who were eager to make quick profit from the market. Thereafter, for obvious reason the market experienced first major crash in l996 affecting about fifty thousand investors

3.2.2 Debacle during 2010

The market crash of 2010 drew greater degree of attention because much larger segments of population spreading all around the country are affected this time as the market in this period has gained significant growth. The securities market debacle in 2010 need to be viewed from different perspectives. The following section attempts to examine those issues mostly from demand side factors. This is a plain logical analysis supported by some facts and figure. The analysis covered the period from 2004 till 2010 because, the impacts of 1996 continued until 2003 period. It can be considered that, the market started consolidation and development from 2004.

3.2.3 Reasons behind the two major debacles

Analysis shows that, the capital market of the country experiences some abnormal upheaval during the last few years, which had full bubble effects in 2010 concluding with the burst. The causes and factors to such behavior are as following:

Political economy inducing demand since 2007

The political reality of 2007 was one of the major reasons for creating a sudden rise in the market. Until 2006, the growth pattern in the market was gradual and moderate. From January 2007, the market experienced a sharp rise in terms of transaction and
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ther operational nor in terms of legal structure ready to absorb such sudden surge in

investment. The emergence of military backed caretaker government (CTG) initially encouraged the investors to come back to capital market. At the time of declared campaign against corruption, budgetary policy support for legalization of undisclosed income through investment in securities market also encouraged new investors to transfer their funds to this market. Besides new civilian investors, influx of armed forces members as investors also boosted the demands in the market.

Macro-economic factors inducing excess savings

Since the last decade, the economy of the country has been growing at a fairly steady rate with national savings rate remaining around 30% of GDP. Such high savings rates were attained mostly due to robust growth in inward remittances from expatriate Bangladeshis over the years. While savings rates were good along with rising GDP, the investment rates were not matching. The real ADP in terms of budgeted amount as well as implemented amount was not increasing. As a result the public sector investment declined from a level of more than 6% to slightly over 4% level. Due to different infrastructural and political reasons, the private sector investments also could not match the shortfalls in public sector investments. Thus an overall surplus savings has been created in the economy.

Gas and power sector shortage and idle business funds

Due to shortage of power and gas, the government declared moratorium on new connections. Such policy almost stopped establishment or expansion of new industrial units and even residential buildings. The moratorium was further extended by the newly elected government until middle of this year. Consequently private sector investment for manufacturing sector almost stalled for quite some time. The global financial crisis of 2008-09 also made many export oriented business to keep their production facilities partially or totally closed. Therefore, the business people having idle funds found incentives to move their funds lo capital market. The transfer of such funds also created excess demand pushing the price level upward.

Excess liquidity in financial sector in 2009

The decline in private sectors' new or expansion oriented investment also created significant volume of surplus liquidity at the hands of financial institutions. The financial
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price level. Especially the political situations in late 2006 made the market little shy of

their liquidity. Almost all the major financial institutions got involved in deploying a portion of their idle funds in the market.


Reform of the market after the debacles

The stock market crash reveals structural weaknesses of the market. This leads to all concerned feeling the agenda for market reforms. Rules, laws and guidelines are framed and implemented to improve infrastructure and foundation on which the stock exchanges can operate effectively. Major notable features of capital market reforms implemented so far include:

a) Reorganizing SEC to strengthen infrastructure capabilities and build capacity b) Updating rules, laws and guidelines to improve regulation framework: Amendment of the SEC Act 1993 to empower SEC a vetting power, financial
penalty power with a view to monitoring and enforcing compliance of rules. SEC is also allowed to conduct special audit to detect window dressing in the accounts of the listed firms, if it suspects.

Information disclosure rule specifying the requirements to comply with the

International Accounting Standard (IAS) and International Standards of Auditing (ISA) for timely and quality information disclosure in the market.

In the new issue rule, the pricing of IPOs has been delegated to the issue

In the merchant bank regulation, three activities, viz., issue management,

underwriting and non-discretionary portfolio management, are restricted to merchant banks operating in Bangladesh.

c) Separation of the management from the ownership at both DSE and CSE d) Inclusion of the representatives of the listed companies and the investors on the
governing bodies of both DSE and CSE

e) Automation of trading at both DSE and CSE introducing order-driven system replacing out-cry system

f) Amendment of the Trust Act, 1882 enabling pension fund and insurance fund
investing in securities market and thereby create demand for securities.

g) Enactment of the Central Depository Act enabling national securities ltd. company to establish CDS. The implementation of the on-line CDS will in fact avoid problems of "fake shares" and "short sale" to a great extent.
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institutions started investment in the securities market as one of the avenue to utilize


a) Restructuring Investment Corporation of Bangladesh (ICB) by creating three

subsidiary companies carrying out the function of merchant banking, fund management and securities brokerage house

b) Divesting government holdings in SOEs and MNCs through securities market c) Issuing government securities with medium term and long-term maturities on a
regular basis through the securities market. Thus the period of 2003 to 06 can be viewed as a period of consolidation & restoration.


Present scenario of Bangladesh Capital Market

Albeit Bangladesh economy is not more integrated with the global economies, Global Financial Crisis 2008 has dented every sphere of Bangladesh. Bangladesh economy has also been limping since being dented by the blow of financial meltdown. On the one hand, Bangladesh economy has been gaining benefits from the crisis and on the other hand it has lost. Because of income declining of developed countries citizens low-priced garments of Bangladesh have been very popular registering more growth in the countrys apparel sector. But financial collapse in many developed countries slowed down the infrastructural development especially construction works in Middle East which have pushed many Bangladeshi workers come back. Remittance inflow has risen but number of workers going abroad has fallen drastically. In the year 2009-10 a record $11 billon remittance has come to Bangladesh against $9.76 billion in 2008-09 fiscal year. Countrys foreign currency reserve hit new record of $11.35 billion recently because of low import expenditure and rising trend of export earnings. But still 44 percent people are under poverty level; the Government and other concerned organizations should take comprehensive efforts to eradicate poverty. But to achieve desired level of growth to turn Bangladesh into a middle income country by 2021, growth rate should be accelerated. To do that more investment in infrastructure especially power sector, roads and highway, modern and sophisticated port facilities are badly needed. Cost of doing business should also be reduced along with the removal of red-tapism in commencing business. Public-Private Partnership has been incorporated in the budget for 2010-11 but success will depend on time-bound implementation. Instead of eying towards foreign countries, multi-lateral donors and agencies Government should choose country s capital market to raise fund for development projects especially for
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However, a few important reform measures are still pending. These include, among

will also ensure peoples association in profitable Government properties. Associating general people in lucrative Government venture means to create the way of ensuring equitable distribution of wealth and this is only possible through strong and vibrant capital market. Because of sluggish economic activities investment has not gotten momentum in recent years but for the sake of rapid economic growth more savings and investment are also necessary. Another important issue is that tax to GDP (Gross Domestic Product) is very poor in Bangladesh, which has been another cause of fiscal deficit in almost every year. The Government has been regularly depending upon the borrowing both from internal and external sources. Because of huge Government borrowing from the country s formal banking sector private industrial ventures and other commercial set ups have been on declining trend. Instead of borrowing from banking sources and other foreign lenders Government should depend on raising fund from the countrys capital market.

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the construction of Padma Bridge, elevated express-way and other big projects which




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:

The Securities and Exchange Commission (SEC) and capital market participants are weak. The SEC lacks sufficient capacity to regulate, monitor, supervise, or enforce regulations effectively and has limited resources to devote to its development functions. As a result, the SECs authority to oversee any structural changes at the two stock exchanges is being undermined. The managements of the two stock exchanges are unable to regulate and supervise their members activities effectively: the exchanges are owned and dominated by brokers, so their businesses take precedence over the governance of their exchanges.

Neither the SEC nor the exchanges have effective automated surveillance systems that can detect, monitor, and prevent market abuses and malpractices. This has affected market confidence, which has often been cited by investors as the major constraint in the development of the capital market.

The limited number of listed securities has always been a constraint on improving the liquidity and market capitalization of the stock market. The main impediments include an inefficient pricing mechanism, issuers concerns over poor corporate governance, and high listing costs. For primary market development, the IPO approval process, pricing methods, and the capacity of merchant banks need to be improved. Mechanisms that facilitate securities transactions in the capital market, such as securities borrowing and lending, need to be introduced.

Market participants, including brokers, dealers, and merchant bankers, require a license to trade from the SEC. However there are no professional standards and minimal qualification requirements (e.g., examinations and professional train- Page | 23 -

Ch[pt_r 4

strengthen governance and the quality of market intermediaries, an examination and minimum qualification standards need to be introduced as a prerequisite for licensing by the SEC. Only qualified and duly licensed personnel should be allowed to deal with the public in transactions involving securities. Currently, there are no institutions in Bangladesh which offer courses specifically related to the functions and regulation of financial intermediaries.

The majority Government-owned Investment Corporation of Bangladesh (ICB)

remains the single largest integrated capital market operator. ICB and its subsidiaries accounted for 32% of total combined turnover on the DSE and CSE in FY2004. To address conflicts of interest in its combined operations, three separate subsidiaries were created at ICB in 2002. However, all the objectives of unbundling ICBs operations have yet to be achieved. Other problems include the followings: 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 marketboth 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 governancesponsor-owners are managing the firm. In almost 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 amongst interest groups. These are important preconditions for building up a healthy and investment friendly market atmosphere. Lack of potential securities and narrow options for the investors. Disclosure problem-inadequate disclosure, concealment of facts or sometimes fabricated disclosures appear in the annual reports.
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ing) imposed by the SEC or the exchanges on any of the intermediaries. To

Exaggerated projection in prospectuses. Credit facilities are inadequate and interest rates are exorbitant. Problem of rebuilding the image of presently depressed market.


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. In this context, merchant banks have yet to play due role in revitalizing the stock market. Measures can be initiated to remove the constraints that merchant banks are facing in order to make them effective are as follows: Merchant banks (MBs) should be allowed to deal in secondary securities on their own account, which are not currently allowed. Merchant banks should provide price support/stabilization of their underwritten IPOs in the immediate aftermarket. They would be able to offer market-making activities in primary and secondary market and to extend loans to their clients for margin buying of securities, if they could access funds at softer rates. Capital Market stabilization/Development fund should be established at the Bangladesh Bank (BB). The fund will counter finance merchant banks through commercial banks to finance their clients' investment activities. Otherwise, merchant banks should be able to obtain refinancing facilities from the BB on certain margin basis. This will make MBs active and inject fresh fund in the securities market. MBs as wholesale banking are given more activities in order to be sustainable and viable ones. Making the market information dissemination system perfect and pure. Corrective measures to rumors and fake reports and thus making the trading of securities smooth and uninterrupted. Prompt explanations to unusual market actions. Refrain companies from misleading potential investors through fake re- Page | 25 -

Infusion of fake shares.

Refrain sponsors from buying and selling own company securities without notifying the exchange through writing. Making the sources of rumors ineffective in the trading floor by strengthening the market intelligence force. Quick transformation to Central Depository System, which is expected to reduce workload of physical deposit and withdrawal of securities. Enhancement of ethical standard of all the parties involved in trading. Restoring of public confidence through application of educative programs like schooling on securities market and orientation program. The following other 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. Prompt clarification or confirmation of rumors and reports that may likely to have an effect on the trading of securities or would likely to have a bearing on investment decision. The companies concerned must refrain from disclosure like exaggerated
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porting and forecasting.

to make informed investment decisions. Insider must not trade on the basis of material information which is not known to investing public. Insider should refrain from trading on principle, even after material information has been released to the press or through other media. Every director, promoter or person of authority from the sponsoring group should not involve in buying/selling of its own company's securities unless fulfilling requirement to report to the exchange in writing about their intention to buy or sell. Ethical standard of all interest groups must be enhanced so that everybody understands the sanctity of this knowledge based securities industry. Public confidence should be restored and confidence building activities must be carried out through educative programs. Education has no alternative and thus education about capital and securities market is one of the most important aspects that help investors taking investment decision. Education program, orientation program and inclusion of securities and non securities issues in the syllabus of the secondary and higher secondary levels can build awareness about the capital market and its operations. It is evident that all interested groups in the marketplace and the Government as well has to play their respective roles promptly in order to restore the gravity of the market. Government should play the role of a facilitator, partner in progress and growth fosterer in the revolutionary movement that is desired to occur in the market.


Recent initiatives of DSE for securities market expansion

Signing contract with Dubai-based Info-Tech Company for integrated software Book Building System has been introduced in Bangladesh Capital Market. Book Building System, modern and scientific system of price discovery, will be able to attract the entrepreneurs to get their profitable business ventures listed with the countrys growing securities market. MSA Plus is being up-graded time to time in collaboration with India-based Cambridge Solutions to start internet-based transaction soon. After the comple- Page | 27 -

reports or predictions which exceeds what is necessary to enable the public

transaction facilities of securities would reach the doorsteps of investors across the world. DSE is upgrading its automated trading system time to time to meet up the demand of the capital market. As number of transactions increases, DSE took initiatives to tune up its trading Server in December 2009. Present Trading Server has capacity to handle around 6,00,000 trades/day and to support trader IDs up to 5,000. At present Trading activities are being operated by around 3200 workstations from more than 1100 locations in 30 districts. In November 2009, DSE Implemented Web-based Market Data Server (MDS) for providing necessary Market Data to different electronic and print media, Cell Phone Companies, Research Institutes, Brokerage houses etc. DSE signed an agreement with a number of TV channels to provide real time trade data for broadcasting continuously during trading hours. Besides, online Trade Data is also available. Plans are already underway to spread trading activities across the country and to the doorsteps of investors across the world but demand and supply mismatch has been halting the process. With the core intention of executing all the professional works and to build its existing manpower into truly efficient and highly qualified human resources DSE has been continuing its tireless efforts to send its staffs to different organizations and abroad for training. For smooth and time-bound supervision of all the professional jobs Chief Operating Officer and GM (Finance and Accounts) have been recruited. Recruitment at different levels has been being continued in tune with the growing volume of activities to accomplish all the activities. To continue the present trend of securities market growth DSE Board of Directors has been maintaining strong communication with the relevant authorities including Finance Minister, SEC, Bangladesh Bank, National Board of Revenue, Bangladesh Institute of Capital Market and other relevant institutions, organizations, personalities and concerned authorities. A Complaint Cell/Box has been set to listen to investors, relevant stakeholders including listed companies and others and necessary steps are taken to come out
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tion of up-gradation of this work and commencement of internet-based trading,

For transparent and smooth settlement of securities and to also reduce time DSE has been trying to establish an Independent Settlement and Clearing Company. Meetings of different committees are going on regularly and time to time suggestions and instructions of those committees are carried out to enhance the departmental activities. All the divisions and departments have become prompt in carrying out day to day activities and also assigned responsibilities in a far better and quicker way than those of past events. DSE Board of Directors visited USA and show-cased Bangladesh capital market to Non-Resident Bangladeshis to draw their investments in the market. DSE has been arranging investors awareness program in different cities to make the investors aware of the real market situation. It has also been co-operating with Bangladesh Institute of Capital Market authority so that through this newly established institute, time-bound education and practical training on securities market related issues may be conducted. Plans are also underway to arrange road-shows and investors awareness program abroad to spread securities market related issues among the NRBs. Members of Board of Directors, members of different committees and officers of DSE have been continuously visiting different related organizations and stock exchanges and trying to utilize the experience for the better development of DSE. DSE has been requesting the relevant and concerned authorities of Government and other organizations to simplify the investment procedure of NRBs. DSE has placed proposals and continued conversation and discussion with relevant Government authorities to attract shares of state-owned companies. In the backdrop of DSEs proposal recently Honorable Prime Minister has intervened in the issuance of off-loading shares of Government companies and Government shares in other companies in the countrys capital market. Here it may be mentioned that Rupali Bank has sold nearly 30 lakhs share and Mobil Jamuna is coming with shares of Tk. 609 crore. For more consciousness and real information of market DSE has signed agree- Page | 29 -

the crisis time to time.

with market data which will also enhance market growth. Because of efforts of DSE face value standardization process has been being implemented by listed companies gradually which helps investors compare the market price of shares. More dynamism has been put in ICT Division, Operations Division, Finance Division and Administration Division. All the officers under the leadership of CEO, COO, CTO, GM (Admin) and Secretary, GM (Finance and Accounts) and DGMs have been working in a team to carry out their responsibilities smoothly for further development. Discussions are also underway to attract shares of big business. DSE authorities have been continuing discussion with the entrepreneurs on regular basis which will further help increase the depth and dimension of the countrys securities market.


Actions required for restoring investors' confidence on the market

Present situation of Bangladesh stock markets needs to be strengthened to provide greater investors' confidence and to improve market liquidity and competitiveness. The existing trading and settlement systems need to be addressed for reform. To this end, the issues that deserve immediate attention are as follows: The membership of stock exchanges to institutions and corporate sector with adequate capital is required. Improvement of the flow of information, introduction of a system of market-maker in addition to the prevailing order-driven system, credible quicker settlement and the development of over-the counter markets (OCT) for large green field projects and non-listed securities are the prerequisites. To redress the problems of the stock markets in Bangladesh, policy prescription should aim at par to the favorable environment within which the flaws of the market could be mitigated, activities of hidden consortia would be ineffective and the likely exposure of investors to various market abuses including market manipulation should be reduced. Due emphasis should be given to implement the existing rules and regulations; Regulatory framework should be adequate for the prevention of unbridled speculation, market-rigging and insider trading so that erosion in
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ment with different print, electronic media and news agency to provide them

Attempts should be taken to make the present order-driven system of automation foolproof so as to eliminate the opportunity of manipulating the market



Capital market in Bangladesh is now going through a hard time currently as there are some upheavals in the market and there exists an upsetting condition in the stock markets. But as per the past occasions, it is evident that our current capital market has a good ground now for future developments. We should take this opportunity to boost up the market as well as contribute to our economy. In addition, our mindset needs to be changed regarding earning profit from the capital market overnight. Foreign investments also need to be increased to ensure a sound capital and along with this, the government should make an authentic list of the companies that has credibility and accountability. If we can develop our capital market, it will definitely enhance our national economy.



Developing countries which accounts for 75% of the world's population, have an enduring need to attract capital and technology to improve their infrastructure and standard of living. Developing economies, thus, look forward to their capital markets as the engine for future growth as its existence ensures mobilization of surplus funds to the ones suffering from deficit. 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.
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public confidence can be contained;

1. Imam, O. Mahmood, The Capital Market Development in Bangladesh: problems and prospects, October 5, 2000 2. Imam, M. Hasan, Capital Market: An Overview, 2005 3. Nazimuddin, AZM, An Overview of Bangladesh Capital Market, 2007 4. Ahmed, M. Farid, Emerging Stock market and the Economy: The Case of Bangladesh, Soufheast Asian Studies Series, 33. The Research Institute of Southeast Asia, Nagasaki University, 2000. 5. Ahmed. M.Farid, "Equity Market Performance in Bangladesh: An Evaluation", Savings and Development. Vol. XXII, No. I. 1998. 6. DCCl. Report of the Round Table Discussion on Capital Market - A Vehicle for Industrialization and Privatization, August 10. 1999. 7. El-Erian. M.A., "Middle East Financial Markets: Potential for Development and Internationalization", Middle East Executive Report, June 1994. 8. Mookerjee. R., R., "The Stock market and the Economy: The Indian Experience 1949-1981'. Indian Economic Journal, Vol. 36. No. 2, 1988. 9. Moore. G.H., "Stock prices and the Business Cycle", Journal of Portfolio Management, Vol. 1 No. 3. 1975. 10. Nafisa H., Foreign Portfolio Investment: Return. Growth, Determinants and Monitoring -A Critical Analysis. Internship Report. Department of Finance and Banking. University of Dhaka, 1998.' 11. Nishat, M. and Saghir. M., The Stock Market and Pakistan Economy4, Savings and Development, Vol., 2. No. XV. 1991. 12. Shaw. E., Financial deepening in Economic Development. Oxford University Press. New York. 1973. 13. Stiglitz. J.E. and Weiss. A., "Credit Rationing in Markets with Imperfect Information", American Economic Review. Vol. 71. No. 3. June 1981. 14. Tarumizu, K., "Fostering Investor Confidence in the Asian and Pacific Capital Markets." Pacific-Basin Financial Journal, Vol. 1, 1993.
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15. Wai, U.T. and Patrick, H.T., "Stock and Bond Issue and Capital Markets in Less Developed Countries". IMF Staff Papers. July 1973.

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