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A REPORT ON

Blue Chip Share in Bangladesh


Submitted to
Mrs. Tanbina Tabassum Lecturer of Finance, Premier university, Chittagong Submitted by: Section A Department of Finance& Banking Serial No. 01. 02. 03. 04. 05. Name MunMun Dev Nath Susmita Sen Sudeshna Das Farjana Karim Prasenjit Roy Chowdhury ID no 0816112271 0816112275 0816112280 0816112289 0816112308 Program BBA BBA BBA BBA BBA

Table Of Contents

Serial no. 1 2 3 4 5

Particulars Letter of transmittal Acknowledgement Objectives of the study, scope of the study, limitation of the study, Data collection, Data analysis. Overview of the SEC Discussion about CSE. CSE initiatives in market development CSE imitative in expansion

6 7

Potential of capital market in Bangladesh Expansion of the Capital Market and Its Future:

Share Categorization: A, B, G, N & Z

Criteria for Share Categorization: A, B, G, N & Z

10 11 12 13 14 15 16 17 18 19

What is blue chip stock? Features of blue chip stocks How to invest in blue chip stocks Feature of blue chip company History Blue chip shares in Bangladesh CSE-30, Criteria for a Selective Index. Stock market index How to calculate stock market index DSE-20

20

21 22 23 24 25 26 27 28 29

SECTOR WISE SELECTED 30 SHARES IN CSE:

Analysis of stocks Analysis of 10 companies & results Beta factors analysis Benefits of blue chip shares Disadvantages of blue chip shares Futures of blue chip shares Misconceptions Suggestions

Letter of transmittal
A Report on blue chip share. June 24.06.12 Mrs. Tanbina Tabassum Department of Finance & Banking Premier University Subject: Submission of the Report. Honorable Madam, It is our great pleasure to submit the report titled `Report on Blue chip shares in Bangladesh to you. We have prepared this report, as a part of the course Money and Capital Market. To make this report up to the standard we tried our best to fulfill the requirements by implementing the knowledge we

have gather from the course. Thank you very much for providing us this type of opportunity and giving us the necessary guidance and direction needed for preparing the report.We have tried our level best to make this report holistic and informative enough. Besides this,there may be some shortcomings. I would be grateful if you consider those from excusable point. Sincerely yours MunMun Dev Nath Susmita Sen Sudeshna Das Farjana Karim Prasenjit Roy Chowdhury

Batch16, 8th Semester Section #A Department of Finance and Banking Premier University

At first we want to express our great gratitude to our honorable Teacher to give us such a good topic for making a assignment. She gave us her helpful hand to do this assignment. Her class lecture & advice help us to prepare our assignment very much which was very fruitful to us. So we are grateful to her.

.At the very beginning, a special note of acknowledgement is due to our course teacher, Mrs Tanbina tabassum, for giving us the permission to prepare the report on this topic. She was very generous and friendly toward us while conducting the course and was the person who has guided us throughout preparing the report. Her teaching method was really effective and interesting.

We would like to thank God for keeping everything on right track. Finally, we would like to thank our parents and friends without whose support it was impossible for us to complete the project.

We areIntake: 8th semester


Section: A Program: BBA

Department of Finance and Banking Premier University

Blue chip companies are usually financially sound and are thought to be relatively low-risk investments. They tend to be less volatile than other companies and to provide solid growth to portfolios. Similarly, the stocks of blue-chip companies are highly valued due to their consistent financial soundness. A regular dividend is expected from blue-chip stocks even in bad financial times in the stock market. Due to stock market crash now investors are very much worried about price volatility so that they are searching low risky shares so blue chip shares will be suitable for investors. Day by day popularity of blue chip shares are increasing because of their performance. For Investors who are fully depend on share market blue chip shares create opportunities for increasing their earning profits by creating scope of low risk investments. We have analyzed 10 blue chip companies in our report.

DEDICATION

We would like to dedicate all of our efforts to complete this report to our beloved parents and respected teacher MrsTanbinaTabassum..

OBJECTIVES OF THE STUDY The main objective to prepare this report is to know about the blue chip shares in stock market by taking CSE as base. In order to achieve the main objective I have to considersome specific and vital objectives which are given below: To highlight the position of blue chip share in Bangladesh. To analyze the benefit of blue chip share To evaluate the impact of blue chip share in Bangladesh economy To evaluate the behavior of investors in blue chip share To identify the problems and prospects associated with blue chip share in Bangladesh.

SCOPE OF THE STUDY

This report is prepared on the basis of CSE-30 and DSE-20. It shows the practical situations about blue chip shares prevailed in the stock market. The investors will get practical knowledge and idea about the benefits of the blue chip shares and will be able to determine the best way to employ their capital. The study extends to cover the price changes ,dividend policy,issued capital,Beta analysis,EPS,price earnings ratio and price risk (volatility) of few CSE and DSE listed companies. To illustrate the recent affect we used the data for the year of 2009, 2010 and 2011.

LIMITATION OF THE STUDY Information is the primary prerequisite to prepare a good report. Informations are not rich enough or many update data are not available in the market. The report deals with some CSE and DSE listed companies, but not in detail. To show the present situations of blue chip in Bangladesh we used most of our practical knowledge but if the data about blue chip share were available we could practically learn theirinfluence on the price volatility of stock market. The limitation of the study at a glance:

In Bangladesh, there have no share named blue chip share

Time constraints all data are not available for all users complex calculation method METHODOLOGY OF THE STUDY All the information provided in this report has been collected through 3 stages. Data collection Data analysis

DATA COLLECTION Data has been collected directly from the brokerage house and CSE CSE Bazar Parikrama, CSE website and company annual reports. DATA ANALYSIS Data has been analyzed with the help of the mathematical and graphical expressions. In the report we have analyzed of 10 listed companies of CSE and DSE including their average return. ORGANIZATION OF DATA To prepare this report I have organized the data in 5 chapters along with problems and recommendations related to the subject matter of this report

Overview of stock exchange commission


Securities and Exchange Commission (SEC) was established on 8 June 1993 through enactment of the Securities and Exchange Commission Act, 1993. The objectives of the SEC are to develop the securities markets and to frame necessary rules and regulations of capital markets and issues and dealings in securities with a view to provide for protection of investors. After establishment, the Commission has played significant role in the overall development of the capital market and legal infrastructure in the capital market, introduction of automated trading system for securities transaction, deposit and transfer of securities electronically through establishment of Central Depository Bangladesh Limited, opportunity of getting real time market price of securities and index information, etc. Consequently, investors have been ensured to invest in the capital market with confidence, and similarly entrepreneurs of different industries have picked the capital market as the main source of long-term financing. At present, the capital market of Bangladesh is passing through a critical juncture. In the backdrop of recent volatility and economic scenario look at national and global levels, concerted efforts are needed to restore the confidence of investors and bringing stability in the market. All market participants such as merchant bankers, brokers/dealers, asset management companies, auditors, credit rating agencies, private entrepreneurs, state owned enterprises, stock exchanges and regulatory organizations have to work together more professionally in order to achieve the ultimate goal of the Capital Market. Likewise, investors have to be more aware about the capital market and need to enhance their knowledge in related areas.

The Dhaka Stock Exchange (DSE):

Dhaka Stock Exchange Ltd (DSE) is the oldest and largest stock exchange in Bangladesh. Though DSE was established in 28 April 1954 but its commercial operation started in 1956.The board of directors consisting of 24 members directs the activities of DSE. Out of them, 12 directors are elected by direct votes of DSE members and other 12 directors are nominated by the elected members from non-DSE members upon approval of the Commission. At present, there are 238 members in DSE of which 22 members are registered by the Commission for conducting securities business. DSE has expanded its on-line trading network to many district towns like Gazipur, Narayanganj, Comilla, Feni,Habiganj, Maulvibazar, Mymensingh, Chittagong, Khulna, Sylhet, Kushtia, Barisal, Rajshahi and Bogra including the divisional towns. As on 30 June 2011 total number of listings in DSE was 490 against which issued capital was Tk. 80683.90 crore and the market capitalization was Tk. 285389.22 crore.

600 500 400 300 200 100 0 No. of S urities ec 2007 2008 2009 2010 2011

The Chittagong Stock Exchange (CSE) at a glance:

The Chittagong Stock Exchange Ltd (CSE), the second stock exchange, was established in 1995. The board of directors consisting of 24 members directs the activities of CSE. Out of them, 12 directors are elected by direct votes of CSE members and other 12 directors are nominated by the elected members from non-CSE members upon approval of the Commission. Now there are 135 members in CSE of which 120 members are registered by the Commission for conducting securities business. As on June 30, 2011 total number of securities in CSE was 215 against which issued capital was Tk. 20677.39 crore and market capitalization was Tk. 225978.00 crore.

Over -the-Counter Market or OTC Market: Securities are traded without intermediaries through mutual understanding in the OTC market, which are outside the stock exchanges. In CSE stock exchanges OTC market, there are opportunities of securities trading. Under Securities and Exchange Commission (Over-the-

Counter) Rules, 2001, OTC market was established in CSE. Securities de-listed from the exchanges and securities not listed with the exchanges but issued obtaining consent from the Commission can be traded in the OTC market. Dhaka Stock Exchanges Ltd started OTC market in line with the direction of the Commission on 6th September, 2009. Settlement procedure of the OTC market is like the public market.

CSE initiatives in market development


CSE was very keen on development activities in 2008. From the very beginning CSE tried to get along with the investors. On the continuation second CSE capital market fair was organized in Sylhet. The first one was organized in Chittagong in 2005. CSE also organized a monthly training program about capital market for the third time in March. The fourth and fifth was arranged in Juneand the sixth and seventh in September. In the same time CSE arranged a five-day certificationcourse in collaboration with National Stock Exchange of India Ltd. to make people working in brokerage firms and financial institutions aware of financial derivatives. In the year 2008, CSEextended its network to Khulna, Moulovibazar, Sylhet, Chhatak, and Hathazary in Chittagong.Up tonow CSE trading network is extended to 11 cities and 4 upazillas.Now CSE trading 30 blue chip shares.

The Mission
To create an effective, efficient and transparent market atmosphere of international standard to save and invest in Bangladesh in order to facilitate the competent entrepreneurs to raise fund and accelerate industrial growth for overall benefit of the economy.

The Potential of the Bangladesh Capital Market

The capital market is the engine of growth for an economy, and performs a critical role in acting as an intermediary between savers and companies seeking additional financing for business expansion. Vibrant capital is likely to support a robust economy. While lending by commercial banks provides valuable initial support for corporate growth, a developed stock-market is an important prerequisite for moving into a more mature growth phase with more sophisticated conglomerates. Today, with a $67 billion economy and per capita income of roughly $500, Bangladesh should really focus on improving governance and developing advanced market products, such as derivatives, swaps etc. Despite a challenging political environment and widespread poverty, Bangladesh has achieved significant milestones on the social development side. With growth reaching 7 percent in 2006, the economy has accelerated to an impressive level. It is noting worthy that the leading global investment banks; Citi, Goldman Sachs, JP Morgan and Merrill Lynch have all identified Bangladesh as a key investment opportunity. The Dhaka Stock Exchange Index is at a 10-year high, how ever, the capital market in Bangladesh is still underdeveloped and its

development is imperative for full realization of the country's development potential. It is encouraging to see that the capital market of Bangladeshis growing, albeit at a slower pace than many would like, with market development still at a nascent stage. The market has seen a lot of developments since the inception of the Securities and Exchange Commission (SEC) in 1993. After the bubble burst of 1996, the capital market has attracted a lot more attention, importance and awareness that have led to the infrastructure we have in the market today.

Expansion of the Capital Market and Its Future:


The capital market of Bangladesh is an emerging market. Although the capital market started in 1956, the establishment of the Securities and Exchange Commission in 1993 quickened the pace of growth of the securities market by strengthening the role of the market participants. While in 2000 the market capitalization was only around 2.24% of the countrys GDP, at the end of June, 2011 it stood around 41.22%. The average daily turnover of the countrys main stock exchange. The trading network has expanded to the six divisions of the country transcending the periphery of Dhaka and Chittagong. The network is also expanding to district towns and other important places gradually. But expansion of the trading network is not enough; it requires expansion of investment related knowledge especially for the investors and development of trend in investing based on fundamentals, which will help investors to protect themselves in many ways from unexpected loss. SEC, DSE, CSE and merchant bankers arrange regular training programs for the investors in related areas. Booklets and brochures have also been published in this regard. To conduct more extensive level of training, an institute named Bangladesh Institute of Capital Market has got approval recently. For the sake of the depth of the capital market, efforts are underway to launch activities for the development of bond market and derivatives market. It is expected that in the next 5 years considerable development will take place in these areas.

Actions have been initiated to launch a full-fledged separate automated clearing house, which is expected to reduce settlement time and thus improve overall market efficiency.

3000 2500 2000 1500 1000 500 0

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11

Share Categorization: A, B, G, N & Z


The prime bourse of the company introduced Group A and Group B from July 2, 2000 based on its financial strength and performance to give clear information to investors for taking informed decision. DSE has further categorized the securities by introducing Group Z which came into effect from September 26, 2000. The Stock Exchange introduced another company category Group G on June 30, 2002. The categorization helps a lot the investors in choosing companies before making investment decision. N Category- the newest one was launched through an order of SEC on July 3, 2006. Listed securities are categorized into A, B, Z, N and G based on profitability , commercial operation, holding of AGM and accumulated loss exceeding paid up capital etc. This categorization helps investors to know the qualities of securities before making investment decision.

During the reporting FY, number of A category companies has increased compared to the last FY. The number of B category companies has increased and Z category companies have decreased compared to the last FY.

Criteria of the Share Category is as follows:


A Category Companies: Companies which are regular in holding the Annual General Meetings and have declared dividend at the rate of 10 percent or more in a calendar year. (Mutual Funds, Debentures & Bond are being traded in this category). B Category Companies: Companies which are regular in holding the Annual General Meetings but have failed to declare dividend at least at the rate of 10 percent in a calendar year. G category and their settlement systems would be like B-category companies. Category Companies: Companies which have failed to hold the Annual General Meetings 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. N Category Companies: Greenfield Companies. Z Category Companies: All newly listed companies except Greenfield companies will be placed in this Category P/E Category name A B Z N P/E Ratio 13.54 38.42 49.94 20.49 Category Cap. 1,749,721,283,585 10,600,188,612 73,507,118,503 13,740,120,000 Category Earning 129,207,923,513 275,927,924 1,471,775,251 670,736,000

1.8E+ 12 1.6E+ 12 1.4E+ 12 1.2E+ 12 1E+ 12 8E+ 11 6E+ 11 4E+ 11 2E+ 11 0

A B Z N PE ratio categ ory categ ory capital earning

Blue Chip Stock


The stocks of well-established companies, leading in their sector, with consistent profit growth over a long period and steady dividend payment are called "blue chip stocks". The term "blue chip" gets its name from the game of poker where a blue chip has the highest value.

Blue chip companies are usually financially sound and are thought to be relatively low-risk investments. They tend to be less volatile than other companies and to provide solid growth to portfolios. Similarly, the stocks of blue-chip companies are highly valued due to their consistent financial soundness. A regular dividend is expected from blue-chip stocks even in bad financial times in the stock market.

Blue chip stocks have a lot of prestige as an investment asset class. They are perceived to be the best stock for long-term investment. Blue-chip companies are the leaders in their sector, and are known for their sheer size and reputation - in products, services and company governance.

Features of Blue Chip Stocks


There are no specific criteria for blue chip stocks. The most common characteristics of such stocks include: 1. Revenues: Companies with revenues higher than that generated by industry peers. 2. Earnings: Companies that have been generating healthy earnings on a consistent basis. 3. Dividends: Companies that pay regular dividends to common stockholders, even if their performance has been unsatisfactory in a particular period. Moreover, the dividend payout is raised at regular intervals. 4. Balance Sheet: The balance sheets are robust and their debt liabilities are not extensive. 5. Credit Rating: Their credit ratings in the bond and unsecured debt markets are high. 6. Size: The market capitalization of these companies is higher than that of other companies in the same industry. 7. Product Portfolio: They have extensive and diversified product lines. They also have a wide global presence. 8. Competition: They are cost efficient, with high distribution control and excellent franchise value, all of which contribute towards their competitive advantage.

How to Invest in Blue Chip Stocks There are several ways of purchasing blue chip stocks. These include: 1. Directly from a broker. One can opt for a direct stock purchase plan or a dividend reinvestment plan to acquire blue chip stocks. 2. A mutual fund that specializes in blue chip stocks. 3. Investing in the Diamond, a popular ETF (exchange traded fund). By buying a share of the Diamond, you purchase a fraction of all the thirty stocks in the US-based Dow Jones Industrial Average (DJIA) index. Given their low expense ratio, limited management fee and high tax efficiency, the Diamonds are preferred to blue chip mutual funds.

Features of a Blue Chip Company


Here are some aspects of a blue-chip company:

Leaders in their sectors, with significant competitive advantage. Steady earnings over a long period of time. Large market capitalisation. High public confidence due the quality of its products and services. Ability to face both good and bad financial times, including recession.

Examples in the Bangladesh include Grameen Phone and Square Pharma. An index such as the DSE 20 tracks blue chip stocks.

History
The term "blue chip stock" was coined by the Dow Jones' Oliver Dingold in the early 1920's (source: Wikipedia). The phrase refers to a blue poker chip, which is the highest and most valuable piece. A blue chip stock is classified as the stock of a large company that is an industry leader and provides consistent, steady investment returns. Blue chip stocks are traditionally thought to be a safe investment since the prices do not tend to vary wildly. To compensate for slower growth, blue chip stocks pay investors dividends at regular intervals. Often, the amount paid out in dividends increases over time.

Blue chip share in Bangladesh There is no share named blue chip share in Bangladesh. But DSE has 155 A category shares of which 20 shares fulfill the requirements of blue chip shares. CSE has 135 A category shares of which 30 shares fulfill the requirements of blue chip shares .The blue chip companies of the country are playing vital role in this growth. We have put together a brief profile of the top 10 blue chip companies. They are well-known names of Bangladesh Inc and have played a vital role in the success of Bangladesh economy. Most blue chip stocks pay regular dividends, even when business is faring worse than usual. They are valued by investors seeking relative safety and stability, though prices per share are usually high. Typically, such stocks are perceived to offer reliable returns, low yield, and low risk.

CSE-30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

DSE-20 ACI AMCL(PRAN) APEXTANRY BATASHOE BATBC BDLAMPS BXPHARMA DHAKABANK GQBALLPEN ISLAMIBANK LINDEBD MEGHNACEM MONNOCERA NBL PRIMEBANK SINGERBD SOUTHEASTB SQUARETEXT SQURPHARMA UTTARAFIN

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

ABBANK ACI AFTABAUTO APEXTANRY ASIAINS BAYLEASING BEXIMCO CONFIDCEM EBL FAREASTLIF HEIDELBCEM IDLC IFIC ISLAMIBANK JAMUNAOIL LANKABAFIN MPETROLEUM NBL NAVANACNG PLFSL PRIMEBANK PRIMEFIN PUBALIBANK SINGERBD SQURPHARMA SQUARETEXT SAPORTL UNIONCAP UTTARABANK UTTARAFIN portfolio identical to the asset mix of the index. Value-Weighted Index satisfies the above criterion. Selection of stocks for the benchmark index should be such that it represents the whole market. In addition it will be guaranteed that the constituent stocks have high percentage coverage of the At the beginning of new millennium a selective Index will be introduced, which is found to be very popular in almost all the developed exchanges worldwide. Here the selection criteria play a very important role in forming an index. Criteria for a Selective Index It provides a discussion about the important criterion for an index, which is to be used as a benchmark of performance. The criterion is that the movement of the index fully represents the aggregate movement of the index's constituent assets and that the index's returns are realizable by an investor who has held a CSE SELECTIVE INDEX (CSE - 30)

market in terms of market value. This will make it difficult if not possible for a few investors to manipulate the movement of the index. CRITERIA FOR CSE-30 INDEX

Two layer methods are followed for selection of listed companies in the CSE-30 Index. In the first layer method, basic criteria are considered for primary selection.

BASIC CRITERIA

Must be listed with the Chittagong Stock Exchange Limited. In case of IPO/New Issue, this should be on listing either with DSE or CSE for a minimum period of 2 years or remained in Commercial Production in Bangladesh for the minimum same period prior to its listing.

Companies that did not hold their Annual General Meetings regularly will not be considered. Minimum market capitalization must be Tk. 200 million and at least two times of paid-up capital. Must have at least 20% free floating share capital. Free floating share capital shall mean the share capital which will exclude Govt's holding (other than ICB), Sponsors/Directors & their Associates' holding plus other locked-in portions.

Must have positive revenue reserve/ retained earnings. Must be traded for at least 50% trading days of the six monthly review period. Paid dividend in any of the last 2 years. Company having negative Earning Per Share (EPS) for last two consecutive years will not be considered. Company falling under settlement category 'Z' will not be considered. Financial Institution falling under the problem list of Bangladesh Bank will not be considered provided such information is available from an acceptable source. Company failing to pay the listing fees and/or penalty imposed under the Listing Regulations of CSE for a period of 2 years will not be considered.

At least one company from each sector having minimum seven companies will be taken in the index if the scrip satisfies the above criteria and achieves the minimum point (50 points) as evaluated on the basis of the following Selection Criteria. The sector having less than seven companies will be considered to be a part of Miscellaneous Sector.

On being qualified on the basis of the Basic Criteria, the companies are required to meet the following further Selection Criteria to have the final berth in CSE-30 Index.

SELECTION CRITERIA

Higher Net Assets Value (NAV) per share Higher rate of Earning Per Share (EPS) Higher rate of Dividend Lower Price Earning (PE) Ratio Higher Dividend Yield (DY) Higher rate of free floating in equity Larger number of shareholders Higher liquidity in terms of trading day Higher liquidity in terms of number of contract Longer duration of continuous remaining in the CSE-30 Index Regular payment of listing fees

Conditions to be followed while forming the selective Index:


Only the active scrips will be considered for calculating the index. Mutual Funds and Debt securities will not be considered in this index. Only normal public market trades will be considered. Selective Index will be refreshed after 3 minutes time interval during online trade. At the time of update the Selective Index will consider the Weighted Average Price for each constituent stock. (Example annexed) No changes in number of shares will be allowed during the bussiness sessions.

Index committee will review the index - its criteria, performance, calculation method after every six month. Index Base Date is 30th December 1999 Base Day index is set to be 1000.

CSE-30
The construction principle of this index based on Laspeyres method like other two CSE indices , CSE All Share Price Index and CSE-30 Index. It may be mentioned here that the base value of these two indices was also set to 1000 with a base date 30th December 1999. The current values (as on 11th February 2004) of CSE All Share Price Index and CSE-30 Index are 1601.54 and 1483.60 respectively. Selected 30 Companies Close Price 43.6 175.0 140.0 100.3 40.3 47.7 90.7 118.7 40.3 195.0 236.0 117.9 45.7

SL Scrip Code 1 2 3 4 5 6 7 8 9 ABBANK ACI AFTABAUTO APEXTANRY ASIAINS BAYLEASING BEXIMCO CONFIDCEM EBL

LTP 43.7 175.0 140.5 100.3 39.8 47.9 90.5 118.3 40.4 195.0 236.0 117.6 45.6

High 44.2 175.0 141.0 101.0 40.7 48.0 91.5 118.9 40.7 195.0 236.0 118.0 45.9

Low 43.1 170.1 138.2 100.1 39.8 47.0 89.9 116.8 39.8 190.2 236.0 116.2 45.5

YCP 43.9 180.0 140.9 105.0 40.5 48.5 91.3 118.6 40.6 193.6 236.1 119.5 46.0

Change -0.2 -5 -0.4 -4.7 -0.7 -0.6 -0.8 -0.3 -0.2 1.4 -0.1 -1.9 -0.4

Trade Volume 231 2 242 6 16 34 437 62 79 7 1 9 12 77,430 150 50,776 1,200 913,562 17,966 136,838 10,065 50,920 2,300 100 1,687 1,690

10 FAREASTLIF 11 HEIDELBCEM 12 IDLC 13 IFIC

14 ISLAMIBANK 15 JAMUNAOIL 16 LANKABAFIN 17 MPETROLEUM 18 NBL 19 NAVANACNG 20 PLFSL 21 PRIMEBANK 22 PRIMEFIN 23 PUBALIBANK 24 SINGERBD 25 SQURPHARMA 26 SQUARETEXT 27 SAPORTL 28 UNIONCAP 29 UTTARABANK 30 UTTARAFIN

42.9 255.2 88.2 214.8 29.6 97.0 45.5 35.0 62.1 32.4 180.0 256.3 105.9 41.0 39.7 45.5 110.6

43.2 255.2 89.5 214.8 30.0 98.0 46.2 35.2 62.9 32.6 180.5 262.0 105.9 41.1 39.7 46.0 111.0

42.8 250.1 86.9 209.0 29.5 96.1 44.8 34.9 61.5 32.1 180.0 255.4 102.9 40.4 38.6 45.4 108.0

43.2 255.6 88.8 213.5 29.9 98.0 46.1 34.9 63.0 32.6 180.0 262.1 103.0 41.4 39.7 46.0 110.1

43.0 254.5 88.2 213.0 29.6 96.9 45.5 35.0 62.4 32.4 180.3 256.6 105.3 40.9 39.7 45.7 109.5

-0.3 -0.4 -0.6 1.3 -0.3 -1 -0.6 0.1 -0.9 -0.2 0 -5.8 2.9 -0.4 0 -0.5 0.5

88 31 144 53 260 90 266 33 84 139 4 258 20 26 7 65 27

38,051 4,900 101,500 59,900 159,838 24,444 88,400 21,836 14,000 72,148 700 107,890 12,706 5,907 3,527 28,556 4,200

Stock market index


A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds. Alternatively, an index may also be considered as an instrument (after all it can be traded) which derives its value from other instruments or indices. The index may be weighted to reflect the market capitalization of its components, or may be a simple index which merely represents the net change in the prices of the underlying instruments.

There are many different ways of constructing an index. One of the most common methods is illustrated by the following simple example.The values of a market portfolio at the close of trading on Day 1 and Day 2 are recorded below:

Trading days DAY 1 (base day) DAY 2

Value of portfolio Tk 20,000 Tk 21,000

Index 1000 1050

We take Day 1 as the base day. The index on that day will be taken as a standard. The value assigned to the base day index is 1000 in this example. On Day 2 the value of the portfolio has changed from Tk 20,000 to Tk 21,000, a 5% increase. Therefore, the value of the index on Day 2 will change to indicate a corresponding 5% increase in market value. The computation follows the procedure below: 2's portfolio value Day 2's index = ------------------------------------------------- * Base Day's (Day 1) index Base Day's (Day 1) portfolio value Tk 21,000 = ---------------- * 1000 Tk 20,000 = 1050

Day 2's index is 1050 as compared to the 1000 of day 1. The above illustration only serves as an introduction to how a particular index is constructed. The daily computation of an index is more involved especially when there are changes in market capitalization of constituent stocks, e.g., rights offers, stock dividend etc. The primary objective of constructing market indices is to measure the performance of the market. The indices provide vital information about the current and historical behavior of the market. Stock market indices differ from one to another basically in their sampling and/or weighting methods.

Highest value : 16564.04 Lowest value : 9995.5619 Date From : 18 Jun, 2011 Date To : 18 Jun, 2012 Trading Days : 241

SECTOR WISE SELECTED 30 SHARES IN CSE: Banking & Financial sector: Islami Bank Bangladesh Limited ( ISBNK), Prime Bank Limited ( PMBNK ), Dhaka Bank Limited ( DHBNK ), South East Bank Limited ( SEBNK ), National Bank Limited ( NBL ), National Credit & Commerce Bank ( NCCBL ), Al-Arafat Islami Bank Limited ( AIBL ). Pharmacy & Chemical sector: Square Pharmaceuticals Limited ( SQPH ), Beximco Pharmaceuticals Limited ( BXPH ), Advanced Chemicals Industries Limited ( ACL ), Keya Cosmetics Limited ( KECOS ).Textiles & Clothing Sector: Square Textiles limited ( SQTEX ), Padma Textiles Limited ( PDTEX ), Beximco Synthetics Limited ( BXSYN ), Prime Textile Spinning Mills Ltd ( PRTEX ), Apex Weaving & Finishing Mills Ltd. ( APXWV ), Beximco Textiles Limited ( BXTEX ). Food & Agriculture sector: Agricultural Marketing Company limited ( AMCL ). Engineering & Electrical Sector: Singer Bangladesh Limited

( SINGR ), Eastern Cables Limited ( ESTCB ), Quasem Drycells Limited ( QUSDR ), Olympic Industries Limited ( OLIND ). Cement Sector: Heidelberg Cement Bangladesh Ltd. ( HBCM ), Confidence Cement Ltd ( CNFCM ), Meghna Cement Mills Ltd ( MGHCM ). Leather & Footwear Sector: Apex Tannery Limited ( APXTN ). Services & Construction Sector: Eastern Housing Limited ( EHL ). Information Technology: BOC Bangladesh Limited ( BOC ).Ceramic Sector: Fu-Wang Ceramic Industry limited ( FWCR ). Miscellaneous Sector: Aramit limited ( ARMIT ).

DSE-20 Index: The index was introduced on January 01, 2001. The index comprises leading 20 shares with a base of 1000. The criteria taken into account in formulating the index were market capitalization, free float shares in public hands, minimum payment of 10 percent dividend for the last three consecutive years and 95 percent trading days liquidity in terms of trading during the last six months. Subjective criteria such as good corporate governance, regular holding of Annual General Meetings and sectoral representation were the other key factors for becoming eligible for inclusion in the index.

DSE 20 Share By Company Name On May 30, 2012 at 14:36:46 Last # Trading Code 1 ACI 2 AMCL(PRAN) 3 APEXTANRY 4 BATASHOE 5 BATBC 6 BDLAMPS 7 BXPHARMA 8 DHAKABANK 9 GQBALLPEN 10 ISLAMIBANK 11 LINDEBD 13 MONNOCERA 14 NBL 15 PRIMEBANK 16 SINGERBD 17 SOUTHEASTB trading High Low price 180.8 120.5 103.0 499.9 600.0 141.0 63.4 30.4 196.1 43.5 532.0 41.9 30.5 34.8 180.9 21.8 Close Price YCP Change Trade Volume Value(mn) 176 4.80 25 11 39 8 42 48 478 146 546 402 21 670 31 927 108 80 115 108 931 412 1900 1300 7700 800 28450 5000 0.34 0.16 0.80 0.40 17.07 0.70

181.0 177.1 0.0 123.7 120.5 0.0 104.6 103.0 0.0 499.9 499.9 0.0 602.0 600.0 0.0 142.0 139.7 0.0 64.1 63.0 0.0 31.0 30.4 0.0 198.0 191.5 0.0 43.9 43.4 0.0 544.0 530.0 0.0 153.1 149.9 0.0 42.0 41.0 0.0 31.0 30.1 0.0 34.8 34.3 0.0 183.4 178.5 0.0 21.8 21.3 0.0 104.9 102.8 0.0 254.9 250.9 0.0 110.0 105.7 0.0

120.4 0.10 102.8 0.20 498 1.90 601.5 -1.50 139.5 1.50 62.7 0.70 30.5 -0.10 191.7 4.40 43.4 0.10 529.2 2.80 147.1 6.00 40.9 1.00 30.3 0.20 34.5 0.30 178.4 2.50 21.6 0.20 102.8 0.00 250.3 1.70 104 5.30

149350 9.50 136600 4.17 79150 2200 5900 15.48 1.18 0.25 340200 14.81 160600 24.39 834000 25.39 128750 4.45 8100 24350 80520 73850 1.47 2.52 20.36 8.02 300500 6.49

12 MEGHNACEM 153.1

18 SQUARETEXT 102.8 19 SQURPHARMA 252.0 20 UTTARAFIN 109.3

Analysis of stocks
Stock analysis is the process of screening a companys fundamentals and investigating market trends in order to identify stocks that can deliver high profits at low risk. Stock markets are volatile and go through bull and bear phases, with share prices moving up or down. Stock market analysis helps investors identify these phases. There are two distinct methodologies for stock analysis, namely fundamental analysis and technical analysis.

Analysis of 10 companies:

SECTOR DETAILS Sector: Sector PE: Sector Cap Sector Earnings: Sector Beta: BASIC INFO Lot: No Of Securities: Listing Year: Reserve: Last AGM Held: Capital Details Paidup Capital: Market Capital: Trade % of MCAP: Public Securities Public Cap 4423 M 22619.315 M 0.02% 160301721 8197M 50 442333668 1983 10460.8 02/05/2012 Bank 10.27 511552005945.00 49834736609.20 0.89

SHARE DRISTRIBUTION Director: 13.9% EPS Last EPS: 1.14 52 WEEK HIGH Adj price: 75.13 Quarter: Q1 Annu EPS: 4.56 P/E: 9.34 Public: 36.24% Govt: 0.57% Inst: 49.29% Foriegn: 0%

52 WEEK LOW Adj price: 31.17

Financial Performance
Basic EPS Net Restated Net Profit After Tax % % (restated) Asset Net (mn) Dividend Dividend Based on Based on Value Asset Yield Performance Including Including Per Value Including Year Continuing Extra- Continuing Extra- Share Per Continuing Extraoperations Ordinary operations Ordinary Share operations Ordinary Income Income Income 2006 93.08 NA 0 NA 481.74 0 532.19 NA 30 0 Basic EPS 2007 2008 2009 2010 2011 2012 256.1 103.18 133.26 12.45 NA NA NA NA 0 0 NA NA 85.37 89.72 106.61 10.82 NA NA NA NA 0 0 NA NA 807 399 44.14 NA NA 202.33 318.87 38.38 NA NA 1903.49 2300.62 3417.19 3989.52 NA NA NA NA 0 0 NA NA 200 15 20 10 NA NA 0 1.82 1.7 0.63 NA NA 301.49 262.16

200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% dividend

2007 2008 2009 2010 2011

SECTOR DETAILS

BASIC INFO 50 23773833 1976 3883.72 12/06/2012

Capital Details Paidup Capital: Market 238 M 2933.238 M

Lot: Sector: Pharmaceuticals & No Of Chemicals Securities: Sector PE: 17.86 Listing Sector Cap 154955418232.00 Year: Sector 8676994879.92 Reserve: Earnings: Last AGM Sector Beta: 0.66 Held:

Capital: Trade % of 0.01% MCAP: Public 7431700

Securities Public Cap 917M

SHARE DRISTRIBUTION Director: 34.2% Public: 31.26% Govt: 0% Inst: 34.54% Foriegn: 0%

EPS Last EPS: 0.10 52 WEEK HIGH Adj price: 252.83 52 WEEK LOW Adj price: 124.25 Quarter: Q1 Annu EPS: 0.40 P/E: 429.50

Dividend Dividend(%) 2007 2008 2009 85 100.00,20%B 105 Dividend payout ratio 4.68 1.92 2.35

2010 2011

120 80,20%B

3.22 3.87

120% 100% 80% 60% 40% 20% 0% dividend 2007 2008 2009 2010 2011

SECTOR DETAILS Sector: Sector PE: Sector Cap Sector Miscellaneous 8.01 50729782832.50 6331036466.76

BASIC INFO Lot: No Of 100 363565109

Capital Details Paidup Capital: Market 3636 M 1339.559 M

Securities: Listing 1989

Earnings: Sector Beta: 0.86

Year: Reserve: 15361.8 Last AGM 30/06/2011 Held:

Capital: Trade % of 1.25% MCAP: Public 277945526

Securities Public Cap 1024M SHARE DRISTRIBUTION Director: 13.25% EPS Last EPS: 3.53 52 WEEK HIGH Adj price: 198.00 52 WEEK LOW Adj price: 61.60 Quarter: Q1 Annu EPS: 14.12 P/E: 6.26 Public: 76.45% Govt: 0% Inst: 0% Foriegn: 10.3%

Financial Performance Basic EPS Net Restated Net Profit After Tax % % (restated) Asset Net (mn) Dividend Dividend Based on Based on Value Asset Yield Performance Including Including Per Value Including Year Continuing Extra- Continuing Extra- Share Per Continuing Extraoperations Ordinary operations Ordinary Share operations Ordinary Income Income Income 2006 0 NA 3.65 NA 34.81 0 132.19 NA 15 0 Basic EPS 2007 2008 2009 2010 2011 2012 1.53 19.08 34.59 NA NA NA NA NA 0 NA NA NA 1.01 11.11 21.62 NA NA NA NA NA 0 NA NA NA 32.9 72.35 NA NA NA 23.13 43.4 NA NA NA 55.4 1047.36 3259.8 NA NA NA NA NA 0 NA NA NA 15 10 60 NA NA NA 0 0.54 0 NA NA NA

101.96 63.73

60 50 40 30 20 10 0 2007 2008 2009 2010 2011

dividend (% )

BASIC INFO SECTOR DETAILS Sector: Sector PE: Sector Cap Sector Bank 10.27 511552005945.00 49834736609.20 Lot: No Of 100 466759413

Capital Details Paidup Capital: Market 4668 M 9508.787 M

Securities: Listing 2000 Year: Reserve: 2989.27 Last AGM 29/03/2012 Held:

Capital: Trade % of 0.06% MCAP: Public 140074500

Earnings: Sector Beta: 0.89

Securities Public Cap 2854M

SHARE DRISTRIBUTION Director: 50.53% EPS Last EPS: 0.90


52 WEEK HIGH Adj price: 37.96 52 WEEK LOW Adj price: 24.58

Public: 30.01%

Govt: 0%

Inst: 19.46%

Foriegn: 0%

Quarter: Q1

Annu EPS: 3.60

P/E: 8.19

Dividend declaration

year 2007 2008 2009 2010 2011

Dividend 25% 15% 25% 35% 30%

35% 30% 25% 20% 15% 10% 5% 0% dividend 2007 2008 2009 2010 2011

BASIC INFO SECTOR DETAILS Lot: Sector: Bank No Of Sector PE: 10.27 Securities: Sector Cap 511552005945.00 Listing Sector 49834736609.20 Year: Earnings: Reserve: Sector Beta: 0.89 Last AGM Held: SHARE DRISTRIBUTION Director: 42.01% EPS Last EPS: 1.57
52 WEEK HIGH Adj price: 46.50 52 WEEK LOW Adj price: 34.90

Capital Details Paidup Capital: Market Capital: Trade % of MCAP: Public Securities 12510 M 21341.232 M 0.05% 316118603

100 1250964000 1985 13508.5 15/05/2012

Public: 25.27%

Govt: 0%

Inst: 9.98%

Foriegn: 22.74%

Quarter: Q1

Annu EPS: 6.28

P/E: 6.85

Dividend year 2007 2008 2009 2010 2011 dividend 25% 30% 30% 35% 25%

35% 30% 25% 20% 15% 10% 5% 0% dividend 2007 2008 2009 2010 2011

SHARE DRISTRIBUTION Director: 42.5% Public: 37.59% Govt: 0% BASIC INFO Lot: Sector: Engineering No Of Securities: Listing Year: Reserve: 482.35 2009 100 49658400 Inst: Foriegn: Capital Details 19.91% 0% Paidup Capital: Market Capital: Trade % of 0.00% MCAP: Public Securities Public Cap 0M 18666593 M 497 M

SECTOR DETAILS

Sector PE: 19.18 Sector Cap 86804872441.30 Sector Earnings: Sector Beta: 0.99 4526302475.00

Last AGM 22/09/2011 Held:

EPS Last EPS: 3.76 Quarter: Q3 Annu EPS: 5.01 P/E: 18.87

52 WEEK HIGH Adj price: 159.82

52 WEEK LOW Adj price: 48.60

BASIC INFO SECTOR DETAILS Lot: Sector: Engineering No Of Securities: Listing Year: Reserve: 2747.84 1983 50 39267580

Capital Details Paidup Capital: Market Capital: Trade % of 0.04% MCAP: Public Securities Public Cap 526M 6282813 3290.582 M 393

Sector PE: 19.18 Sector Cap 86804872441.30 Sector Earnings: Sector Beta: 0.99 4526302475.00

Last AGM 30/04/2012 Held:

SHARE DRISTRIBUTION Director: 75% EPS Last EPS: 2.33 Quarter: Q1 Annu EPS: 9.32 P/E: 19.24 Public: 16% Govt: 0% Inst: 9% Foriegn: 0%

52 WEEK HIGH Adj price: 309.00 52 WEEK LOW Adj price: 165.90

SECTOR DETAILS Sector:

BASIC INFO Lot: 10

Capital Details Paidup Capital: Market Capital: 2648 M 31564.436 M

Pharmaceuticals & Chemicals No Of 264834760 Securities: Sector PE: 17.83 Listing 1995 Sector Cap 154731079433.00 Year: Sector 8676994879.92 Reserve: 11279.9 Earnings: Last AGM 21/09/2011 Sector Beta: 0.66 Held:

Trade % of 0.09% MCAP: Public Securities 103656325

Public Cap 12354M

SHARE DRISTRIBUTION Director: 54.16% EPS Last EPS: 11.21 Quarter: Q3 Annu EPS: 14.95 P/E: 17.19 Public: 39.14% Govt: 0% Inst: 0% Foriegn: 6.7%

52 WEEK HIGH Adj price: 286.00 52 WEEK LOW Adj price: 175.50

Dividend year 2007 2008 2009 2010 2011 dividend(%) 50% 40% 40% 35% 30%

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

2007 2008 2009 2010 2011

dividend

SECTOR DETAILS Sector: Financial Institutions

BASIC INFO Lot: 200

Capital Details Paidup Capital: Market Capital: 1238 M 3020 M

Sector PE: 27.17 Sector Cap 191637970524.00 Sector Earnings: 7052330754.44

No Of 123750000 Securities: Listing Year: Reserve: 1992 2696.44

Trade % of 0.22% MCAP: Public Securities 26655750

Sector Beta: 0.90

Last AGM 28/03/2012 Held:

Public Cap 651M

SHARE DRISTRIBUTION Director: 35.99% EPS Last EPS: 1.71 Quarter: Q1 Annu EPS: 6.84 P/E: 17.30 Public: 21.54% Govt: 0% Inst: 42.47% Foriegn: 0%

52 WEEK HIGH Adj price: 190.40 52 WEEK LOW Adj price: 65.12

BASIC INFO SECTOR DETAILS Sector: Bank Lot: 250

Capital Details Paidup Capital: Market Capital: 9358 M 19985.875 M

Sector PE: 10.28 Sector Cap 512363794719.00 Sector Earnings: 49834736609.20

No Of 935771469 Securities: Listing Year: Reserve: 2000 7175.58

Trade % of 0.01% MCAP: Public Securities 341275855

Sector Beta: 0.89

Last AGM 29/03/2012 Held:

Public Cap 7289M

SHARE DRISTRIBUTION Director: 40.75% EPS Last EPS: 0.52 52 WEEK HIGH Adj price: 43.00 52 WEEK LOW Adj price: 27.17 Quarter: Q1 Annu EPS: 2.08 P/E: 16.59 Public: 36.47% Govt: 0% Inst: 20.95% Foriegn: 1.83%

Analysis of Beta Coefficient


What Does Beta Mean? A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.

Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market.

A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market. ACI: Beta Coefficient of ACI = 0.792108337923

Covariance = 3.41940671414 Variance = 4.3168422177

Beta Coefficient of BEXIMCO = 0.929687655672


Covariance = 4.0461473953 Variance = 4.3521578141

Beta Coefficient of DHAKABANK = 0.927159897464


Covariance = 3.99236619145 Variance = 4.30601690428

Beta Coefficient of SINGERBD = 0.680546393985


Covariance = 2.9588146789 Variance = 4.34770458716

Beta Coefficient of ISLAMIBANK = 0.745086809377


Covariance = 3.22945178389 Variance = 4.33432956167

Beta Coefficient of ABBANK = 1.01335264579


Covariance = 4.38138309572 Variance = 4.3236509165

Beta Coefficient of SQURPHARMA = 0.535334352303

Covariance = 2.31094185336 Variance = 4.31681965377

Beta Coefficient of IDLC = 0.863711100588


Covariance = 3.67306439471 Variance = 4.25265391658

MARKET YIELD
Company ABBANK IFIC ISLAMIBANK PUBALIBANK UCBL UTTARABANK IDLC ULC PRIMEBANK SOUTHEASTB DHAKABANK Last Price 39.2 41.8 41.8 31.6 24.9 40.9 109.8 36.7 32.6 20.1 28 Dividend Yield 1.276 % 1.196 % 1.675 % 1.582 % 4.819 % 4.890 % 3.188 % 2.044 % 3.067 % 7.463 % 1.786 % Payout Ratio 13.228 % 6.550 % 11.626 % 14.793 % 16.000 % 34.722 % 15.823 % 32.468 % 14.493 % 64.378 % 8.000 % Declaration(C) 5% 5% 7% 5% 12 % 20 % 35 % 7.5 % 10 % 15 % 5% Declaration Date 01-03-2012 17-05-2012 24-04-2012 06-03-2012 03-04-2012 05-04-2012 10-03-2011 18-03-2012 05-03-2012 29-02-2012 28-02-2012

BATASHOE

481

2.183 %

24.741 %

105 %

26-04-2012

MONNOSTAF 6THICB 8THICB

165 45.9 49.5

0.606 % 19.608 % 18.182 %

37.313 % 9.926 % 72.993 %

10 % 90 % 90 %

13-05-2012 11-08-2011 11-08-2011

AIMS1STMF ICBAMCL1ST ICBISLAMIC GRAMEEN1 AFTABAUTO BDLAMPS ECABLES SINGERBD RENWICKJA NTLTUBES APEXFOODS BATBC LINDEBD DELTASPINN HRTEX SQUARETEXT MALEKSPIN ACI SQURPHARMA AMCL(PRAN) CONFIDCEM MEGHNACEM

33.7 39.7 19 45.4 131.9 135.8 58.9 174.2 75.7 57.5 63.3 600.1 528.2 28.4 27.2 98.4 17.2 169.1 248.7 119 108.8 123.9

8.309 % 13.854 % 18.947 % 5.507 % 1.516 % 2.577 % 1.698 % 1.722 % 2.642 % 4.348 % 2.212 % 6.166 % 1.893 % 3.521 % 1.838 % 1.626 % 5.814 % 4.731 % 1.206 % 2.605 % 1.838 % 2.018 %

595.745 % 7.771 % 863.309 % 26.624 % 10.199 % 40.854 % 40.486 % 19.634 % 3.695 % -349.650 % 74.074 % 87.038 % 22.779 % 72.307 % 19.157 % 22.989 % 58.140 % 66.061 % 18.067 % 54.520 % 27.064 % 84.459 %

28 % 55 % 36 % 25 % 20 % 35 % 10 % 30 % 20 % 25 % 14 % 370 % 100 % 10 % 5% 16 % 10 % 80 % 30 % 31 % 20 % 25 %

08-09-2011 31-07-2011 31-07-2011 29-09-2011 05-12-2011 24-04-2011 12-06-2012 20-03-2012 14-11-2011 11-11-2010 07-09-2011 14-03-2012 20-03-2012 21-11-2011 24-02-2011 30-04-2012 2010-11-14 16-05-2012 16-08-2011 03-11-2011 14-05-2012 05-06-2011 07-08-2011

NAVANACNG

89.7

2.007 %

26.049 %

18 %

Results:
From above discussion, these companies are in excellent financial condition and are leading players in its sector.so these are blue chip stock in Bangladesh. These high-quality stocks are considered a lower risk investment, which are much preferable for risk-averse investors in Bangladesh. These companies pay regular dividends to common stockholders, although their performance has been unsatisfactory in a particular period. Their dividend payout is rising at regular intervals. These Companies have been generating healthy earnings on a consistent basis.

In this way Before investing in any blue chip company, investors have to carefully read and analyze all information available about the company , its history, nowadays reality and outlook for the future. No one knows what's going to happen in the next few months and the every-yeargrowing stock doesn't have to follow its twenty years history.

Benefits
Since blue chip companies are industry leaders, the company is likely to have a long standing record of successful business. Most industry leaders have low debts and healthy balance sheets, which leads to consistent and increased dividends for shareholders. Unlike more volatile stocks, blue chip stocks are likely to ride out dips in the economy without dropping substantially. For example, a recession would likely have a stronger negative impact on other stocks than it would the blue chip companies (although it is worth noting that in a recession, nearly all stock prices will dip at least somewhat).

Here are some advantages of investing in blue chip stocks:

The main reason why blue chip shares are much sought after is due to the perception of safety. Blue chip stocks are perceived to be less risky than other stocks.

The preference for quality among investors is another reason that blue chip stocks are valued. High value blue chip stocks are said to be worth possessing for long-term investment purposes.

The prospect of steady dividends, irrespective of market conditions, is a factor of attraction in blue chip stock for investors. They are a preferred choice for those seeking recessionproof investment and are considered to be great dividend stocks.

A stock portfolio should consist of a mixed bag of investments - there should be diversity in assets. Instead of putting all eggs in one basket, it is better to diversify and dedicate a percentage to large-caps or blue chip stocks, and the rest to other asset classes. This would create a balance between stability and risk in a stock portfolio.

Disadvantages of Blue Chip Shares


Blue chip shares are investments in well-established companies and leaders in their respective industries. Blue chip companies in general are financially stable with a history of solid earnings. Investors buy blue chip shares for investment safety, predictable returns, consistent dividend payments and their defensive nature in market downturns. However, investors may have to trade the benefits of owning blue chip shares for certain disadvantages such as low returns, slow growth, little volatility and expensive pricing, which can also become disincentives to some investors when considering blue chip shares. The share market is prone to ups and downs. Blue chip stocks are not immune to those fluctuations, although they are in a better position to weather any financial storms and pay consistent dividends. As lot of investors flock to blue chip stocks as to a refuge of stability, the dividend returns from such stocks tend to be lower, although consistent.

Low Returns

Like any investment, returns on blue chip shares are commensurate with their risk. Providing a high degree of investment safety from their predictable, steady business operations, blue chip shares are low-risk investments, and thus returns are normally low as well. Because of this disadvantage, blue chip shares are not suitable for investors who have a high level of risk tolerance and are more aggressive in their investment approaches.

Slow Growth Blue chip shares are comprised of large-cap companies with maturing businesses and markets, compared with small- and mid-cap companies that are still in their development stages and have a high potential for growth. Nevertheless, blue chip share may yet deliver earnings increases over time, but the growth is likely to be small and steady. While blue chip shares may be ideal for investors seeking value accumulation over the long-term, their slow growth presents a particular disadvantage to growth investors who expect above-average growth and large share price moves in a short period of time.

Little Volatility Large price swings in trading are uncommon with blue chip shares, as their respective companies are financially stable with smooth operations. Little volatility can be a plus for some investors who desire consistent investment returns, but this is actually considered a disadvantage to others seeking varied trading gains. While many value investors choose blue chip shares based on fundamental analysis, the lack of volatility makes them unsuitable in technical trading for quick, short-term profits.

Pricing Blue chip shares tend to commend higher valuation in market trading supported by investor demand. Blue chip investors may include those who invest in blue chip shares for consistent longterm returns, switch to blue chip shares for investment safety during economic downturns and favor blue chip shares for predictable dividend payments. As a result, prices of blue chip shares are more expensive, which creates a disadvantage for the investor who may not be particularly interested in blue chip shares, but mainly needs them to spread his investments among various share classes for diversification purposes.

Misconceptions
Inexperienced investors can make the mistake of thinking blue chip stocks are a safe, sure bet with guaranteed dividends. However, this is not always the case. The state of the economy, industry news, and company mergers & acquisitions can all cause the price of a stock to fall, irregardless of how well established the company behind it is. Also, investors must make sure to diversify their portfolios. Even holding multiple blue chip stocks is not enough of a diversification; safer investments like Treasury bonds and established, steady yield mutual funds should be included to mitigate risk. However, mutual funds do exist that invest primarily in blue chip stocks; these are a good starting point of investment for the inexperienced or conservative investor.

Suggestions to improve the activities of blue chip shares

To introduce automated monitoring system that may control price manipulation, malpractices and inside trading of blue chip shares.

To introduce full computerized system for settlement of transactions of blue chip shares. To force the blue chip companies to publish their annual reports with actual and proper information that can ensure the interests of investors. Although blue chip shares are not suitable for investors who have a high level of risk tolerance and are more aggressive in their investment approaches so in that case risk averse people are suitable for blue chip share. So blue chip companies should try to attract risk adverse investors.

Blue chip companies should have rapid growth for the long term existence. For quick, short term profits blue chip companies should increase their price volatility which will be suitable in technical trading. Blue chip companies need to spread their investments among various share classes for diversification purposes by decreasing their share price.

Future of blue chip shares Theres never been a better time to buy blue chip shares
Due to stock market crash now investors are very much worried about price volatility so that they are searching low risky shares so blue chip shares will be suitable for investors. Day by day popularity of blue chip shares are increasing because of their performance. For Investors who are fully depend on share market blue chip shares create opportunities for increasing their earning profits by creating scope of low risk investments. After analyzing their performance it is clear that blue chip shares will play a vital role in our share market besides Bangladesh economy.

Conclusion:
From above discussion it is clear that Blue chip stocks are selective stocks those are most valuable and primarily larger companies' stock. The blue chip shares are the engine of growth for an economy, and perform a critical role in acting as an intermediary between savers and companies seeking additional financing for business expansion but for those who are risk averse. Blue chip companies usually have a long operating history, steady earnings and a good reputation. As they are selected to be enlisted in DSE-20 or CSE-30 index those companies are reviewed every six month based on a company has market capitalization at least Taka 200 million, company's free float stock in the market at least 20% shares of the company remains in the hands of general public, a company provide payout to investors at least 10% of dividend for the last three consecutive years, a company maintains a minimum trade of 95% trading days in the last six month. In addition, other subjective criteria like good corporate governance, regular holding of annual general meetings have been also considered.

Bibliography:

www.msn.com www.google.com www.wikipedia.com www.scribd.com

www.globaloneness.com
www.cse.com.bd www.dsebd.org

www.secbd.org
www.stockbd.com ,http://www.investopedia.com/search/default.aspx?

q=total+impact+of+volatility+on+stock+market,http://www.investopedia.com/search/default.aspx? q=evaluate+the+behavior+of+investors+in+stock+market
www.biasl.net CSE Bazaar porikroma (magazine)