COURSE CODE: MKT- 506

Course Name: Financial Management

MBA (Evening Program), Department of Marketing

Term Paper on:

Capital Market of Bangladesh

Submitted To:

Submitted By:

Shahin Ahmed Chowdhury

Name

Batc

ID

Muhammad Muzammal

h
24th

Number
4132406

Haque
Sohel Chowdhury

29th

3
4152901

Md. Sharif Hossain

30th

3
4153007

Assistant Professor

Department of Marketing, DU

Semester: Summer, 2015

Submission Date:
28.07.2015

UNIVERSITY OF DHAKA

TABLE OF CONTENTS
Capital Market of Bangladesh
SL

Chapter

page

01.

INTRODUCTION

01

02.

THE PRIMARY MARKET

03

03.

THE SECONDARY MARKET

03

04.

BANGLADESH STOCK EXCHANGES

04

05.

THE ROLE OF CAPITAL MARKETS IN AN ECONOMY

08

06.

BANGLADESH CAPITAL MARKET OUTLOOK

08

07.

THE POTENTIAL OF THE BANGLADESH CAPITAL MARKET

11

08.

OPPORTUNITIES OF BANGLADESH CAPITAL MARKET

12

09.

RECOMMENDATIONS & CONCLUSION

13

Page-1

01
INTRODUCTION
Capital markets are financial markets for the buying and selling of long-term debt or equitybacked securities. These markets channel the wealth of savers to those who can put it to longterm productive use, such as companies or governments making long-term investments. Capital
markets are defined as markets in which money is provided for periods longer than a year.
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 cap-ital 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.
Financial regulators, such as the Bangladesh Financial Services Authority or the Bangladesh
Securities and Exchange Commission (SEC), oversee the capital markets in their designated
jurisdictions to ensure that investors are protected against fraud, among other duties.
Capital markets may be classified as primary markets and secondary markets. In primary
markets, new stock or bond issues are sold to investors via a mechanism known as underwriting.
In the secondary markets, existing securities are sold and bought among investors or traders,
usually on a securities exchange, over-the-counter, or elsewhere.
The Capital market, an important ingredient of the financial system, plays a significant role in
the economy of the country.
Product of capital market: a) Shares, b) Debentures, c) Mutual funds, d) Bonds, e) Derivatives,
f) Future and options.
Players of capital market: a) Investors, b) PLCs, C) Stock Exchanges, d) Brokers and Dealers,
e) Merchant banks, f) Securities and Exchange Commission, g) CDBL.
Operation of capital market: Each and every step of capital market operation is regulated.
Regulations may come from SEC, Stock Exchanges and CDBL under Securities Act.
Parameters used to measure size of capital market: a) Number of listed companies, b)
Number of securities, C) Size of market capitalization, d) Index, e) Daily trade volume, f) GSP
ratio to market capitalization,
Efficiency indicators of capital market: a) PE multiple, b) Dividend yield, c) Liquidity, d)
Visible presence of regulators, e) Exit route regulation for sick PLC.
CSE role in Bangladesh capital market development: Automation, On-line trading, SAFE,
Securities Institute, International Seminar, Investors training etc.

Page-2
Future action plan for vibrant capital market in Bangladesh: a) Strengthen SEC, b) Capital
Market Education: at school, college and university levels, c) Training of Directors of PLC,
Regulator and Broker house officials etc, d) Certification system for certain level of officials, e)
Introduction of new Products, f) Incentives for listing with Stock Exchange, g) New pricing
mechanism for IPO, h) Appropriate fiscal measures, i) Fully automated settlement system, j)
Separate bench at High Court.
Institutional investor: Institutional Investor is a leading international business-to-business
publisher, focused primarily on international finance. It publishes magazines, newsletters and
journals as well as research, directories, books and maps. It also runs conferences, seminars and
training courses and, is a provider of electronic business information through its capital market
databases and emerging markets information service.
Whether you are a first time investor, a seasoned pro, an "in and out" day trader or a long term
investor the Dhaka Stock Exchange Ltd, Chittagong Stock Exchange Ltd, StockBangladesh.com
and Securities and Exchange Commission will provide you with the necessary information you
need for maximum profits and success in today's dynamic markets.
Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and
demand in a market in an attempt to determine what direction, or trend, will continue in the
future. In other words, technical analysis attempts to understand the emotions in the market by
studying the market itself, as opposed to its components. If you understand the benefits and
limitations of technical analysis, it can give you a new set of tools or skills that will enable you to
be a better investor.

The capital market includes all the bank, non bank financial institution as
well as the stock market
Member of Capital Market
State-owned commercial banks
Private commercial banks
Private Islamic Commercial Banks
Foreign commercial banks

Quantity
06
32
08
09
35

Non-banking financial institutions

02
Stock Market
1. Dhaka Stock Exchange (DSE)
2. Chittagong Stock Exchange (CSE)
Securities and Exchange Commission (SEC)

01

Central Depository Bangladesh Limited (CDBL)

01

Page-3

02
THE PRIMARY MARKET
The primary market is that part of the capital markets that deals with the issue of new securities.
Companies, governments or public sector institutions can obtain funding through the sale of a new stock
or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new
issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public
offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can
be found in the prospectus. A primary market creates long term instruments through which corporate
entities borrow from capital market.
Features of primary markets are this is the market for new long term equity capital. The primary market is
the market where the securities are sold for the first time. Therefore it is also called the new issue market
(NIM).
In a primary issue, the securities are issued by the company directly to investors. The company receives
the money and issues new security certificates to the investors.
Primary issues are used by companies for the purpose of setting up new business or for expanding or
modernizing the existing business. The primary market performs the crucial function of facilitating capital
formation in the economy.
Methods of issuing securities in the primary market are:
Initial public offering;
Rights issue (for existing companies);
Preferential issue.

03
THE SECONDARY MARKET
The secondary market, also known as the aftermarket, is the financial market where previously issued
securities and financial instruments such as stock, bonds, options, and futures are bought and sold. [1].
The term "secondary market" is also used to refer to the market for any used goods or assets, or an
alternative use for an existing product or asset where the customer base is the second market (for
example, corn has been traditionally used primarily for food production and feedstock, but a "second" or
"third" market has developed for use in ethanol production). Another commonly referred to usage of
secondary market term is to refer to loans which are sold by a mortgage bank to investors such as Fannie
Mae and Freddie Mac.
With primary issuances of securities or financial instruments, or the primary market, investors purchase
these securities directly from issuers such as corporations issuing shares in an IPO or private placement,
or directly from the federal government in the case of treasuries. After the initial issuance, investors can
purchase from other investors in the secondary market.
The secondary market for a variety of assets can vary from loans to stocks, from fragmented to
centralized, and from illiquid to very liquid. The major stock exchanges are the most visible example of
liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the
Dhaka Stock Exchange and Chittagong Stock Exchange provide a centralized, liquid secondary market
for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade
over the counter, or by phoning the bond desk of ones broker-dealer. Loans sometimes trade online
using a Loan Exchange.

Page-4

04
BANGLADESH STOCK EXCHANGES
The Securities and Exchange Commission exercises powers under the Securities and Exchange
Commission Act 1993. It regulates institutions engaged in capital market activities. Bangladesh Bank
exercises powers under the Financial Institutions Act 1993 and regulates institutions engaged in financing
activities including leasing companies and venture capital companies. The SEC has issued licences to 27
institutions to act in the capital market. Of these, 19 institutions are Merchant Banker & Portfolio
Manager while 7 are Issue Managers and 1(one) acts as Issue Manager and Underwriter.There are two
stock exchanges ( the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) ) which
deal in the secondary capital market.
Bangladesh capital market has two full-fledged automated stock exchanges namely Dhaka Stock
Exchange (DSE) and Chittagong Stock Exchange (CSE) and an over-the counter exchange operated by
CSE. It also consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it
implements rules and regulations, monitors their implications to operate and develop the capital market. It
consists of Central Depository Bangladesh Limited (CDBL), the only Central Depository in
Bangladesh that provides facilities for the settlement of transactions of dematerialized securities in CSE
and DSE.

DHAKA STOCK EXCHANGE

Dhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is
located in Motijheel at the heart of the Dhaka city. It was incorporated in 1954. Dhaka stock exchange is
the first stock exchange of the country. As of 18 August 2010, the Dhaka Stock Exchange had over 750
listed companies with a combined market capitalization of $50.28 billion.
History
It first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal
trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as
Dacca Stock Exchange Ltd in 13 May 1964. After the liberation war in 1971 the trading was discontinued
for five years. In 1976 trading restarted in Bangladesh. In 16 September 1986 was started. The formula
for calculating DSE all share price index was changed according to IFC in 1 November 1993. The
automated trading was initiated in 10 August 1998. In 1 January 2001 was started. Central Depository
System was initiated in 24 January 2004.
Formation
Dhaka Stock Exchange (DSE) is a public limited company. It is formed and managed under Company Act
1994, Security and Exchange Commission Act 1993, Security and Exchange Commission Regulation
1994, and Security Exchange (Inside Trading) regulation 1994. The issued capital of this company is Tk.
500,000 which is divided up to 250 shares each pricing Tk. 2000. No individual or firm can buy more
than one share. According to stock market rule only members can participate in the floor and can buy
shares for himself or his clients. At present it has 230 members.

CHITTAGONG STOCK EXCHANGE

Chittagong Stock Exchange is a stock exchange located in the port city of Chittagong in southeastern
Bangladesh. It was established in 1995 as the second stock exchange of the country. The exchange is
located in the Agrabad commercial area of the city.
Timeline
1 April 1995 CSE incorporated as a company.
10 Octabar Floor trading started in cri out system.
4 November 1995 formally opened by then former Prime Minister Begum Khaleda Zia.
30 May 2004 Internet based Trading system opened.

Page-5

Vision of the stock exchange:

Regulating the market structure through proper rules and strict compliance by members.
Expansion of CSE trading network to cover 504 thanas.
Introduce Book Building system in Bangladesh capital market.
Introducing derivative market
Create opportunity to cross border trading with SAFE countries.
Introduce global depository receipts (GDR)
Mission:
To create an efficient and transparent market facilitating entrepreneurs to raise capital so that it
accelerates industrial growth for overall benefit of the economy of the country.
Objectives:
Develop a strong platform for entrepreneurs for raising capital;
Provide an investment opportunity for small and large investors;
Develop a transparent market ensuring investors interest;
Attract foreign institutional investors to invest in Bangladesh;
Collect, preserve, disseminate date and information on stock exchange;
Management of stock exchanges:
DSE and CSE comprises of 25 members of whom 12 are elected through direct election from the
235 and 134 shareholders respectively. Another 12 members representing distinguished
personalities from different key economic and social arena of the country. The CEO of the
exchange is also a Director of the Board.
Categorization of listed company:
Category: A, B, N & Z
Categorization of listed company, 30th June, 2009
Category
A
B
G
N
Z
Debenture (category A)
Treasury Bonds
Total

DSE
186
27
0
11
83
8
135
450

CSE
158
18
0
11
99
1
0
287

Note: this information is collected from the current markets which are currently trading both in
DSE and CSE. There are lot other companies in Z category which trading occur in OTC market.

Page- 6
Criteria of the share Category:
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.
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.
DSE and CSE Scenario
As of 30 June 2009 the total issued capital of all listed securities including treasury bonds of
Dhaka Stock Exchange was Tk.457,944 million (US$ 6,634.94 million) which was Tk. 4, 16,024
million (US$ 6,034.58 million) on 31 March 2009. In Chittagong Stock Exchange the total
issued capital on 30 June 2009 was Tk.137420.50 million (US$1991.60 million) which was
Tk.1,30,420 million (US$1,890.15 million) on 31 March 2009.
Total market capitalization of all securities including treasury bonds listed on the Dhaka Stock
Exchange was Tk. 1,312,773 million (US$19,025.69million) as on 30 June 2009 compared to
Tk. 10,17,057 million (US$14,753million) as on 31 March 2009.In the Chittagong Stock
Exchange, total market capitalization of all listed securities was Tk. 962,477million
(US$13,948.94million) as on 31 March 2009.
Stock Market Operation:
During October-December, 2009 the total turnover in Dhaka Stock Exchange was 2,420 million
securities while the total amount traded on Dhaka Stock Exchange during the same period was
Tk. 569,586.85 million
In the same period, the total turnover in Chittagong Stock Exchange was 346.25 million
securities while the total amount traded on Chittagong Stock Exchange during the same period
was Tk. 48,910.73 million.
Market Capitalization:

Total market capitalization of all securities including treasury bonds listed on the Dhaka Stock
Exchange was Tk. 1,887,177.00 million (US$27,283.00 million) as on 31stDecember. 2009
compared to Tk. 1,382,991.00 million (US$20,026.00 million) as on 30 September, 2009.
In the Chittagong Stock Exchange, total market capitalization of all listed securities was Tk.
1,470,807.05 million (US$ 21,011.53 million) as on 31stDecember. 2009 compared to Tk.
1,032,307 (US$ 14,960.97 million) as on 30 September, 2009.

Page-7
Bangladesh Capital Market Summary (As on 31stDecember, 2009)

Indicators

Dhaka Stock
Exchange
236
19
8
151
1
415

No. of companies
No. of mutual funds
No. of debentures
No. of treasury bonds
No. of corporate bonds
Total No. of Listed Securities

Chittagong Stock
Exchange
197
19
1
217

Figures in million
No. of shares of all listed companies
No. of certificates of all listed mutual funds
No. of debentures of all listed debentures
No. of all listed govt. T-bonds
No. of all listed corporate bonds
Total No. of Tradable Securities

4167.00
450
0.41
3.56
3.00
4624 4.00

4,030.99
450.27
3.00
484.26

Figures in million

Issued capital of all companies

TK.

156,831.00

147,309.41

US$

2,267.00

2,104.42

Issued capital of all mutual funds

Issued debentures

TK.

4,816.00

4,815.50

US$

70.00

68.79

TK.

140.00

3,000.00

US$

2.00

42.86

Figures in million

Total Market Capitalization

TK.

1,887,177.00

1,470,807.05

US$

27,283.00

21,011.53

3747.53 13

181.3755

All Share Price Index

Market Performance of DSE & CSE, 30th June 2009

Particulars
Member
Listed Securities
Issued Capital (core, TK)
Market Capital (core, TK)
Price index
Market cap. to GDP

DSE
238
443
45,794.00
131,277.00
2520.15
20%

CSE
134
245
13,742.00
96,247.00
10477.67
14%
Page-8

5.
THE ROLE OF CAPITAL MARKETS IN AN ECONOMY

Provides an important alternative source of long-term finance for long-term productive

investments. This helps in diffusing stresses on the banking system by matching long-term
investments with long-term capital.

Provides equity capital and infrastructure development capital that has strong socio-economic
benefits - roads, water and sewer systems, housing, energy, telecommunications, public transport,

etc. - ideal for financing through capital markets via long dated bonds and asset backed securities.
Provides avenues for investment opportunities that encourage a thrift culture critical in increasing
domestic savings and investment ratios that are essential for rapid industrialization. The Savings

and investment ratios are too low, below 10% of GDP.

Encourages broader ownership of productive assets by small savers to enable them benefit from
Bangladeshs economic growth and wealth distribution. Equitable distribution of wealth is a key

indicator of poverty reduction.

Assists the Government to close resource gap, and complement its effort in financing essential

socio-economic development, through raising long-term project based capital.

Provides a gateway to Bangladesh for global and foreign portfolio investors, which is critical in
supplementing the low domestic saving ratio.

6.
BANGLADESH CAPITAL MARKET OUTLOOK

Success of Bangladesh capital market

a) Capital markets continue strong performance
Market capitalization is above US$20bn in 2009 from US$10bn in 2007. Average daily turnover is
approximately US$75mm in 2009 from US$24mm in 2007.
b) Key opportunities for future growth
Institutionalization of market brings greater liquidity and lower volatility. Attracting large corporate for
listing provides investors with viable investment options
c) Challenges ahead
Retail dominated market resulting in higher volatility from speculation. Large, well reputed companies
prefer to source funds from traditional bank finance against capital markets
d) Remittance inflow has been resilient to global turmoil
Bangladeshis abroad sent home US$887.9mm in September09

Page- 9
e) Inflation continues to decline
Fell to 6.04% in July09, from 6.66% in June09 and 8.90% in December08
f) GDP growth forecast has been revised downwards to 5.88%, compared to 6.19% in the
previous fiscal year
g) Exports have been relatively sheltered due to low cost nature of Bangladeshi products
Recovery in the US and Europe, the major buyers, expected to boost export earnings

Failure:
Dhaka stock market started functioning in 1956. Sixty years have passed since then. But the
Bangladesh stock market remained immature and failed to be an important force in shaping the
economy of the country. The predominant source of funding for the private sector investments
has always been the banking sector and contribution of the stock market has been marginal.
Investments in recent years have been sluggish. Private sector credit growth has remained
stagnant for some time. Many banks have started investing their surplus funds in government
securities following lower demand for private sector credit. Due to the slow growth of private
sector investment, access to long-term bank credit has been easy. This is one of the reasons why
entrepreneurs prefer bank credit instead of raising funds from the capital market, notwithstanding
the higher cost of funds from banks. Stock markets mobilize household savings and idle funds
and can influence economic activity though the creation of liquidity. However this becomes
complicated when the banking sector has enough liquidity to offer long-term financing.
Therefore we cannot perhaps expect rapid development of the stock market unless private sector
investments pick up to a level where banks cannot afford long-term loan with short-term
borrowing.
It is unfortunate that since the establishment of the Securities and Exchange Commission in
1993, the stock market has crashed twice. On both occasions, thousands of small and
inexperienced investors lost everything they had. Stock market crash is not something unique
and it happened in many other countries. But market collapses in other countries were normally
linked to some internal or external economic shock or global recession. In case of Bangladesh, it
has not been so. Bangladesh stock market is isolated and is not globally integrated. Foreign
investment is insignificant. Both the crashes were neither due to external economic factors nor
internal economic malfunctions. These crashes were the results of poor governance, unbridled
manipulations, undue influences and unlimited greed. Let us hope that this does not happen
again.

Page-10
Reasons of Failure:
Stock markets function in a regulatory regime and it is important that the regulators are
professional, efficient and transparent. Bangladesh Securities and Exchange Commission
(BSEC) is the apex regulator for the stock market. It was formed in 1993. More than twenty
years after its formation, BSEC is yet to develop as an efficient watchdog competent to discharge
its most important responsibility of protecting the interest of investors. The debacle of 2011 was
basically a massive regulatory failure.

Lack of quality professional manpower: BSEC lacks quality professional manpower,

competent accountants, financial analysts and legal experts. Instead of developing as a highly
professional organization, it has grown into more of a bureaucratic body. Credible financial
reporting is vital for appropriate investment decisions. Auditors are required to examine data,
statements, accounts, records, performance and operation of the company, and record their
independent opinion. Auditors, in turn, should be provided with reliable information by the
management.
Lack of co-ordination: There is also a persistent lack of co-ordination between the Ministry of
Finance, Bangladesh Bank, Securities and Exchange Commission, Insurance Development and
Regulatory Authority, National Board of Revenue and other related organizations. This isolation
of BSEC was, perhaps, a crucial factor for the regulatory failure in 2011. Close understanding
and coordination between Bangladesh Bank and the Securities and Exchange Commission is
particularly important because the money market often has an impact on the capital market.
Therefore BSEC needs a close liaison with their regulators for stability of the market.
Exposure limit of banks: The exposure limit of banks to the capital market has been decreased
by amending the concerned law. This has probably been done in the interest of protecting the
depositors. In the long run, such measures are likely to protect the safety of bank deposits and
persuade the banks to focus on their core business. This is also likely to reduce volatility in the
stock market and help improve its stability. However, in the short-term, this may have an adverse
impact on the activities of the stock market.
Cash flow problem of the merchant banks and brokerage houses: Due to the abrupt plunge
of the price level, balance of many of these accounts has turned negative and a huge amount of
fund has been trapped. This is affecting the operational capacity of these institutions.
Mutual Funds: Ideally mutual funds ought to be the most important institutional investors in the
market. Inexperienced investors should invest through mutual funds for professional
management of their funds. There are 40 mutual funds operating in the market but their
contribution to market performance is extremely limited.
Page- 11

07.
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 pre-requisite 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 noteworthy 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, however, the capital market in
Bangladesh is still underdeveloped, and its development is imperative for full realization of the country's
development potential.
Craig Brewer
It is encouraging to see that the capital market of Bangladesh is 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
has led to the infrastructure we have in the market today.

Page- 12

08.
OPPORTUNITIES OF BANGLADESH CAPITAL MARKET
The capital markets in Asia are getting more and more focus with the growing corporatization of the
Asian economies. Eastern Asia has progressed a lot with respect to attracting western companies to get
listed in Asian bourses as well as supporting innovative instruments, and Southeast Asia is also coming up
with India leading the way. Comparing the local market scenario with that of the rest of the region,
Bangladesh is in pretty good shape as we have most of the infrastructure in place. Our market
capitalization is relatively smaller and it currently stands at $9.3 billion, which is just over 13 percent of
GDP. Higher liquidity is skewed towards a handful of scrips, while a stagnant situation exists for few less
profitable issuers.
At present, the government is heavily focusing on developing a debt capital market. Such measures are
certainly welcome as Bangladesh lacks a proper secondary market for bonds. The market is yet to support
short-term capital requirements of corporations. Commercial Paper (CP) has not yet been tried primarily
due to interest rate volatility and illiquid risk-free instruments that can be used as benchmark neither for
short-term and hardly for long-term financing. It can, therefore, be said that we have a somewhat flat
yield curve in Bangladesh at the moment.
Debut trading of state-owned oil companies like Jamuna Oil Company Ltd and Meghna Petroleum
Limited on the local bourses in January 2008 has spurred a lot of encouragement among investors. This
initiative taken by the government to list SOEs will increase market capitalization and improved liquidity.
SEC is also contemplating the introduction of the book-building method in the valuation of IPOs in order
to ensure a fair price within this year. This will encourage companies with sound financial health to come
into the market.
Regulatory pressures are mounting on telecom companies to get listed. It is estimated that the listing of
the top telecom companies will attract more foreign investment, increase the market capitalization by few
folds, and bring about higher standards of corporate governance.
There is still huge potential in the market for securitization and other debt instruments like commercial
papers and corporate bonds, and derivatives, which will help foreign investors hedge their exposure.

Page-13

09.
RECOMMENDATIONS & CONCLUSION
The market needs more and more good scrips. The process would be easier if we could draw attention of
good issuers by improving the market governance system and eliminating scope for manipulation. There
are only limited instances, such as in commercial banks/leasing companies, where regulators can impose
guidelines relating to capital structure. Hence, it may be difficult to force a corporate house to list unless it
agrees at the time of licensing or registration. Inadequate disclosure requirement, and a culture of familyowned conglomerates deter the expansion of corporate governance into the local industry. The regulators
need to play an active role in removing the bureaucratic bottlenecks, and promote rules that provide
incentives to these groups of companies to list.
The missing link between the SEC, Bangladesh Bank, Bangladesh Telecom Regulatory Commission and
other regulatory bodies is now getting established. Individually, they were not serving each others'
interests, and there was no effective coordination among them, hence the country was deprived of great
initiatives. A dedicated financial market cell at the Ministry of Finance could be formed to coordinate
with these regulators as well as other ministries.
In terms of creating market depth, more profitable state-owned-enterprises should be listed. The supply of
securities can be increased if the SOEs are allowed to operate through the stock exchanges. Floatation of
SOE scrips is expected to expand the market by couple of times. Corporatization of SOEs will bring in
transparency as well as confidence on the government financial system.
In a more developed market, institutional investors such as merchant banks, commercial banks, insurance
companies, are major traders of securities. We need enforceable and more effective laws and rules to
attract foreign institutional investors.
The Bangladesh capital market still has a long way to go. The recent measures taken by the transitional
government have already begun to positively impact the markets. If more investor-friendly policy reforms
were to be implemented, the capital market will undoubtedly play a critical role in leading Bangladesh
towards being the next Asian tiger with growth comparable to India, Vietnam and the other most dynamic
economies in the region.