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Introduction:
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.
Objectives:
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.

Methodology:
The secondary data sources are annual reports, manuals, and brochures of Dhaka Bank limited
and different publications of Bangladesh Bank. To identify the implementation, supervision,
monitoring and repayment practice- interview with the employee and extensive study of the
existing file was and practical case observations were done.
Limitations of the Study:
All the group members gave their best effort. But at the time of collecting data, it would
have been better if the information could be available elaborately. They provided
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information and sometimes guidance for better study. But the selection process methods
of employees are very confidential information for an organization. The authority could
not give us necessary information for their security purpose

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 (MahmoodOsman Imam,
October 5, 2000), Capital Market: An Overview (Md. Hasan Imam,2005), An Overview of
Bangladesh Capital Market (AZM Nazimuddin, 2007), Emergin 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),). Dhaka Stock Exchange
Monthly Review, (September, 2011), Bangladesh Economic Update by Unnayan Onneshn 2012,
Reviving the rules and regulations by Salma Ahmed 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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Capital Market:
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.

Role of Capital Market in Economy:
Capital Market 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
It 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.
It 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.
Capital Market Encourages broader ownership of productive assets by small savers to
enable them benefit from Kenyas economic growth and wealth distribution. Equitable
distribution of wealth is a key indicator of poverty reduction.
Promotes public-private sector partnerships to encourage participation of private sector
in productive investments. Pursuit of economic efficiency shifting driving force of
economic development from public to private sector to enhance economic productivity
has become inevitable as resources continue to diminish.
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Assists the Government to close resource gap, and complement its effort in financing
essential socio-economic development, through raising long-term project based capital.
Improves the efficiency of capital allocation through competitive pricing mechanism
for better utilization of scarce resources for increased economic growth.

Capital Market in Bangladesh:

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 realisation of the country's development potential. 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.
Bangladesh capital market is one of the smallest
in Asia but within the south Asian region, it is
the third largest one. It has two full-fledged
automated stock exchanges namely Dhaka
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Stock Exchange, Chittagong Stock Exchange (CSE) and OTC exchange operated by CSE. It also
consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it
implements rules and regulations, monitor and develop the capital. 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
market and DSE.After the independence, establishment of Dhaka Stock Exchange (formerly
East Pakistan Stock Exchange) initiated the pathway of capital market intermediaries in
Bangladesh. In 1976, formation of Investment Corporation of Bangladesh opened the door of
professional portfolio management in institutional form. In last two decades, capital market
witnessed number of institutional and regulatory advancements which has resulted diversified
capital market intermediaries. At present, capital market intermediaries are of following types:

1 Stock Exchanges: Apart from Dhaka Stock Exchange, there is another stock exchange in
Bangladesh that is Chittagong Stock Exchange established in 1995.
2
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 31 December 2007, the Dhaka Stock Exchange had 350 listed
companies with a combined market capitalization of $26.1 billion.


Chittagong Stock Exchange: The Chittagong Stock Exchange (CSE) began its
journey in 10th October of 1995 from Chittagong City through the cry-out trading
system with the promise to create a state-of-the art bourse in the country. Founder
Dhaka
Stock
Exchange
Public
Market
Spot
Market
Block
Market
Odd Lot
Market
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members of the proposed Chittagong Stock Exchange approached the Bangladesh
Government in January 1995 and obtained the permission of the Securities and
Exchange Commission on February 12, 1995 for establishing the country's
second stock exchange.
3 Central Depository: The only depository system for the transaction and settlement of
financial securities, Central Depository Bangladesh Ltd (CDBL) was formed in 2000
which conducts its operations under Depositories Act 1999, Depositories Regulations
2000, Depository (User) Regulations 2003, and the CDBL by-laws.
4 Stock Dealer/Sock Broker: The Securities and Exchange Commission (SEC) was
established on 8th June, 1993 under the Securities and Exchange Commission Act, 1993.
The Chairman and Members of the Commission are appointed by the government and
have overall responsibility to administer securities legislation. The Commission is a
statutory body and attached to the Ministry of Finance. Under SEC Stock Dealer, Stock
Broker & Authorized Representative) Rules 2000, these entities are licensed and they are
bound to be a member of any of the two stock exchanges. At present, DSE and CSE have
238 and 136 members respectively:
Registering the business of related parties of the securities market.
Monitoring and regulating of collective investment scheme including all forms of
mutual funds.
Prohibiting fraudulent and unfair trade practices relating to securities trading in
any securities market.
Promoting investors education and providing training for intermediaries of the
securities market.
Undertaking investigation and inspection, inquiries and audit of any issuer or
dealer of securities in the securities market.
Conducting research and publishing information.
5 Merchant Banker & Portfolio Manager: These institutions are licensed to operate
under SEC (Merchant Banker & Portfolio Manager Rules) 1996 and 45 institutions have
been licensed by SEC under this rules so far.
6 Asset Management Companies (AMCs): AMCs are authorized to act as issue and
portfolio manager of the mutual funds which are issued under SEC (Mutual Fund) Rules
2001. There are 15 AMCs in Bangladesh at present.
7 Credit Rating Companies (CRCs): CRCs in Bangladesh are licensed under Credit
Rating Companies Rules, 1996 and now, 5 CRCs have been accredited by SEC.

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8 Trustees/Custodians: According to rules, all asset backed securitizations and mutual
funds must have an accredited trusty and security custodian. For that purpose, SEC has
licensed 9 institutions as Trustees and 9 institutions as custodians.

9 Investment Corporation of Bangladesh (ICB): ICB is a specialized capital market
intermediary which was established in 1976 through the ordainment of The Investment
Corporation of Bangladesh Ordinance 1976. This ordinance has empowered ICB to
perform all types of capital market intermediation that fall under jurisdiction of SEC. ICB
has three subsidiaries:
8.1. ICB Capital Management Ltd
8.2. ICB Asset Management Company Ltd
8.3. ICB Securities Trading Company Ltd.

Bangladesh Bank Monitoring:
Bangladesh Bank played an important role in the capital market. They are supposed to monitor
the money market whereas they mostly concentrate on the capital market. They can do that for the
betterment of good banking for sure. But they acted like in an ineffective and inefficient way.
When market reached to its peak then they started to monitor tightly whereas in the early stage
they remained silent. Chittagong Stock Exchange:
SEC Monitoring:
Security Exchange Commission is the regulator of the Bangladesh Capital Market. But they were
failed to do so properly and effectively. In this case we have observed SEC has lack of efficient
manpower to run and monitor two capital markets in the country. SEC has failed to initiate their
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authoritarian power effectively and efficiently. When market went upward and upward, they took
various decision to cool the market. But all the decisions influenced the market to go upward.




CAPITAL MARKET VOLATILITY:


Volatility is a measurement of the degree of price movements of a stock. It shows how active a
stock price typically is over a certain period of time. In general, the volatility of stock is
determined by the fluctuations in stock index. Fluctuation in the stock index also depends on the
demand and supply of securities traded in a stock exchange. The market estimate of volatility can
be used as the barometer of the vulnerability of the stock market. Stock return volatility represents
the variability of day-to-day stock price changes over a period of time, which is taken as a
measure of risk by the relevant agents. High volatility, unaccompanied by any change in the real
situation, may lead to a general erosion on the confidence of investors in the market and redirect
the flow of capital away from the stock market. The excessive level of volatility also reduces the
usefulness of stock price as a reflector of the real worth of the firm.



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Capital Market Size:
One of the important indicators of the capital market is the number of listed companies. The
rationale of including this measure is that as the number of listed company increases, available
securities and trading volume also increases. In basis of the properties of the companies, the
companies are divided into five groups; A, B, G, N and Z. The properties of these companies are
shown in the table below.


Table 1: Capital Market
Company Category and
Characteristics Company
Properties
A Holding Annual Meetings (AGM) and have declared
dividend at the rate 10 percent or more in a calendar year
B Holding Annual Meetings (AGM) and have declared
dividend less at the rate 10 percent or more in a calendar year
G Greenfield companies.
N All new listed companies except Greenfield companies.
Z Have failed to hold the AGM or fail to declare any dividend
or which are not in operation

In February, FY 2012-13, the number of DSE listed company was 286. The number of the
listed company grew from 149 in FY 1990- 91 to 286 in February, FY 2012-13 with an
average annual rate of growth of 3.01 and a standard deviation of 44.32. In FY 1990-91, the
number of listed companies of DSE was 149 whereas in FY 2001-02, the number of listed
companies increased to 248. The rationale of including this measure is that as the number of
listed company increases that reveals available securities and trading volume also increases.










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Successes and Failure of the Capital Market in
Bangladesh:
In January 2013 total market capitalization of DSE was Tk.184545.2 crore, a less of 4.5
percent than that of previous fiscal year of 2011-12. In FY 2010-11, the market
capitalization was Tk. 232701.6 crore. The market capitalization and investment ratio
witnessed a downward trend, reaching at 83.01 percent in FY 2011-12. This indicates the
descent in ratio between capitalization and investments, revealing a continuous fall in the
capital market. In FY 2011-12, the turnover sunk to 64 percent than that of FY 2010-11.
The sector-wise contribution of financial institutions, which have occupied the major share of the
market capitalization, fell down to 8 percent in January, 2013 from 12 percent in FY 2010-11.
Moreover, continuous drop in the contribution of banking sector is observable, with 27 percent in
January 2013 from 29 percent in FY 2010-11


Bangladesh capital market saw a dearth of liquidity in the year 2012 with Bangladesh Bank going
for another year of monetary tightening. In the above chart we can see the most underperformed
sector were Engineering, Jute and Services and Real Estate where the companies with the largest
market capitalization saw a slump of -26%, -4%, -15% respectively.
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Dhaka Stock Exchange in Bangladesh:



In FY 2010-11, the market capitalization was Tk. 232701.6 crore. In FY 2009-10, the turning
year, saw the market capitalization increased by 127.31 percent from the previous year and
reached from Tk. 100143.3 crore in FY 2008-09 to Tk. 227640.8 crore in FY 2009-10. The
increasing trend of market capitalization till FY 2011-12 states that the volume of value of
capital stock has followed a positive trend, but after the crush the market capitalization starts
to fall.





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Growth in percentage of Companies:
In FY 1991-92, the number of listed companies increased to 2.68 percent whereas in FY
1994-95; the number of listed companies decreased to 4.47 percent. In FY 2009-10, the
number of listed companies of DSE decreased from 300 to 273, about 9 percent less than the
previous year.











Turnover:
Turnover equals the value of total shares which is divided by the market capitalization. High
turnover is often used as an indicator of high level of liquidity. Turnover can also be used as
the complements of total value traded ratio. (Mollik and Bepari) Whereas total value traded
and GDP ratio captures trading compared with the size of the economy, turnover measures
trading related to the size of the stock market. Therefore, a small, liquid market may have a
high turnover ratio within a small total value traded and GDP ratio.

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There has been a significant level of squeezes in liquidity in the capital market during this period.
In FY 1995-96, the turnover of DSE was Tk. 819.91 crore whereas in FY 1996-97, this turnover
reached at Tk. 6541.35 crore. Fake demand augmentation mechanism during this period has led
the general price index to move vertically and hence, increased the liquidity of capital market.
The following year in FY 1997-98, the turnover reduced by a significant rate of 80.71 percent and
reached at Tk.1261.6 crore. Again, in FY 2009-10, the turnover increased dramatically and
reached at Tk. 256353.55 crore and it continued at Tk. 325879.77 in FY 2010-11 and dropped to
Tk. 117145.07 crore in FY 2011-12 by 64.05 percent.

Comparative Assessment of Collapse of Capital Market:

Our analysis revealed few core reasons of unexpected rising of capital market.These reasons are
given below:
1. There are anti-relation between supply and demand of stock.
2. Entrance of a lot of new companies into the market like, Grameen Phone.
3. Opening a great number of BO accounts which is more around three million.
4. When the price was rising the regulatories had not taken any proper actions or implemented
any strong regulations to control the capital market.
5. Tendency of holding the stocks to make more profits.
6. Banks have invested more in capital market than 10% of their liabilities which is
unlawful as per act of Bangladesh Bank.
7. Many industrialists taken loans from banks to invest in authorized productive sectors but they
invested that loan amount in capital market.
8. Price hike in Z category shares which is abnormal as per categorization.
9. Tendency of mass people to get quick and huge profits from the capital market.
10. Mass people preferred investing in capital market more than saving in bank to get more
returns.
There are mainly two big crashes of the capital market in the history of the Bangladesh - one
has occurred during 1996 and another happened recently in 2011.
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Collapse of Capital Market In 1996:
There was a large surge in the stock market in the summer and fall of 1996 evidenced by a
large increase in the market capitalization. The monthly closing index was 775.65 in January,
1996 which increased to 3064 in November, 1996. After an increase in the general index of
DSE for a brief period, the index started to fall dramatically. In December 1996 the index fall
down to 2300.15. The short time quick profit generation persuaded the investors to invest
more in the capital market. The confidence of the investors, however, damaged significantly
because of excessive speculations, allegedly aggravated by widespread irregular activities.

Collapse of Capital Market In 2011:
In 31 December 2011, DSE General Index (DGEN) dropped by 41 per cent; market capitaliza
tion went down by 29 percent; and total trade value of the Dhaka Stock Exchange (DSE) suff
ered erosion to the tune of 83 per cent from the peak on 12 December 2010, when DGEN att
ained 8918 points. Price/Earnings (P/E) ratio which rose to as high as 29.7 in November 2010
, had come down to 13.68.

In July 2009, the general index of DSE was 2914.53 which increased and reached at 5654.88
in April 2010. Finally, in November 2010, the general index reached at the peak and became
8602.44, which was the peak of the capital market before the crash. After that, the general
index started to fall.

Some reasons influenced our investors to invest more in the market and thus our market became a
bullish market. So economists and researchers expected a big crash in the market. Recently we
have seen that expected situations in our market that is a big fall in 10
th
January 2011. The reasons
of falling the index of capital market are given below.1. Syndicates are working behind this recent
plunge. These syndicates have a huge investment in Stock Market and they take control of the
price of the shares. They are united and buy a share simultaneously so a want is created in the
whole market. So the prices of share become higher and general investors suffer with it.2. Most of
investors in share market is either newbie or have no analysis power. They are just trading on the
basis of seeing what other peoples are trading. So without seeing a companys saturation point;
the invest money and loose money.3. Government has changed lots of rules of local stock market
and applied lots of limited on Debt and other facilities. And this is another reason of this recent
Bangladeshi share market plunge. Regulator restricted the money supply and it is also a result of
the interest hike by the central bank.4. Stock brokers said the recent rise in the Statutory Liquidity
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Reserve (SLR) and Cash Reserve Ratio (CRR) because the plunge in the stocks as the increase
prompted banks and financial institutions to pull out substantial investment from the bourse.
The central bank from December 15, 2010 also increased the SLR and CRR by 0.5 percent to
18.5and 6 percent respectively inflating the call money rate to a blasting trajectory and alerted
all banks to bring down excess over limit exposure in stock market by the end of January 10,
2011. Circuit breaker should be raised immediately.5. Bank other investment organization
have stopped opening new stocks. Here is the scenario of fall of general index of DSE.


Reasons behind the underdevelopment
Access to high quality and credible corporate information remains a major problem in the market.
While a handful of institutional investors may enjoy certain benefits since they have an
investment unit manned with qualified officers, nothing exists for retail investors. And, in the
absence of independent research houses, retail investors primarily focus on advice given by their
brokers, which often consists of market rumors. This is not acceptable, and it often leads to
enormous losses for small investors who are vital for a low-income and emerging market like
Bangladesh. Filtering of information among different types of investors may leave scope for
manipulation; this assumption had been proved right in the 1996 market meltdown at the cost of
many individuals and households. The market does not have an adequate number of
fundamentally sound scrips. The authorities should not force major corporations to come into the
market, without creating an enabling environment. The focus should be on the privatization of
state owned enterprises through public offerings in the bourses. The market has to reach such a
stage of development that companies will take it as a serious alternative to bank financing.
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The government has reduced the interest rates on savings instruments, however this particular
market is still limited to the commercial banks, and individual investors do not have access to
these instruments. These savings instruments are considered risk-free, and since they are not
present in the capital market, the overall risk of investment for an investor remains very high. A
portfolio investor does not have the option of reducing his average portfolio risk by adding these
risk-free opportunities.
An estimate suggests that the ratio of institutional-to-retail investors is still low in Bangladesh,
even relative to other emerging markets. Institutional investors bring long-term commitment and a
greater focus on fundamentals and, hence, stability in the market. The presence of institutional
investors is also expected to ensure better valuation levels due to their specialised analytical skills.
While we do have public sector as well as private sector institutional investors in the economy,
proprietary investment from these institutions is not significant other than the Investment
Corporation of Bangladesh that was created in 1976 and currently manages several mutual funds.
Corporate governance of international standard is still lacking. Multinational corporations and
institutions operating in Bangladesh often adhere to a very high international standard compliance
regime. Parent companies of most of these corporations and institutions have their scrips listed in
developed markets. Unless the local market adheres to, and effectively enforces, a standard
corporate governance system, there will not be a level-playing ground for international business
houses vis-a-vis local operators. An important aspect for capital market is reflection of fair value
of scrips. This is not adequately present in the current scenario, and due to this reason the market
is not receiving the attention of an important segment of investors, both foreign and local.
Investors are perhaps depending more on speculative analysis, resulting in volatility in the market,
as opposed to fundamental analysis, which could attract more stable long-term investors who are
sure about their investment tenure and expectations.

Opportunities:
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
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$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.
Problems of Stock Markets in Bangladesh:
The unexpected rise and fall in share prices mostly followed from the general confidence of the
investors about political stability, euphoria of investment in shares, prospect of quick capital
gains, a vacuum in respect of institutional presence in the share market, monopolistic dominance
of member brokers, inefficiency of the SECS to cape with the developments, existence to Kerb
market , absence of proper application of circuit breaker etc. Delivery versus payment mechanism
was used as one of the main vehicles of manipulation. Kerb market gave birth fake and forged
share certificates. Although there are increasing trends in all the indicators, DSE, CSE are not free
from problems, The problems of DSE, CSE may be summarized as under:


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Price manipulation:
It has been observed that the share values of some profitable companies has been increased
fictitiously some items that hampers the smooth operation of Stock market.
Delays in Settlement:
Financing procedures and delivery of securities sometimes take an unusual long time for which
the money is blocked from nothing.
Irregulations in Dividends:
Some companies do not hold Annual General Meeting(AGM) and eventually declare dividends
that confused the shareholders about the financial positions of the company
Selection of Membership:
Some members being the directors of listed companies of DSE, CSE look for their own interest
using their internal information of share market.
Improper financial statement:
Many companies do not focus real position of the company as some audit firms involve in
corruption while preparing financial statements. As a result the shareholders as well as investors
do not have any idea about position of that company.
Others:
The concept of centralization of the securities market has not been implemented that arise
technical problems and political infighting.
The intrinsic values for securities traded are sometimes estimated without considering the
current market prices of the securities.
The absence of comprehensive legal and supervisory framework.
Lack of skilled manpower as well as financial and non-financial institutions involved in
the securities market.
The lack of proper policy framework that provides incentives and protection to investors.
The dominance of bigger public sector and borrowing of public sector as well as
government form the institutional sources rather than the market.


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Suggestions to improve the activities of Stock
Market
To introduce automated monitoring system that may control price manipulation,
malpractices and inside trading.
To introduce full computerized system for settlement of transactions.
To force the listed companies to publish their annual reports with actual and proper
information that can ensure the interests of investors.
To control and abolish kerb market form premises of stock market.
To take remedial action against the issues of fake certificates.
The composite Quotation system(CQS) should be introduced and implemented that
available the exchange specialist bid-ask quotes to the subscribers.
To make arrangement to set-up merchant banks, investment banks and floatation of more
mutual funds particularly in the private sectors.
Banks, insurance companies and other financial institution should be encouraged deal in
share business directly.
The brokers should not be allowed to deal in the Scripps on their own accounts.
The management of DSE and CSE should be vested with professionals and should not in
any way be linked with the ownership of stock exchange and other firms.









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Conclusion:
To expedite the market development process, it may be a good idea to decide on certain
milestones and link them to the disbursement of Development Credit Support of the World Bank.
The government is making good progress in other sectors, including monetary management,
corporatization of public-sector banks and others through this linkage. 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. 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.