Investment

A report on Capital Markets Development in Bangladesh: The Status of Dhaka Stock Exchange

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PATUAKHALI SCIENCE AND TECHNOLOGY UNIVERSITY Capital Markets Development in Bangladesh: The Status of Dhaka Stock Exchange

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Prepared For Md. Hasan Uddin Lecturer Department of Finance and Banking Faculty of Business Administration and Management

Prepared By Group Name: Creative Core Level- 4, Semester- I Faculty of Business Administration and Management

Sl. No.

Name of the students

Roll No.

Reg. No.

01

Md. Mofizer Rahman (L)

12

00671

02

Md. Kamruzzaman

01

00660

03

Shuvradeb Barai

09

00668

04

Abu Zafour

21

00680

05

Dipayan Chakma

17

00676

06

Sahana Parveen

07

00666

07

Shofiq Uddin Khan

23

00682

08

Nazmul Alam Siddiqui

24

00565

Investment Analysis and Portfolio Management Course Code: FBK-415

Date of Submission: June 1, 2009

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PATUAKHALI SCIENCE AND TECHNOLOGY UNIVERSITY Letter of Transmittal

Date: June 1, 2009

To

Md. Hasan Uddin Lecturer Department of Finance and Banking Faculty of Business Administration and Management

Subject: Letter of Transmittal

Dear Sir,

Here is the report on “Capital Markets Development in Bangladesh: The Status of Dhaka Stock Exchange" you asked us to prepare this report as a course requirement of Investment Analysis and Portfolio Management.

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This report focuses on the Capital Markets Development in Bangladesh in respect to the Dhaka Stock Exchange. We are proud of making this report. We have tried our level best to make the report informative and fruitful. For any classification we will be available and looking for such term paper in coming days. We will be happy to get such type of report further.

Sincerely Yours

Group: Creative core Level-4, Semester-I Faculty of Business Administration and Management Patuakhali Science and Technology University

Letter of Authorization

Date: June 1, 2009

To

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Md. Hasan Uddin Lecturer Department of Finance and Banking Faculty of Business Administration and Management

Subject: Declaration regarding the validity of the report

Dear Sir,

This is our truthful declaration that the “Capital Markets Development in Bangladesh: The Status of Dhaka Stock Exchange" we have been prepared is not a copy of any report previously made by any other students.

We also express my honest confirmation in support of the fact that the said “Report” has neither been used before to fulfill any other course related purpose nor it will be submitted to any other person or authority in future.

Sincerely Yours

Group: Creative core Level-4, Semester-I

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Faculty of Business Administration and Management Patuakhali Science and Technology University

Acknowledgment At first we desire to express our deepest sense of gratitude of almighty Allah.

With profound regard we gratefully acknowledge our respected course Md. Hasan Uddin, Lecturer, Department of Finance and Banking, Faculty of Business Administration and Management for his generous help and day to day suggestion during the preparation of the report.

We like to give thanks especially to our friends & many individuals, for their enthusiastic encouragements and helps during the preparation of this report and for their assistance in typing and proofreading this manuscript.

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Executive Summary This report is an assigned job as a partial fulfillment of course requirement by honorable Course teacher Md. Hasan Uddin, Lecturer, Department of Finance and Banking, Faculty of Business Administration and Management, Patuakhali Science and Technology University. It is the optimum aggregated outcome of 5 pupils’ about “Capital Markets Development in Bangladesh: The Status of Dhaka Stock Exchange". Global Capital Markets Development helps countries deepen their securities markets and make them more transparent and accessible to investors. It also helps countries develop crucial non-bank financial institutions such as insurance, housing, leasing and contractual savings. Dhaka Stock Exchange (DSE) is the major and earliest stock exchange of Bangladesh, which is playing a major role for the development of Capital market development. Through our report we try to represents the contribution of Dhaka Stock Exchange for the development of Capital Market of Bangladesh.

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ABSTRACT

This report focuses on the development of capital market in Bangladesh, the status of Dhaka Stock Exchange Limited. The market trends in terms of market capitalization, market liquidity, market concentration, number of listings, volatility in the market index and foreign portfolio investment were considered. The study finds that key indicators are significantly correlated. Stock market growth index is constructed considering market capitalization ratio; turnover ratio, value traded to GDP ratio and volatility in market index. The findings of the study suggest that although Bangladesh stock market is growing over time, the growth has not yet assumed any stable and obvious trend. We conclude that Bangladesh stock market is still at an early stage of its growth path with a small market size relative to GDP and is characterized by poor liquidity and high market concentration.

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INTRODUCTION

The Dhaka Stock Exchange is the prime stock exchange of Bangladesh established in 1954 in Motijheel. Stock exchanges started in Bangladesh with the Dhaka Stock Exchange. Stock market growth plays an important role in predicating future economic growth in situations where the stock markets are active. Economies without wellfunctioning stock markets may suffer from three types of imperfections: first, opportunities for risk diversification are limited for investors and entrepreneurs, second, firms are unable to optimally structure their financing packages and third, countries without well functioning markets lack information about the prospects of firms whose shares are traded, thereby restricting the promotion of investment and its’ efficiency. The proponents of stock markets emphasize the importance of having a "developed" stock market in enhancing the efficiency of investment. A well-functioning stock market is expected to lead to a lower cost of equity capital for firms and allow individuals to more effectively price and hedge risk. Finally, stock markets can attract foreign portfolio capital and increase domestic resource mobilization, expanding the resources available for investment in developing countries.

Objectives of the study Page 11

The objectives of the study are

• To investigate the pattern of Bangladesh stock market growth • To identify various indicators of Bangladesh stock market growth. • To develop an index of Bangladesh stock market growth. • To examine and evaluate the issued capital and market capitalization of the securities. • To identify the problems of DS; and • To make suggestions to improve the activities of DSE.

Data and Methodology We examine secondary data of stock market of Bangladesh. The study covers time period from 1990-91 to 2006-07. Data are collected from various issues of annual report of Securities and Exchange Commission (SEC) of Bangladesh, Quarterly Review of SEC, Monthly Review of Dhaka Stock Exchange (DSE), Bangladesh Economic Review, Statistical Year Book of Bangladesh, Website of Dhaka Stock Exchange, and Website of SEC Bangladesh. Form those huge data we take the necessary and used them for the analysis.

Our analysis data are clearly represented in our main part of the report through relevant chart, graph with proper description.

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DEFINITION OF CAPITAL MARKET

Capital is anything that brings our ideas and abilities to fruition and enables us to produce goods and services more efficiently. For example, computers, lasers, and so on are all capital goods. A person's education and training, in the sense that they improve productivity, are capital investments. And funds that are made available for a business improvement or expansion are considered capital in a financial sense.

The capital market is the market for securities, where companies and governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market. Capital market is the group of interrelated markets, in which capital in financial form is lent or borrowed for medium and long term and, in cases such as equities, for unspecified periods.

A capital market is simply any market where a government or a company can raise capital to fund their operations and long term investment. Selling bonds and selling stock are two ways to generate capital, thus bond markets and stock markets are considered capital markets.

A market in which individuals and institutions trade financial securities, Organizations/ institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets.

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ROLE OF CAPITAL MARKET The primary role of the capital market is to raise long-term funds for governments, banks, and corporations while providing a platform for the trading of securities. This fund rising is regulated by the performance of the stock and bond markets within the capital market. The member organizations of the capital market may issue stocks and bonds in order to raise funds. Investors can then invest in the capital market by purchasing those stocks and bonds. The capital market, however, is not without risk. It is important for investors to understand market trends before fully investing in the capital market. To that end, there are various market indices available to investors that reflect the present performance of the market. Regulation of the Capital Market

Every capital market in the world is monitored by financial regulators and their respective governance organization. The purpose of such regulation is to protect investors from fraud and deception. Financial regulatory bodies are also charged with minimizing financial losses, issuing licenses to financial service providers, and enforcing applicable laws. The Capital Market’s Influence on International Trade Capital market investment is no longer confined to the boundaries of a single nation. Today’s corporations and individuals are able, under some regulation, to invest in the capital market of any country in the world. Investment in foreign capital markets has caused substantial enhancement to the business of international trade.

The Primary and Secondary Markets

The capital market is also dependent on two sub-markets – the primary market and the secondary market. The primary market deals with newly issued securities and is responsible for generating new long-term capital. The secondary market

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handles the trading of previously-issued securities, and must remain highly liquid in nature because most of the securities are sold by investors. A capital market with high liquidity and high transparency is predicated upon a secondary market with the same qualities.

BANGLADESH CAPITAL MARKET

Bangladesh capital market is one of the smallest in Asia but the third largest in the south Asia region. It 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 capita 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. Bangladesh Capital Market summary are in the next page.

Bangladesh Capital Market summary are as follows—

Capital Market Summary Page 15

As on 30th June 2008

Indicators No. of companies No. of mutual funds No. of debentures No. of Treasury bonds Total No. of Listed Securities

DSE 271

CSE 216

14

14

8

…

85

1

378

231

Figure 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 Treasury bonds Total No. of Tradable Securities

2096.00

1973.40

190.00

190.30

3.41

3.00

1.75

…….

2291.16

2166.70 Figure in Million Taka

Issued Capital

284380.00

102220.00

Market Capitalization

964800.00

777743.00

Turnover

543284.30

34177.60

2588 .03

9050.56

All share price index

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Capital Market Development Program in Bangladesh

Asian Development Bank (ADB) approved the Capital Market Development Program (CMDP) to the People’s Republic of Bangladesh for $80 million equivalent from its Special Funds resources on 20 November 1997. The CMDP aimed to broaden market capacity and develop a fair, transparent, and efficient domestic capital market to attract larger amounts of investment capital to augment the capital resources provided through the banking system. The key agenda of the CMDP in achieving this objective was to restore investor confidence, which was significantly damaged when the Bangladesh stock market crashed in 1996 because of excessive speculations, allegedly aggravated by widespread irregular activities.

The CMDP was to achieve its objective by—

(i) Strengthening market regulation and supervision, (ii) Developing the capital market infrastructure, (iii) Modernizing capital market support facilities, (iv) Increasing the limited supply of securities in the market, (v) Developing institutional sources of demand for securities in the market, and (vi) Improving policy coordination.

The policy matrix of the CMDP included 95 program measures. They included 52 measures to be implemented prior to the first tranche

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release (of which 38 were tranche conditions) and 43 measures to be implemented prior to the second tranche release (of which 23 were tranche conditions). Three technical assistance (TA) grants totaling $2.04 million were attached to the CMDP, aimed at –

(i) Capacity building of the Securities and Exchange Commission (SEC) and the stock exchanges, (ii) Institutional strengthening of the Privatization Board, and (iii) Insurance industry and pension and provident fund reforms

Like emerging-market countries around the world, Bangladesh could benefit from having a local-currency, fixed-income securities market. At present, its main fixed-income financial products are bank deposits, bank loans, government savings certificates, term loans, treasury bills, and government bonds and corporate debt.

THE DHAKA STOCK EXCHANGE (DSE)

Evolution of the Dhaka Stock Exchange

The need to develop a new stock exchange in Bangladesh was realized by the government of Bangladesh ever since Calcutta Stock Exchanges had stopped the transactions in Pakistani shares and securities.

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The Dhaka Stock Exchange basically started with the formation of the Provincial Industrial Advisory Council. Initially it was named the East Pakistan Stock Exchange Association Ltd. It was revised in 1964 and since then it has used the present name. Although the Dhaka Stock Exchange was incorporated in 1954 it started trading formally from 1956. Trading in the Dhaka Stock Exchange discontinued for a span of five years following the liberation war of 1971. Trading was regained from 1976. In 1976, there were nine listed companies in Dhaka Stock Exchange with a paid up capital of Tk. 137.52 million. The Dhaka Stock Exchange actually witnessed high growth in 1983 when the market capitalization reached Tk. 812 million. By 1987, there was a spurt in the market size with the number of listed companies shooting up to 92. With the opening up of the economy in the 90s the Dhaka Stock Exchange also rapidly developed.

Structure of the Dhaka Stock Exchange

By 2001 the number of listed securities in the Dhaka Stock Exchange was 244, number of listed companies was 224, number of listed debentures was 10, and the number of shares issued by the listed companies was 666,553. The number of Mutual Funds was 72,250 and the market capitalization was Tk. 72,168 million. Management The management and operation of Dhaka Stock Exchange is entrusted on a 25 members Board of Director. Among them 12 are elected from DSE members, another 12 are selected from different trade bodies and relevant organizations. The CEO is the 25th ex-officio member of the board. The following organizations are currently holding positions in DSE Board: •

Bangladesh Bank Page 19

• • • • • •

ICB President of Institute of Chartered Accountants of Bangladesh President of Federation of Bangladesh Chambers of Commerce and Industries President of Metropolitan Chambers of Commerce and Industries Professor of Finance Department of Dhaka University President of DCCI (Dhaka Chamber of Commerce and Industry)

Nature of Dhaka Stock Exchange

The Dhaka Stock Exchange was a physical stock exchange in its initial days when trading took place in the open objection system. But with the advent of new technology, the traditional mode of trading was abolished and was replaced by a fully automated computerized Stock Exchange. The trading session occurs in five parts- the pre-opening session, opening session, continuous or regular trading session, closing session or post-closing session.

There are four markets in the system: (1) Public Market: Only trading of market lot share is done here through automatic matching. (2) Spot Market: Spot transactions are done here through automatic matching which must be settled within 24 hours. (3) Block Market: A place where bulk quantities of shares are traded through pick and fill basis. (4) Odd Lot Market: Odd lot scripts are traded here based on pick and fill basis.

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RECENT DEVELOPMENTS IN DSE

Total market capitalization of all listed securities in DSE increased substantially (by around 133 percent) in end of December, 2007 to Tk. 753.9 billion which, as a share of GDP, reached a new height in 2007 of nearly 16.0 percent as against 2.3 percent in 2003. In December 2007, a total of 350 securities were listed at DSE comprising 266 companies, 14 mutual funds, 8 debentures, 61 treasury bonds, and 1 corporate bond as opposed to a total of 267 securities comprising of 248 companies, 11 mutual funds, and 8 debentures in December 2003. Thus during the last four years only 43 new companies got listed in the DSE of which only three were listed by direct listing route, and the rest were listed through public offering.

FUNCTIONS OF DSE The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are regulated by its Articles of Association rules & regulations and bye-laws along with the Securities and Exchange Ordinance, 1969, Companies Act 1994 & Securities & Exchange Commission Act, 1993. There are so many functions of DSE the major functions are as the following —

•

Listing of Companies. (As per Listing Regulations).

•

Providing the screen based automated trading of listed Securities.

•

Settlement of trading.(As per Settlement of Transaction Regulations)

•

Gifting of share / granting approval to the transaction/transfer of share outside the trading system of the exchange (As per Listing Regulations 42)

• Market Administration & Control. • Market Surveillance. • Publication of Monthly Review. Page 21

• Monitoring the activities of listed companies. (As per Listing Regulations). •

Investor’s grievance Cell (Disposal of complaint bye laws 1997).

•

Investors Protection Fund (As per investor protection fund Regulations 1999 • Announcement of Price sensitive or other information about listed companies through online.

DSE OPERATIONAL STATISTICS

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POLICIES OF DHAKA STOCK EXCHANGE

LONG TERM POLICES FOR DSE

 First, we believe that business is primarily the domain of private

individuals and groups. Thus we have to significantly expand the space available to the private sector in running the economy of the country.

 Second, the role of the government is that of a regulator and

umpire. It must not engage in any economic activity directly. It is not the business of the government to engage in business.

 Third, markets should be left alone to determine price and output

decisions. Interventions are justified only in the case of market failure or when the vulnerable groups of the society are being affected by major swings in market conditions.

 Fourth, Bangladesh would move toward greater openness and integration with the world markets and as such foreign investment will not only be provided a level playing field but would be given the necessary guarantees for its protection.

 Fifth, poverty is a major challenge our society is facing. The government not only has to play an active role in combating this problem, but the entire focus of economic planning would be redirected toward poverty alleviation. However, we believe that growth will be the primary instrument to achieve this goal.

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 Finally, we would like to add one thing. Besides devolution,

reforms in civil services, tax administration, judiciary and police are needed to be aimed at reconstructing the nearly demolished institutions of governance so that the state regains its efficiency and capacity to positively influence the lives of its citizens.

SHORT TERM POLICIES FOR DSE

 DSE can introduce automate monitoring systems that may control price manipulation, malpractices and inside trading.

 It can make sure all the listed companies publish their annual reports with actual and proper information that can ensure the interest of the investors.  To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting.

 To make arrangement to set up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors.

 More banks, insurance companies and other financial institutions should be encouraged to deal in share business directly

 The management of DSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms.

 To train the investors about fundamentals to deal in share transactions. Page 24

 To punish the member brokers for breaching of contract.

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ANALYSIS OF LISTED SECURITIES

Shortly speaking, a security may be defined as an instrument that represents evidence of a property right. But in a broader sense, a security represents a claim on assets or any future cash flows the asset may generate. So a security itself is usually a document that identifies the investor’s rights or claims. Typically securities means stock or bonds of a company where a bond indicates that the investor is to receive certain interest and principal payments at a specific time and stock certificate indicates that the investor owns a certain percentage of the cash dividends and other distributions like bonus shares, tights shares etc. made to the firm’s shareholders. So securities may be of any Government Securities as defined in the Securities Act, 1920, or other instruments creating a charge or lien on the assets of the company.

Security analysis involves the process of estimating the future cash flows which will accrue to the owners of a particular security. Before doing this estimation, a great deal of preparatory work relating to the gathering of a variety of data must be done. The listed securities of DSE comprised of shares, mutual funds and debentures. Although the size of this securities market is very small with limited facilities, its activities improved since 1985 and gained drive from early 1991. As in 30th June 2001 there were 244 listed securities with DSE. In 2008 the number of listed securities of DSE reached to 378 including 14 mutual funds, 8 debentures, and 85 treasury bonds. Table-1 focuses the trends of securities of DSE from 2001 to 2008 where the numbers of listed securities increase gradually showing a positive trend. In 2008

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there was a remarkable growth of securities which is recorded as 16.31% growth than the previous year. There had been a growth all round in the securities market during the study period. The improvement of securities of DSE during the period can be attributed to trade liberalization and industrial policy of the government and increasing number of saves who prefer to hold their assets in the form of shares etc. On 30th June 2008 the total number of tradable securities in DSE was 2166.70 million as compared to 739.60 million in 2001.

The vast increase in tradable securities in DSE was occurred in 2002, which increased by 35.68% from the previous year 2001. Table shows that the number of tradable securities keeps the increasing trend during the period under study. Various reasons for such development of DSE are attributed to the— • better management functioning in secondary market activities, • a huge number of investors, • proper supervision and control of SEC, • government policies towards financial and • trade liberalization

Table

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1

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2

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3

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ANALYSIS OF CAPITALIZATION

The capital of securities market may be either issued capital of all listed securities of market capital of all securities of listed companies. Issued capital or paid up capital means the face value of all securities listed with a stock exchange but it does not include premium where as market capital or market capitalization which does not involve adjusted market capitalization means market scenario of DSE through the operational statistics during the period from 2001 to 2008 is given in table-2.

From the previous table it is found that as on 30th June 2008 the total issued capital of DSE reached to Tk. 284380.00 million as against Tk. 32227.00 million in 2001. There is an increasing trend in the volume of issued capital of DSE with compared to the issued capital in 2001 to 2007. But in this table we see that total issued capital in 2007 is increased 91.64%, which is the highest increase than the other years of the study period. In 2008 total issued capital is increased by 73.11% than the previous year 2007.

The market capitalization of all securities of listed companies of DSE during the period from 2001 to 2008 is also shown in Table-2. As on 30th June 2008 the total market capitalization of all listed securities in DSE amounts to Tk. 964800.00, which is 96.22% more than the previous year 2007. In 2007 the total market capitalization of all listed Page 34

securities is Tk. 491684.00 against the total market capitalization of all listed securities is Tk. 225300.00. This is 118.23% more in compare to the previous year 2006. Although there is no regular trend in the changes of market capitalization, vast amount of market capital is shown in 2008 amounting to Tk. 964800.00 million. In 2002 there was decrease in the market capital than market capital of the previous year2001. The reasons for declining in market capitalization in 2002 are attributed to listing of lesser number of new issues, absence of right a bonus issues.

Total number of securities traded in DSE as on 30th June during 2001 to 2008 is depicted in table-2. DSE experienced a regular positive trend in the number of securities traded in securities traded in DSE during 2007 and 2008. In 2008 the total turnover is Tk. 543284.30 million as against the total turnover is Tk. 49094.70 million in 2001. This state of affairs indicate that the volume of transactions in increasing day by day with a vast amount in 2008 due to the implementation of automation system in trading and clearing of transaction.

Table 2

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4

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5

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6

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PROBLEMS AND LIMITATIONS OF DSE

 Price Manipulation: It has been observed that the share values of

some profitable companies have been increased fictitiously some times that hampers the smooth operation of DSE.

 Delays of settlement: Financing procedures and delivery of

securities sometimes take an unusual long time for which the money is blocked for nothing.

 Irregulations in dividends: Some companies do not hold Annual

General Meeting and eventually declare dividends that do not

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reflect the real or actual financial positions of the company and ultimately shareholders become confused.

 Selection of membership: Some members being the directors of

listed companies of DSE look for their own interest using the internal information of share market.

 Improper Financial Statement: Many companies of DSE 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 the company.

 The concept of centralization of securities market has not been implemented that arises technical problems and political infighting.  As DSE is a small market, the spread/cot ratio is relatively higher which is a important factor for capitalization.

 The absence of comprehensive legal and supervisory framework.

 Lack of skilled manpower in DSE 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 from institutional sources rather than the market.

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SUGGESTIONS TO IMPROVE THE ACTIVITIES OF DSE

The authorities take unusually long time to decide to allow the stuckup shares to be free from the application of circuit breaker temporarily in the DSE floor. As a result, all share price index of DSE did not reflect the actual position. To improve the market activities DSE is to take some measures as under—

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.

Person being the director of listed company should not be allowed to be a member of DSE.

To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting

To control and abolish market from the premises of DSE

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To take remedial action against the issues of fake certificates

The Composite Quotation System should be introduced and implemented that available the exchange specialist bid-ask quotes to the subscribes

To establish Central Depository System to curb the scope of manipulation by the brokers

To make arrangement to set-up merchant banks, investment banks and flotation of more mutual funds particularly in the private sectors.

Banks, insurance companies and other financial institutions should be encouraged deal in share business directly.

The brokers should not be allowed to deal in the Scripps on their own accounts, there should be complete transparency in their transactions with the clients so the one is favored as against the other.

There should be a system to penalize defaults to fulfill contacts regulating share dealings Chartered Accounts’ Firms should be allowed to certify the accounts.

The management o DSE should be vested with professionals and should not in any way be linked with the ownership to stock exchange and other firms.

To publicize and educate the investors about fundamentals to deal in share transactions

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To punish the member brokers for breaching of contract.

The above suggestions are recommended as major to improve the overall performance of DSE to play an important role in the securities market development in Bangladesh.

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Conclusions The capital market is the market for securities, where companies and governments can raise long term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market as well as consists of both the primary market and the secondary market. The primary markets are where new stock and bonds issues are sold to investors. The secondary markets are where existing securities are sold and bought from one investor or speculator to another, usually on an exchange. We aimed at evaluating the growth of Bangladesh stock market over last decade in terms of some commonly used indicators of stock market development. Our analysis reveals that the Bangladesh’s stock market is growing in terms of market capitalization to GDP, turnover ratio;

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value traded to GDP and number of listed companies, although the growth over time is not stable and has not yet assumed any obvious pattern. It also remains highly volatile and concentrated with foreign portfolio investment gradually disappearing.

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References •

Islam Md. Atikul .2007. “Stock Market Growth and Economic Growth: Preliminary Evidence from Bangladeshi Capital Market.” Journal of Sustainable Development in Bangladesh.www.jsd-bd.com

•

“Financial integration and stock markets in developing countries: A study of growth, volatility and efficiency in the Bangladesh stock market” Institute of Business Administration of Bangladesh, Discussion paper with 21members.

•

Bundoo, S. K. 2006. “The Mauritius Stock Exchange: An Assessment,” Capital Market Development & Management Research Journal. University of Mauritius, Mauritius.

•

Demirguc-Kunt, Asli and Ross. Levine. 1996. “Stock Market Growthand Financial Intermediaries: Stylized Facts,” The World Bank Economic Review, Vol. 10 (2), pp.291- 232.

•

Khan, Harun-or-Rashid.1992. “The Performance of Stock Markets in Bangladesh: An Appraisal”. Finance and Banking. The Journal of the Department of Finance and Banking, University of Dhaka. Volume 2, Number 1

•

La Porter, R. Lopez-de-Silanes.,F, Shlieifer A. and Vishny R.W. 1997."Legal Determinants of Capital Market", Journal of Finance, 54 p. 471 – 517.

•

Levine R. and Zervos S. 1998.“Stock markets, bank, and economic growth”, American Economic Review, June pp.537-558.

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•

Maunder, P., Myers, D., Wall, N. & Miller, R. 1991. “ Economics Explained.” 2nd ed. London, HarperCollins

•

Naceur, Samy Ben, Samir Ghazouani and Mohamed Omran. 2007. “The determinants of stock market development in the Bangladesh.” Managerial Finance. Volume: 33 Issue: 7 Page: 477 – 489, ISSN: 03074358

•

Singh A. 1997."capital market of Bangladesh and the necessary Economic Development issue", Economic Journal,107,pp.771-782.

•

Rahim Md. Abdur. 2008. “The Determinants of Stock Market Development in Emerging Economies: Is Bangladesh Different?” IMF working paper no: WP 08/32

•

Yartey, Charles Amo. 2007. “Well Developed Financial Intermediary Sector Promotes Stock Market Development: Evidence from Africa,” Journal of Emerging Market Finance, Vol. 6, No. 3, 269-289.

Table -1: Showing the Listed Securities of DSE during the Period from 2001 to 2008 Securities

Trade able Securities [

Figures in million No. of compani es

No. of mutual funds

224

10

238

10

No. of debentur es

No. of Treasur y bonds

Total No. of Listed Securities

% Change (+/-)

No. of shares of all listed compani es

10

…..

244

……..

666.60

9

…..

257

5.33

930.50

Page 50

No. of certificates of all listed mutual funds

No. of debentur es of all listed debentur es

Total o Trada Secu s

72.30

0.70

739

72.30

0.70

1003

241

10

9

…..

260

1.17

972.7

72.20

0.70

1,04

248

11

8

…..

267

2.69

1113.4

73.20

0.40

1187

239

12

8

18

277

3.74

1175.80

74.20

0.06

1250

256

13

8

26

303

9.38

1390.40

161.20

0.60

1552

259

14

8

44

325

7.26

1735.00

162.00

1.20

1898

271

14

8

85

378

16.31

2096.00

190.00

3.41

2291

Source: Annual report of DSE during the study period Table-2: Showing the Market Capitalization of DSE during the Period 2008 13

from 2001 to

Issued Capital

Turnover

Market Capitalization

e Taka in Million

% Change (+/-)

32227.00

…….

Taka in Million

% Change (+/-)

72168.00

……

Taka in Million

% Change (+/-)

49094.70

…….

34968.00

8.51

65518.00

(9.21)

35935.60

(26.80)

36081.00

3.18

72998.00

11.42

30596.53

(14.86)

48945.00

35.65

142369.00

95.03

24770.00

(19.40)

66392.00

35.65

224611.00

57.77

65172.90

163.11

85723.00

29.12

225300.00

0.30

45990.20

(29.43)

164279.0 0

91.64

491684.00

118.23

164670.90

158.06

284380.0 0

73.11

964800.00

96.22

543284.30

229.92

Source: Annual report of DSE during the study period

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