Stock Market Crisis in Bangladesh in 2010-11

Topics: Stock market, Stock, Stock exchange Pages: 39 (10143 words) Published: June 28, 2013
ABSTRACT

The Capital Market of Bangladesh is passing tough times since December 2010 as high volatility is eroding the capital of Thousands of Investors that might turn into social instability. The study has attempted to find out the major reasons for the recent stock market crash of Bangladesh in 2010-11 and role of different regulatory organizations including DSE, CSE, SEC and the government of the country. It also tries to suggest regulatory organizations to follow the recommendation made by the investigation report of Khondkar Ibrahim Khaled and dif-ferent market analysts as well.

The theoretical background of the study includes brief introduction of Bangladesh stock market with its structure and different regulatory and intermediary organizations. It also describes one international stock market crash and stock market crash of Bangladesh in 1996. For the theoretical part investigation report of Khondkar Ibrahim Khaled is used as the main secondary resource. The report helps to get background of the crash with reasons and role of different regulatory and intermediary organizations.

Finally, the researcher made some recommendation to the regulators, government and investors.

ACKNOWLEDGEMENT

I would like to express my deepest gratitude to my supervisor Mrs. Monsura Zaman for her effort and guidance throughout last couple of months in my thesis work.

I would also like to thank my friends and relatives for their supports.

Finally, my special gratitude to my parents and family members for their encouragements supports and loves during last years in my studies.

Dhaka, 31.12.2012

TABLE OF CONTENTS

List of Figures

Figure 1: Figure 2: S&P 500 index around the time of crash

Figure 2: Figure 3: DGEN Graph

Figure 3: DSE daily DGEN index of December, 2010

Figure 4: CSE daily CASPI index of December, 2010

Figure 5: Daily DGEN index of January, 2011

Figure 6: CSE daily CASPI index of January, 2011

Abbreviations

BO = Beneficiary Owners

DSE = Dhaka stock exchange

CSE = Chittagong stock exchange

SEC = Security and exchange commission

CDBL= Central depository Bangladesh limited

BB = Bangladesh Bank

AGM = Annual general meeting

DVP = delivery versus payment

CEO = Chief Executive Officer

IPO = Initial public offerings

DGEN = DSE general index

CASPI = CSE all-share price index

CSCX = CSE selective categories index

ICB = Investment Corporation of Bangladesh

NAV = Net asset value

CPD = Centre for Policy Dialogue

SLR = Statutory Liquidity Ratio

CRR = Cash Reserve Ratio

MC = Market Capitalization

EPS = Earnings per share

FDI = Foreign direct investment

1. INTRODUCTION

1.1 Background

Stock market is a very important financial institution in Bangladesh which opens doors for companies to raise huge amount of capital from a lot of individuals inside and outside of a country. Here investors participate voluntary to buy ownership of a company in the public market. In these days investing in stock market is more popular than investing in other sectors for millions of middle class people in Bangladesh. Since 2007 in Bangladesh share prices have been increasing steadily over the last four years and it performed as second best in the world after Srilanka in 2010 gaining nearly 83%. The financial year of 2008-09 known as global financial and economic crisis could not affect Bangladesh economy greatly. So there was no significant change or fall here. According to CPD (2011) in 2008-09 financial year Bangladesh economy benefited from low prices of importable and was able to avoid negative pressure on its export of goods and services.

The continuous good performance of Bangladesh stock...

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