The Capital Market in Bangladesh: an overview on volatility and trends
1. Importance of Study
Financial markets are facilitated through the flow of funds in order to finance investments by corporations, governments, and individuals. Financial Institutions are the key players in financial because they serve as intermediaries that determine the flow of funds. So, among them we have to channelize the fund in proper way to give the opportunity for investment in Bangladesh.
2.0 Capital Market in Bangladesh
2.1 Capital Market
A capital market is a market debt or equity based, where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year. The Capital market plays a significant role in the economy of the country.
A. Regulatory Bodies
The Securities and Exchange Commission (SEC) exercise powers under the Securities and Exchange Ordinance 1969, Securities and Exchange Commission (SEC) Act 1993, Depository Act, 1999. It regulates institutions engaged in capital market activities.
B. Participants in the Capital Market
The SEC has issued licenses to institutions to act in the capital market of these, 52 institutions are Merchant Banker & Portfolio Manager while 16 are the Asset Management Companies and 9 (one) acts as Security Custodians beyond these institutions SEC issuing 9 (nine) registration certificate for Credit Rating Companies.
There are two stock exchanges: a) The Dhaka Stock Exchange (DSE) and b) The Chittagong Stock Exchange (CSE) which deals in the secondary capital market. DSE was established as a Public Limited Company in April, 1954 thereafter CSE in April, 1995. As on June 15, 2012 the total number of enlisted securities with DSE and CSE were 237 and 204 respectively. Out of 281 listed securities including mutual fund with the DSE, 237 were listed companies, 41 mutual funds, 8 debentures and corporate bond 3.
Total No. of traded securities with mutual fund for DSE : 281
: Category wise:
A – 239, B - 13, G - 0, N - 6, Z – 18
← Government T. Bond (Gilt): 221 with (US$ 6.86 BN)
← Debenture: 08 (US$ 1.00 MN)
New Circuit Breaker Category “A, B & G, N & Z”
For both DSE & CSE
|When Share Price |Percent |Exceeding Limit | |Up to TK. 200 |10.00% |Tk.17.50 | |Above Tk.201 – 500 |8.75% |Tk.37.50 | |Above Tk.501 – 1000 |7.50% |Tk.62.50 | |Above Tk.1001 – 2000 |6.25% |Tk.100.00 | |Above Tk.2001 – 5000 |5% |Tk.187.50 | |Above Tk.5001 |3.75% |Tk.300.00 |
Circuit Breaker is a system to sustain sanity of the stock market and hence circuit breakers are required for movements in both directions.
2.2 Factors influence on Stock Market of Bangladesh
Interest rates have impact on the stock market in a number of ways. One of the primary ways interest rate affect the stock market is through the effect on company's profitability of the company and resulting dividends. For example, if the Federal Reserve raises interest rates, it would increase the cost of borrowing for companies. An increase in cost of borrowing would have a negative impact on company...
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