Analysis of products of capital market in Bangladesh

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Part 2

1. Introductory Aspect:

1.1 Background:

Capital market has a great importance for a country’s development. Capital market
supplies required money to the industries and business organizations.In capital market
shares,debentures,bonds,are traded for raising funds for the business.General people buy
these instruments (share, debenture, bonds etc.) form capital market by investing their
saving to the industry. Long term loan users are the members of capital market.

In a macro level the financial market for any country is divided in two parts. These are a)
money market and b) financial market. Both of the market assists the business and
individual financial activities. Some policies whether government or private is formulated
for regulating the financial markets.

Stock exchange is the most important part of the capital market of a country. Stock
exchange is called the economic mirror of a country.Stock exchange is called share
market interchangeably. Stock exchange has started its journey in the middle age. After
industrial revolution it got much spread all over the world. In 1773, some jobber started
trading of bond and stock in Sweating Alley in London. It was the institutional starting of
stock exchange. Stock exchange is a market where share,debenture, bond etc. are traded.
Stock exchange is an organization and specific location where buyers and sellers,sell and
buy share bond of public limited company. Only the member of stock exchange is
allowed to trade in a stock exchange.

The necessity of establishing a stock exchange in the then East Pakistan was first decided
by the government when, early in 1952, it was learnt that the Calcutta Stock Exchange
had prohibited the transactions in Pakistani shares and securities. The Provincial

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Industrial Advisory Council of Pakistan soon thereafter set up an organizing committee
for the formation of a stock exchange in East Pakistan. A decisive step was taken in the
second meeting of the organizing committee held on the 13th march, 1953. In the cabinet
room, Eden building, under the chairmanship of Mr. A. Khaleeli, secretary of the
government of East Bengal, commerce, labor and industries department at which various
aspects of the issue were discussed in detail. Then the central government’s proposal
regarding the opening a branch of Karachi Stock Exchange at Dhaka did not find favor
with the meeting who felt that East Pakistan should have an independent stock exchange.
It was suggested that Dhaka Narayanganj Chamber of Commerce & Industry should
approach its members for purchasing the membership cards at RS.2000 each for the
proposed stock exchange. It was thought that the location of the exchange should be
either at Dhaka, Narayanganj or at Chittagong. An organizing committee was appointed
consisting of leading commercial and industrial personalities of the province with Mr.
Mehdi Ispahani as the convener in order to organize the exchange.

The Chittagong Stock Exchange (CSE) began its journey on 10th October of 1995 from
Chittagong City through the cry-out trading system with the promise to create a state-of
the art bought in the country.
Founder members of the proposed Chittagong Stock Exchange approached the
Bangladesh 1Government 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. The Exchange comprised of twelve Board members, presided by Mr.
Amir Khosru Mahmud Chowdhury (MP) and run by an independent secretariat from the
very first day of its inception.
CSE was formally opened by then Humble Prime Minister of Bangladesh on November
4, 1995.

1.2 Objectives and scope of the study:

 To get a clear cut idea of capital market products of Bangladesh.

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  To make a in depth analysis of capital markets products of Bangladesh.
 To find out a problems associated with the capital market products of Bangladesh
and the way to solve the problem.
 To draw a picture of advantages and disadvantages of capital market products.

The study is best on the capital market on Bangladesh Dhaka stock exchange and
Chittagong stock exchange.

1.3 Methodology:

The study is based on secondary data which consist of different published report and
journal.

1.4 Limitation:

 Lack of time
 Lack of primary data
 Lake of reliable data
 Lake of enough knowledge about capital market and its product

2. Theoretical Aspects:

Capital market: A market in which long term capital is raised by industry and
commerce, the government and local authorities.

Stock exchange: The stock exchange is an organized market for the purchase of selling
of listed industrial and financial securities.

Primary market:Primary market refers to then financial market, in which the seller of
the securities is also the issuer of the securities; it is the market for the newly issued
securities.
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Secondary market: Financial market in which preowned securities (those that are not
new issue) are traded.

Bond: Bond is a long term debt instrument or contract under which a borrower agrees to
make payments of interest and principal on specified dates to the holder.

Common stock: Common stock represents the ownership of the corporation and it is a
perpetual security.

Preferred stock: Preferred stock is an equity security because it has no maturity date and
because it represents ownership.Preferred stock is called hybrid or quasi-debt security.

Equity market: Equity market is a financial market that facilitates the flow of funds
from individual or institution investors to corporations.

Money market: The market which deals with short term (one years or less) loans and
securities is called money market.

Debt: Debt means borrowing money and not giving up ownership. Debt includes all
borrowing incurred by a firm, including bonds, and is repaid according to a fixed
schedule of payments.

Equity: Equity represents ownership shares on a business firm and such are claims
against the income and assets of the firm.

Capital Market Products:

Share:A unit of owershi

Debenture:

3. Practical Aspects:

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3.1 Dhaka stock exchange: Dhaka stock Exchange (DSE) is the first and largest stock
exchange in Bangladesh. It was formed under company Act 1913 and now regulated
under company Act 1994.It’s a nonprofit organization. The two vital following laws are
securities and Exchange Commission Act 1993,Securities and Exchange Commission
Regulation 1994.DSE Plays a very important role in developing capital market i8n
Bangladesh.To be a member os DSE one is to buy at lest o9ne share of it.A1ny
competent person can buy it form irrespective citizens of home or abroad.Though bar was
foreigners the number of member of DSE is still the same as after the liberation and the
number is 195.It is Bing taken step to increase the member of member. In future the
number is likely to be 500.

The major functions are:

 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 47).
 Market Administration & Control.
 Market Surveillance.
 Publication of Monthly Review.
 Monitoring the activities of listed companies (As per Listing Regulations).
 Investors 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.
 VISION:

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  To be the leading exchange in the region and a key driver of economic growth
with state-of-art technology and world class service to ensure highest level of
confidence among stakeholders.


MISSION:

 Proactive approach to keep pace with continuous technological advancement, and

providing highest standard of service through efficiency improvement and
introduction of new products.

 Contributing to country's economic growth through creation of wealth, facilitating

access to capital and penetrating untapped market.

 Superior corporate governance to enhance confidence of investors, regulators,

issuers and intermediaries.

OBJECTIVES:

Dhaka Stock Exchange shall endeavor to achieve the following objectives within 2020:

Commercial:

 Achieve a sustainable average daily turnover of BDT 25 billion.

 Ensure steady domestic and offshore institutional investments of at least three
fourth of the total investments in the market.
 Attract more foreign investments to attain a steady level of at least 30% of the
total market capitalization.

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  Double the total number of listed securities (other than Government Bills and
Bonds).
 Increase depth and liquidity of bond market, including bringing in the Government
Securities under trading net.
 Increase breadth by listing new products, i.e. Index futures, ETF, Sukkuk and
derivatives.

Knowledge Development:

 Enhance knowledge of general investors to ensure an aware and educated investor

base.

Governance:

 Ensure effective separation of regulatory function from commercial operation.

 Enhance corporate governance and ensure investors' protection.

3.2 Chittagong stock exchange:

Vision:
Aspire a global standard transaction place of securities and financial product.

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 Mission:
Practice a set of core values to build competency in compliance, diversification and
technology so that an accessible platform, market confidence and wealth maximization
scope can be ensured.

Objectives:

 Increase business turnover

 Modernize trading system

 Ensure effective relationship management

 Achieve high level of confidence & professionalism

 Engage in product and market diversification

 Contribute to capital market policy development

 Ensure exchange related quality services

4. Conclusionary Aspect:

5. Ending Matters:

5.1 References

5.2 Appendix: