Bangladesh Capital market

What Is a Capital market?

A capital market is a market for securities (debt or equity), 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 includes the stock market (equity securities) and the bond market (debt). Money markets and capital markets are parts of financial markets. Capital market is the market for securities and It gives fund for securities for more than a year. Stock, Bond, Currency and Commodity are coming under the capital market Financial regulators, such as the Financial Services Authority (FSA) or the Securities and Exchange Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.

Capital Market in Bangladesh:

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 capital 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.

History of Stock Exchange in Bangladesh:

Dhaka Stock Exchange was setup on 28th April, 1954 that started formal trading nearly 1956. Postindependence government did not promote a capital market during the first five years, and it was activated again in 1976 with 9 issues on board. In 1995, a second bourse, the Chittagong Stock Exchange, was setup with sophisticated logistic support and modern management.

Vision:
Regulating the market structure through proper rules and strict compliance by members. Expansion of CSE trading network to cover 504 thanas. Introduce Book Building system in Bangladesh capital market. Introducing derivative market Continuous promotion of stock investment throughout the country. Create opportunity to cross border trading with SAFE countries. Introduce Global Depository Receipts

Mission:
To create an efficient and transparent Market facilitating entrepreneurs to raise capital, so that it accelerates industrial growth for overall benefit of the economy of the country.

Function: Securities & Exchange Commission (SEC)

Registering and regulating the business of stock exchanges, stock brokers, merchant bankers and managers of issues, trustee of trust deeds, underwriters, portfolio managers and other intermediaries in the securities market. Promoting investors education and providing training for intermediaries of the securities market. Prohibiting fraudulent and unfair trade practices relating to securities trading in any securities market.

Functions: Dhaka Stock Exchange Ltd. (DSE) & Chittagong Stock Exchange Ltd. (CSE)
Listing of securities and ensuring compliance by the issuers. Trading provisions for listed securities through efficient trading platform (Online screen based trading system) . Over the counter market (OTC) & Internet based trade facilities provide by CSE. Real time online market Surveillance of trading and regular monitoring and compliance inspection of trading operations. Clearing and Settlement of executed trades.

 Management of the Members.

Categorization of listed company

Criteria of the share Category:

A Category Companies: Companies which are regular in holding the Annual
General Meetings (AGM) and have declared dividend at the rate of 10 percent or more in a calendar year. (Mutual fund, debentures and bonds are being traded in this category). B Category Companies: Companies which are regular in holding the AGM but have failed to declare dividend at least at the rate of 10 percent in a calendar year. G Category Companies: Greenfield companies.

N Category Companies: All newly listed companies except Greenfield

companies will be placed in this category and their settlement system would be like BCategory companies. Z Category Companies: Companies which have failed to hold the AGM or failed to declare any dividend or which are not in operation continuously for more than six months or whose accumulated loss after adjustment of revenue reserve, if any is negative and exceeded its paid up capital.

Market performance of DSE & CSE, 2007

Sector wise PE and EPS 30.12.2007

Growth of Listed Securities of CSE March, 2008

Bangladesh Economic growth

Economic growth:
Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. inflationadjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output. As economic growth is measured as the annual percent change of gross domestic product (GDP), it has all the advantages and drawbacks of that measure.

Measuring economic growth:

Economic growth is measured as a percentage change in the Gross Domestic Product (GDP) or Gross National Product (GNP). These two measures, which are calculated slightly differently, total the amounts paid for the goods and services that a country produced. As an example of measuring economic growth, a country which creates $9,000,000,000 in goods and services in 2010 and then creates $9,090,000,000 in 2011, has a nominal economic growth rate of 1% for 2011. In order to compare per capita economic growth among countries, the total sales of the countries to be compared may be quoted in a single currency. This requires converting the value of currencies of various countries into a selected currency, for example U.S. dollars. One way to do this conversion is to rely on exchange rates among the currencies, for example how many Mexican pesos buy a single U.S. dollar? Another approach is to use the purchasing power parity method. This method is based on how much consumers must pay for the same "basket of goods" in each country. Inflation or deflation can make it difficult to measure economic growth. If GDP, for example, goes up in a country by 1% in a year, was this due solely to rising prices (inflation) or because more goods and services were produced and saved? To express real growth rather than changes in prices for the same goods, statistics on economic growth are often adjusted for inflation or deflation.

Theories of economic growth:

Classical growth theory The neoclassical growth model Endogenous growth theory Useful work growth theory The big push

Economic growth of Bangladesh:

The economy of Bangladesh is a rapidly developing market-based economy. Its per capita income in 2010 was est. US$1,700 (adjusted by purchasing power parity). According to the International Monetary Fund, Bangladesh ranked as the 43rd largest economy in the world in 2010 in PPP terms and 57th largest in nominal terms, among the Next Eleven or N-11 of Goldman Sachs and D-8 economies, with a gross domestic product of US$269.3 billion in PPP terms and US$104.9 billion in nominal terms. The economy has grown at the rate of 67% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leather goods, ceramics, RMGs. Remittances from Bangladeshis working overseas, mainly in the Middle East, is the major source of foreign exchange earnings; exports of garments and textiles are the other main sources of foreign exchange earnings. Ship building and cane cultivation have become a major force of growth. GDP's rapid growth due to sound financial control and regulations have also contributed to its growth; however, foreign direct investment is yet to rise significantly. Bangladesh has made major strides in its human development index. The land is devoted mainly to rice and jute cultivation as well as fruits and other produce, although wheat production has increased in recent years; the country is largely self-sufficient in rice production. Bangladesh's growth of its agricultural industries is due to its fertile deltaic land that depend on its six seasons and multiple harvests. Transportation, communication, water distribution, and energy infrastructure are rapidly developing. Bangladesh is limited in its reserves of oil, but recently there has been huge development in gas and coal mining. The service sector has expanded rapidly during last two decades and the country's industrial base remains very positive. The country's main endowments include its vast human resource base, rich agricultural land, relatively abundant water, and substantial reserves of natural gas, with the blessing of possessing the worlds only natural sea ports in Mongla and Chittagong, in addition to being the only central port linking two large burgeoning economic hub groups SAARC and ASEAN.

Macro-economic trend
This is a chart of trend of gross domestic product of Bangladesh at market prices estimated by the International Monetary Fund with figures in millions of Bangladeshi Taka. However, this reflects only the formal sector of the economy.

Overview:
Bangladesh has made significant strides in its economic sector performance since independence in 1971. Although the economy has improved vastly in the 1990s, Bangladesh still suffers in the area of foreign trade in South Asian region. Despite major impediments to growth like the inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by agriculture, inadequate power supplies, and slow implementation of economic reforms, Bangladesh has made some headway improving the climate for foreign investors and liberalizing the capital markets; for example, it has negotiated with foreign firms for oil and gas exploration, better countrywide distribution of cooking gas, and the construction of natural gas pipelines and power stations. Progress on other economic reforms has been halting because of opposition from the bureaucracy, public sector unions, and other vested interest groups.

Conclusion:
The capital market plays an essential role in the growth of commerce and industry which ultimately affects the economy of the country to a large extent. This is the rationale that the industrial bodies, government advisors and even the central bank of the country keep a close eye on the activities of the stock market. The increasing importance of financial markets has reinforced the researchers to study the impact of stock market development on economic growth. The capital market and economic growth of Bangladesh is under growing position. As Bangladesh is an under developing country its capital market is not fully matured and the economic growth is increasing. The per capita income and GDP also increase from past times.

Reference:
Mujeri MK and Sen B (2003), A Quiet Transition: Some aspects of the history of economic growth in Bangladesh 1970-2000, Bangladesh Country Paper, Global Research Project, World Bank. Amalendu mukherjee (2009), Capital market in Bangladesh-trends and practices, Research Project, Bangladesh Government. Adajaski CKD, Biekpe NB (2005). Stock Market Development and Economic Growth: The Case of Selected African Countries. Working Paper. African Development Bank. Bangladesh Export Promotion Bureau. World Bank, Economic Growth in the 1990s: Learning from a Decade of Reform. Wikipedia, the free encyclopedia http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,menuPK:23 2599~pagePK:64133170~piPK:64133498~theSitePK:239419,00