Introduction: The share markets of Bangladesh recently witnessed wild volatility. Recent experience has made us believe that anything can happen in our capital market. Most of the investors have lost up to 60 percent of their capital. At present, government steps, merchant banks and mutual funds must play the vital role in achieving a stable market.
Dhaka Stock Exchange: Dhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of Dhaka city. It was incorporated in 1954. Dhaka Stock Exchange is the first stock exchange of the country. As of March 2012, the Dhaka Stock Exchange had 504 listed securities...
Share: In plain and simple, share is the ownership of a company. Share represents a claim on the company's assets and earnings. As you acquire more share, your ownership stake in the company becomes greater. Whether you say shares, equity or stock, it all means the same thing.
Why do a company issues share: A company could keep the profits and earnings for the owners of the company. In order to extend market share or get bigger asset a company issues share. At some point every company needs to raise money. To do so companies can either borrow it from somebody or raise it by selling part of the company, which is known as issuing share. The First sale of share by a company is called the Initial Public Offering (IPO)
Risk involvement in a share: This is a very important factor you believe in risk When you want to invest in the share market. There is no guarantee of what Percentage of capital gain you can get, where and when the share price stops in up-end or low-end and how long it takes to get the profits. It is true, no company or institute can guarantee. However, you can measure the risk in various ways. That's why it is essential to do some Home Work on a company before you invest. The "Home Work should be calculated earning per share EPS, total debt, relative price strength, profit margins, volumes, industry leader and so. You can also reduce the risk by diversifying the portfolios (selecting stock from different industries) and measuring the correlation between a share and market index. A less risk taker has options to invest in Bond (fixed returns) or company that provides dividends at the end of year.
However, investors need to measure "expected rate of returns first it should be high enough to compensate the investors for the perceived risk the investment. Risk is contrary to the positive profit, but there is also bi side. Taking on greater risk demands a greater return on the investment
How share trade : Most shares are traded on exchanges, which are places where buyers and sellers meet and decide on a price. Some exchanges are physical locations where transactions are carried out on a trading floor. Two trading floors are located in Bangladesh, DSE which is located in Dhaka CSE is located in Chittagong. We should distinguish between the primary and secondary market. The primary market is the first phase of share where securities created before trading at the floor which is called IPO. In the secondary market, investors trade previously issued securities without the involvement of the issuing companies. The secondary market is what people are referring to when they talk about the share market.
What causes price to change : Share prices change everyday by market forces. By this we mean that share prices change because of supply and demand. Any single time, if more people want to buy a share than sell it, the price moves up. Conversely, if more people want to sell a share than buy it which is a greater supply than demand, the price falls.
The Bulls and the Bears: On Wall Street, the bulls and bears are in a constant struggle. A bull market is when everything in the economy is great people are finding jobs, GDP is growing and share prices are rising. Things are just plain rosy (IMIAIH), picking shares during a bull market is easier because everything is going up. Bull markets cannot last forever though and Sometimes they can lead to dangerous situations if shares become overvalued. If a person is optimistic, believing that shares will go up. he or she is called a bull and said to have a bullish outlook. A bear market is when the economy is bad, recession is looming and share prices are falling.
Current situation of share market: Our share market experienced a totally new kind of development in the trading. It watched both sides of a coin within two trading days. On January 10, 2011 we saw a huge selling pressure and a record fall, 600 points in the general index of Dhaka Stock Exchange (DSE) within just 50 minutes of trading. Again next day, we find the other side of the coin when almost no seller was found in case of most of the shares. At the end of the day's trading the DGEN, actually, gained l012 points taking into consideration the previous day's loss. Thus, we witnessed both record gain and record decline in index on January 10 and January 11 respectively. It appeared like a circus show said a market analyst.
The DGEN which was 5367.11 points on January 10, 2010, increased 6249.35 on the same date this year. But in a day's gap market index soared to 7512.09. The percentage change in one year stood at 39.9 from 16.40 within two consecutive trading days.
In 2010, institutional investors especially some banks and non-bank financial institutions showed their investment characteristics like general investors. Over the last two years, the profit of most of the banks and financial institutions became two to three times more than that of the previous years. This profit growth was attributed to profit earned from investment in shares. Thus many banks and financial institutions concentrated on share business instead of investing in their core banking activities.
In early December 2010 when general index reached the record 8700 points, many analysts expressed their concern about the overvaluation and syndicated price hike. But that time our general investors were over-inspired by the gain from the market. It was seen that most regulatory decisions failed to slow down he unending market rally. Investing people became more dependent on rumors (994) than fundamentals of the issues traded on the bourses. Insider-traders turned out to be big gainers. Now it is becoming clear to us that there are many Other factors that have brought the capital market on the verge of a collapse. ne SEC, the central bank and other shareholders are also blaming one other his ultimately proves the lack of coordination among them in policy-making and policy implementation. Many of us started blaming the regulators.
Government steps: The Finance Minister asked the SEC to carry out an investigation to identify the sellers who led the market towards instability
The government has suspended the book building method for initial public offering (IPO)
- Index circuit breaker will not continue.
Bangladesh Bank to remain soft on banks exposure to stocks.
Experts comments: Salehuddin Ahmed, a former governor of Bangladesh Bank, advised the government to remain alert as share market debacle might affect the entire financial system. Market experts said the index circuit breaker will not help curb the volatility in the markets and restore investors confidence unless the liquidity inflow increases to support fresh buying. "It is not an effective solution. Introduction of the circuit breaker will result in fall in share prices, halting of trading and demonstrations" said Salahuddin Ahmed Khan, Professor of Finance at Dhaka University. Hasan Imam, chief executive of Race Asset Management Ltd. said "The circuit breaker is just a tool to manage the market instability."
Investor's demand : Investors said, all the steps taken by the regulators have failed to get any grip on the volatile market. The scenario will not change unless the Prime Minister looks into the matter directly." We cannot bear losses any more, we are close to bankruptcy" said frustrated investors. The investors also urged the government to take effective measures to save the stock market.
To ensure stability:
To ensure stability of share markets, the authorities concerned would require action on a number of fronts. Some of these are suggested bellow:
Co-ordinated role of regulators : Bangladesh Bank and SEC should regularly exchange notes and adopt policies with due regard to interactions between money market and share market.
Investor's education : The cover age of existing investor's education programmed conducted by the stock exchanges and SEC is limited. Those programmed need to be expanded.
Strengthening monitoring and surveillance: SEC should strengthen monitoring and surveillance over all direct and indirect market actors. Those include banks, non-bank financial institutions, merchant banks, mutual funds brokers, the stock exchanges, issuer companies, auditors etc. Appropriate actions should be taken against violators of relevant laws, rules and regulations. Demutualization : Our stock exchanges have reached a stage where demutualization over the next three to five years should be seriously considered Stock exchange authorities are the front line soldiers for ensuring market stability
July 23, 2021
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1 Comments
I am totally agree with you
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