This paper focuses on the growth of Bangladesh stock market over time. The market trends in terms of market capitalization, market liquidity, market concentration, number of listings, volatility in the market index and foreign portfolio investment were considered. The study finds that key indicators are significantly correlated. Stock market growth index is constructed considering market capitalization ratio; turn over ratio, value traded to GDP ratio and volatility in market index. The findings of the study suggest that although Bangladesh stock market is growing over time, the growth has not yet assumed any stable and obvious trend. We conclude that Bangladesh stock market is still at an early stage of its growth path with a small market size relative to GDP and is characterized by poor liquidity and high market concentration.
PROBLEMS AND PROSPECTS OF BANGLADESH CAPITAL MARKET INCLUDING PROBLEMS SOLUTION FUTURE PLANS
Meaning of Capital Market
The capital market is market for securities, where companies and Governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market. Capital market is the group of interrelated markets, in which capital in financial form is lend or borrowed for medium and long term and, in cases such as equities, for unspecified periods.
Sub-Markets of Capital Market
The Primary Market
The primary market deals with newly issued securities and is responsible for generating new long-term capital. The secondary
The secondary market handles the trading of previously-issued securities, and must remain highly liquid in nature because most of the securities are sold by investors.
ROLE OF CAPITAL MARKET
The primary role of the capital market is to raise long-term funds for governments, banks, and corporations while providing a platform for the trading of securities. This fund rising is regulated by the performance of the stock and bond markets within the capital market.
Capital Market of 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). 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 capita market.
The Potential of the Bangladesh Capital Market
The capital market is the engine of growth for an economy, and performs a critical role in acting as an intermediary between savers and companies seeking additional financing for business expansion. Vibrant capital is likely to support a robust economy. While lending by commercial banks provides valuable initial support for corporate growth, a developed stock-market is an important pre-requisite for moving into a more mature growth phase with more sophisticated conglomerates. Today, with a $67 billion economy and per capita income of roughly $500, Bangladesh should really focus on improving governance and developing advanced market products, such as derivatives, swaps etc.
Despite a challenging political environment and widespread poverty, Bangladesh has achieved significant milestones on the social development side. With growth reaching 7 percent in 2006, the economy has accelerated to an impressive level. It is
noteworthy that the leading global investment banks, Citi,
Goldman Sachs, JP Morgan and Merrill Lynch have all
identified Bangladesh as a key investment opportunity. The
Dhaka Stock Exchange Index is at a 10-year high, however,
the capital market in Bangladesh is still underdeveloped, and its development is imperative for full realisation of the
country's development potential.
It is encouraging to see that the capital market of Bangladesh is growing, albeit at a...