Effect of Stock Market on Bangladeshi Economy

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The recent performance of the capital markets in Bangladesh, notably from December 2010 till February of 2011, has been very poor compared with its performance over the last five years. The index fell from a high of around 8,900 points to 5,200 points, a drop of almost 42 percent in just three months. Bangladesh capital markets have been in the top three best performing markets in the world over the last three years. However, its recent performance has cast a big doubt about its future performance. It is a case of “too much money chasing too few stocks”. Burning Truth with Calculus of Share Market Fall

The Finance Minister AMA Muhit has told the media that the current crisis in the stock market is the result of some of his “mistakes.” Although the Bangladeshi finance minister admitted his failure, he did not resign from the post. Instead, he is trying to find some real or artificial way to cool down the current crisis, thereby tackling the virtual lawlessness prevailing in the stock market. According to media reports, a number of companies listed with the Dhaka Stock Exchange are not only cashing hundreds of millions of dollars through countless manipulations but also that most of such these companies are either backed or owned by influential members of the current ruling party. A number of influential ministers are also actively involved in this huge scam. The government has also failed to address issues like the increasing prices of essentials, as well as law and order.

Like many other developing nations, small and medium sized investors, as well as the unemployed and students, invest money in the stock market. In most cases, such investors have been lured and misled by these companies, as well as some corrupt stock brokerage firms and corrupt officials within the Dhaka Stock Exchange. The concerned ministry is visibly remaining silent even after seeing small investors virtually ruined in the stock market. The former deputy governor of the Bangladesh Bank [Central Bank], Khondokar Ibrahim Khaled, in an exclusive interview with a local news agency revealed that around 10-15 politicians and businessmen seized Tk150 billion from the country’s investors in the last four months, crashing the stock market to a new low. He said, “One lawmaker of the then-ruling Awami League was responsible for the ’96 share-market scam, but this year’s crisis was created by other politicians and businessmen, including a BNP leader. However, I do not want to name anybody’s name.” In answer to a question as to how such a huge amount of money vanished from the stock market as the tiny investors had done well with huge investments since the beginning of the upturn in the stockmarket index, he said, “I think this huge amount of money simply poured into the pockets of a group of people who reaped a windfall out of a freefall in share prices over the last few days.” He added: “In creating the crisis they looted such a huge amount of money, which they would never invest in the stock market.” Local and international media reported the plunge in the stock as unprecedented in the 55 years’ history of the Dhaka stock exchange. The Dhaka Stock Exchange [DSE] general index lost 1,235 points in two consecutive days, bringing nerve-shattering shocks to small investors.

According to stockmarket analysts and financial experts in Bangladesh, the current crisis may not be easily tackled by the government: several unscrupulous companies have already extracted millions of dollars from the market and smuggled out major portion of this money to various countries.. If the government fails to tackle this situation immediately, however, there will be a huge negative impact on the fate of the ruling party in Bangladesh. Burning Truth with Calculus of Share Market Fall

Friday, January 21st, 2011
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Bangladesh’s bourses close again after crash: opposition claim finance mismanagement. I agree .I also like to blame weak or bad governance. It was...
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