The stock markets market consists of both primary market and secondary market. There are two stock exchanges in our country Dhaka Stock Exchange and Chittagong Stock Exchange. These two are the secondary market of securities. The stock markets have been growing significantly from last couple of years. Despite the global economic recession, the stock market has achieved tremendous growth in the year 2010. The benchmark index had climbed by almost 82 per cent, turnover and market capitalization have also increased significantly in 2010. Due to the opportunity of making huge profits, there were 1.5 million new investors in the stock market. Mainly due to inadequate investment opportunities in other sector, both retail investors and institutional investors have invested heavily on the stock market. The stock prices have almost doubled in year 2010, this was mainly because the demand for shares was very strong, but the supply of shares did not match the demand of shares, therefore leading to increased prices abnormally high. The market price earnings ratio was as high as 30 indicating that the stocks were heavily overpriced. The sharp rise in prices of shares indicated the stock market was overheated, which implied that the rate at which it was growing was not sustainable and could encounter a severe market crash. The concerned regulators, Bangladesh Bank (BB) and Security and Exchange Commission (SEC), initiated remedial measures for soft landing of the stock market to avoid stock market crash. The Soft landing of the market means slowing down the rate of growth of the stock market and therefore stabilizing the stock market. However, the stock markets have been crashing frequently from last year December month and the down trend in the stock market still continues. The recent stock market crashes definitely indicates that the policy makers have failed to establish a soft landing of the stock market. The stock market growth is definitely important for the growth of the economy and therefore the concerned regulators and government should take necessary steps to bring back stability in the stock market and should be more cautious in the future so that such stock bubble does not occur again.
1.1 Origin of the Report
BBA-499 is a requirement to complete graduation for every business graduates of IUB which is also known as internship. The aim of internship program is to connect practical knowledge with theoretical aspects. Being a student of BBA with major in Accounting and minor in Finance I have completed my internship from PHP Stocks & Securities Limited, Chittagong. As my field of study is Accounting & Finance, my supervisor Nusrat Jahan, Lecturer School
of Business, has assigned me the topic, “overheated stock market: remedial measures for soft landing”.
1.2 Objectives of the Study
Every research is conducted to full fill certain objectives. This research report was prepared based on the following objectives: 1. To give clear idea of recent stock market 2. To indentify why the stock market was overheated. 3. To identify the causes of stock market crash and to provide recommendations to stabilize the stock market 4. To identify the remedial measures for soft landing and impact of soft landing measures on stock market. 5. To identify the Force Sale of the Stock Market After Crashing in 2010 6. To identify the Interest rate of the Margin loan after crashing the stock market.
1.3.1 Research Design From the view point of Objectives: this research is an applied research as the research is conducted to answer some specific questions. From the view point of function: this research is a descriptive research. This report describes the recent trend of the stock market. It describes the factors responsible for overheating of the stock market and the report also describes the implication of policy change by SEC and Bangladesh Bank. From the view point of nature of data: the research is...