Recent Trends of Capital Market

Only available on StudyMode
  • Download(s) : 445
  • Published : December 14, 2012
Open Document
Text Preview
Special Supplement
The Financial Express
May 10, 2007

CAPITAL MARKET IN BANGLADESH: SOME RECENT TRENDS
Courtesy by: AIMS of Bangladesh Ltd
The capital market
Bangladesh capital market is quite small compared to both other regional markets and to the size of its economy. Though generally a capital market has two prongs, the stock market and the debt market, Bangladesh market has only stock market in active operation, as a debt market is still in its incipient stage. However, the stock market is also considerably small thanks to a conducive regulatory regime, lack of incentives and local business ethos. Since going public appears to be losing control over their creation by most of the entrepreneurs, who prefer running proprietary concern to corporatized public company, and as government fiscal measures act as a disincentive, few companies become interested to move to the capital market for raising capital. A proprietary concern may be taxed at individual rate, a private company at its double rate.

Among over 40,000 small and medium companies only 291 have become listed till April 30, 2007, of which 33 have been delisted in the past 15 years. Though the governments tried their best to attract the growing private companies to turn their enterprises into public limited and get listed to reap benefits and avail incentives offered time to time, on average only 10 companies have joined the market each year, and a large section of which is under regulatory compulsion. Though industrialization has picked pace in Bangladesh almost three decades back, capital market has failed to attract the entrepreneurs as the key source of capital, which has usually been occupied by the banking system since beginning. That is why Bangladesh capital market has the lowest market capital as percentage of GDP in the region as well as other similar sized economies, as the following table shows, while its neighboring country India, sharing almost the same industrial history, has the highest: Sl

01.
02.
03.
04.
05.
06.
07.
08.

Country

GDP Size

South Korea
India
Indonesia
Iran
Pakistan
Philippines
Bangladesh
Vietnam

$886.00b
$750.00b
$353.00b
$182.00b
$127.00b
$117.00b
$62.02b
$61.00b

Market Capital of
the listed stocks
$824.00b
$810.00
$134.00b
$38.30b
$48.00b
$73.70b
$4.47b
$14.00b

Market Capital as
Percentage of GDP
93.0%
108.0%
38.0%
21.0%
41.0%
63.0%
7.5%
23.0%

Stock Exchange Trends
The country's stock market, after the excruciating debacle in 1996, has been in a consistent trauma till mid 2004. As the DSE general index performance shows in the following table, the market peaked in December 2004 and came down but settled at well over 1,700 at present. Period

January
February
March
April
May
June
July

2002
749.11
768.04
795.05
763.70
752.91
792.56
874.57

2003
807.60
806.92
750.84
787.94
791.70
830.46
799.98

2004
961.18
953.81
973.88
1,112.19
1,185.83
1,305.21
1,289.14

2005
1,843.95
1,835.62
1,919.25
1,537.87
1,648.28
1,713.17
1,510.11

2006
1,643.34
1,531.44
1,491.77
1,361.27
1,355.04
1,339.52
1,406.81

2007
1,805.12
1,791.54
1,760.88
1,743.33

August
September
October
November
December

870.46
874.22
842.36
845.08
848.41

793.12
788.89
801.27
920.61
967.88

1,513.29
1,633.02
1,710.45
1,882.63
1,971.31

1,613.17
1,649.05
1,679.28
1,694.42
1,677.35

1,587.08
1,562.53
1,541.65
1,527.30
1,609.51

The Stocks
At present there are some 320 listed securities of which 258 are equity, 14 mutual funds, 8 debentures and 40 treasury bonds listed with the country's prime bourse, the Dhaka Stock Exchange (DSE). The market is evidently predominated by the equity shares that constitute over 98% of the stock market. The following table shows the relative strength and share of the stocks in the market: Type of securities

Equity stocks
Mutual funds
Debentures

Number of stocks
92.14%
4.64%...
tracking img