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ONRole of Chittagong Stock Exchange for the economic development of
Bangladesh
SUBMITTED TO
Mohammed Shahedul Quader
Assistant Professor,
Department of Marketing Studies and International Marketing
University of Chittagong.
SUBMITTED BY
Name ID
Mohammad Atikuer Rahman bhuyan 08304013
Md.Mahmodul Hasan Rone 08304034
Bibi Joynab 08304083
Md.Ibrahim 08304083
Srimangal Das 08304110
Tajkia Sherefin 08304132
DATE OF SUBMISSION: Jul y 6, 2013
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Role of Chittagong Stock Exchange for the economic development of Bangladesh
Letter of Submission
Date: January 7, 2012
To
Mohammed Shahedul Quader
Assistant Professor,
Department of Marketing Studies and International Marketing
University of Chittagong.
Subject: Submission of Industry Report.
Dear Sir,
We have great pleasure to submit you my industrial tour report title Role of Chittagong Stock
Exchange for the economic development of Bangladesh. During preparation of this paper, I
have tried my best to ensure completeness.
We have put my best effort to overcome my shortcoming and prepare the report to the best of
my ability. However, if any clarifications are required, I would be glad to provide them as best as
we can.
Thanking you
Yours sincerely,
Name ID
Mohammad Atikuer Rahman bhuyan 08304013
Md.Mahmodul Hasan Rone 08304034
Bibi Joynab 08304083
Md.Ibrahim 08304083
Srimangal Das 08304110
Tajkia Sherefin 08304132
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Role of Chittagong Stock Exchange for the economic development of Bangladesh
PREFACE
Stock market is an essential part of capital market. The economy of our country largely depends
on a strong capital market. Contribution of any stock exchange generally leads to economic
growth by increasing the funds to finance industry and other enterprise
The Industrial Tour is a program that is common for the BBA student. The program intends to
provide practical training in handling of jobs as well as to integrate the knowledge of theories
formulas, frameworks and models with current management practices in business community
This paper titled Role of Chittagong Stock Exchange for the economic development of
Bangladesh is conducted as a part of Industry Tour arranged by department of Finance And
Banking, University of Chittagong. In this report I have tried to give an idea about Role of
Chittagong Stock Exchange for the economic development of Bangladesh in our country.
This report is prepared on the basis of study and submitted in partial fulfillment of BBA course
requirements of the department of Finance and Banking, University of Chittagong.
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Role of Chittagong Stock Exchange for the economic development of Bangladesh
EXECUTIVE SUMMARY
This report concentrates on the Performance evaluation of the Chittagong Stock Exchange.
From the very beginning of taking birth, this organization is playing an outstanding role for the
betterment of the capital market in this country
Stock markets contribute to the development of economy through the development of businesses
and Industries. It can perform will to meet financial needs of business enterprises on a
continuous basis if there exist a congenial legal, administrative and infrastructural environment
for boosting confidence of all stock market participants including investors. Stock market in
Bangladesh has two exchange-CSE and DSE. The study has examined the performances of CSE
on different important such as growth in listed companies and securities, market capitalizationsales volume, market shares ; changes in stock index, changes in share prices by employing both
statistical and financial techniques. It has also tested the randomness of changes in share prices
of some listed securities. It has identified some important problems such as political instability
lack of supply of good certificates, demand listed members, lack of awareness of investment, etc
to the development of stock market. The study has put especially of Chittagong stock exchange
(CEG). The policy measures are promulgation of lows for activating dormant listed members
bringing good securities into the net, curbing fraudulent activities in the stock market
introduction of full-flagged corporate governance, and disclosure of financial information. These
measures are for consideration of Government, policy markets, SEC, stock exchange and other
concerned parties in other to develop the performance of stock market, especially of CSE.
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ACKNOWLEDGEMENT
First of all gratitude goes to almighty Allah who blessed me to accomplish the industry tour
report.
At first I like to thank my honorable teacher Mohammed Shahedul Quader Assistan
Professor, Department of Marketing Studies and International Marketing, University of
Chittagong. who sent us to the Chittagong Stock Exchange in lieu of visiting its various
departments and modes of operating CSE.
His assistance, instructions, advice, investigation were all along with me while working on the
issue. My report has seen the face of success because of his sincere assistance as well as
supervision..
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1.1INTRODUCTIONStock market is considered to be a barometer of the Economy. The economic development of a
country depends largely on the effective performance of stock market. The stock market augment
the process of economic development though a number of ways: a) bringing together holders of
surplus funds and users of such funds; b) offering a broad spectrum for investment and financing
choices to both investors and issuers, c) drawing more institutions into investment, and e)
reducing the dependence of industrial enterprises on non security market for capital. Thus stock
market contributes to the development of economy through the development of businesses and
industries.
Stock market can perform well to meet the continuous financial needs of business enterprises ifexist a congenial environment for boosting confidence of both stock market operations and
investors. The growth and development of stock market in a market economy largely depend
upon the creation of enabling environment for boosting up investors confidence. Lassitier has
identified five prime environment ingredients that contribute to the enhancement of investors
confidence and in turn, healthy growth of stock market. .These are: a) stable political
environment, b) investment sensitivity tax and regulation environment c) reliability flow of
information d) liquidity and e)fair financial disclosure practice, codes of conduct and smooth
trading guidelines
1.2 OBJECTIVE OF STUDY
The objective of the study is to evaluate the performance of the Chittagong Stock Exchange. The
study covers the period from 2000 to 2011 and the study in confined to analyze the capital
market indicators of CSE only. The study is purely based on primary and secondary data
supplied by CSE. The study attempts to evaluate and examine the performance of CSE in terms
of securities analysis and market capitalization under the auspice of market development
indicators of the same. Though the principal objective of the study is to observe the growth
pattern of CSE, The study attempts to strive at the following specific objectives:
To evaluate the securities listed with CSE during the period from 2000-2011.
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To examine and evaluate the growth of the issued capital and market capitalizationof the securities during the period under study.
To analyze the indicators of the development of CSE during under study. To highlight the performance of CSE on different parameters such as number of
listed companies, number of listed securities, volume of trade, capitalization market
market share, and share price fluctuation etc.
To identify the weakness with the stock market operation, especially of CSE. To suggest some sound policy measured for the improvement of the performance of
CSE.
1.3 METHODOLOGY OF THE STUDY
The present study is a part of academic curriculum. The collected data and information have
been tabulated, processed and analyzed carefully. It has been prepared in present from to make
the study more informative and useful. The study period has been made only by one month. I
tried my best to be acquainted with all the sections and departments of this organization.
The information of the term paper has been collected through primary and secondary sources
Most of the data have been collected from secondary sources. The primary data had been
collected by direct interviews and discussions all the secondary information helps a lot. Thesecondary information is collected from various books, financial papers, document articles
related with the capital market, stock exchange, and security & exchange commission etc.
Analysis of data
The data thus collected have been tabulated first manually. Then they have been analyzed by
employing techniques such as percentage for measuring the growth in listing of companies and
securities in CSE; average, standard deviations and coefficient of correlation foamed r measuring
financial & turnover performance of listed securities, ratio analysis for market capitalization &
turnover, diagrammatic and graphical presentation for seeing the trend of CSE price index
variance & coefficient of variance for measuring the price volatility of some selected companies
,securities. It has also used the test of randomness of changes in share prices of sample listed
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companies. Different calculations using the data made by the researchers themselves, average
ratios, percentage and necessary calculations have been done by using statistical methods. A
number of different indicators over time have also been prepared
1.4 SCOPE OF THE STUDY
As I was involved myself a Chittagong Stock Exchange I know various areas of the stock exchange
its managing procedures, working systems and environments which are very helpful to know & to
increase our knowledge & to get more information and data regarding my topic. The information
section of Chittagong Stock Exchange is very rich thats why I as able to collect the required books
magazines, periodicals, journals, brochures, portfolio and the Internet facilities.
1.5 LIMITATIONS OF THE STUDY
A good report sells the result of the study but should not over sell. In spite of my sincerest
endeavor, the report has the following lacking:
The study was confined in CSE & Internet Primary & secondary data were not available in the organization form Short Time: I had to conduct the whole survey alone in this very short time, which also
hindered my study.
There was shortage of adequate literature in the CSE Low facility of the Internet and personal computer.Lacks of enough previous experience also limit my performance in conducting the study.
In spite of above limitations, I have tried with all of my efforts to know and find out the response
pattern of the subject and consultation of relevant record and document. Data have reached a
fairly acceptable degree of accuracy
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CHAPTERTWO
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2.1 HISTORICAL BACKGROUND OF THE CSE
The Chittagong Stock Exchange (CSE) is a nonprofit making organization. It was incorporated on 1 s
April 1995 as a limited company by guarantee. After six month, on 10th October 1995 floor trading
was started with open cry- out auction system. In the backdrop of a strong need to institute a dynamic
automated and transparent stock exchange in the country, seventy reputed business personalities
under the leadership of Mr. Amir Khosru Mahmud Chowdhury MP, the founder president
established this bourse in the commercial capital Chittagong. Only 30 securities were listed on the
first day trade when market capitalization stood at US$ 0.2 Billion. Now CSE is a completely
automated exchange with screen based trading facility on countrywide communication network.
The Chittagong stock exchange will create an effective, efficient and transparent market of
international standard to save and invest in Bangladesh in order to facilitate the entrepreneurs to raisecapital and accelerate industrial growth for overall benefit of the economy.
2.2 MISSION OF THE CSE
The Chittagong Stock Exchange will create a successful well-organized and transparent market of
international standard to save and invest in Bangladesh in order to facilitate the competent
entrepreneurs to raise capital and speed up industrial growth for overall benefit to the economy.
2.3 OBJECTIVES OF THE CSE
The prime objectives of the CSE are to create a nation-wide stock market also beyond the national
boundary, which will simultaneously act as a platform for industrial entrepreneurs and genera
investors. Explicitly the objectives of CSE are following:
To develop a strong platform for the entrepreneurs for raising capital.
To provide an investment opportunities for small and large scale investors. To develop a transparent market ensuring investors interest. To provide a fully automated trading, Clearing and settlement system to ensure quick,
easy, accurate and easily accessible to all transactions.
To attract non-resident Bangladeshis to invest in Bangladesh Stock Market.
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2.4 MANAGEMENT & ORGANIZATION
CSE has a policymaking Body of 24 members, of whom 12 are nominated and 12 are elected
This Board comprises of one president, three Vice-Presidents and 20 Directors. The Chittagong
Stock Exchange was in corporate on 1st April 1995 as a limited company by guarantee. Its
activities are regulated by the following a Acts & Regulation:
1. Companies Act, 1994.2. Securities and Exchange Commission Act, 1993.3. Securities & Exchange commission Act, 1993 (Act repelling controller brokers)
Regulations, 1994.
4. Chittagong Stock Exchange.a) By laws
b) Listing Rules
c) Memorandum of Association
d) Articles of Association
e) Settlement to Transaction Regulations.
In 1998 CSE had many new rules and regulations as well as amendments in the rules ®ulations of Stock Exchanges, Issuers and in the overall capital market. Some major ones are
as follows:
1. The National Parliament passed The Depository Act, 1999 on the 5the of April 1999.2. SEC adopted public Issue Rules 1998 which was gazette on the 25th January 1999 and
subsequently brought some amendments in this rule on the 28th April 1999.
3. SEC has approved the Merging Rules 1999 to facilitate proper administration of creditfacilities extended by the brokers to their clients and to enhance liquidity in the exchange.
4. The cabinet on June 7th, 1999 approved the amendment to the Trust Act 1882 tofacilitate the investment of 25% of person and insurance funds in the capital market.
5. SEC has extended the time limit for brokers/dealers to continue underwriting businessform June 30 to December 31, 1999.
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Continuous trading session 11.00 a.m. To 3.00 p. m
Closing session 3.00 p.m. To 3.10 p. m
Close price trading session 3.10 p. m To 3.30 p. m
Post closing session 3.30 p. m To 4.15 p. m
Odd lot session 11.30 a. m To 2.30 p. m
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2.6.1ORGANIZATIONAL CHART OF CSE
Board ofDirectors
Chief Executiveofficer
GeneralManager
Deputy General
Manager
AssistantGeneral
Manager
Manager
Senior Manager
Officer
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General
Body
Board of
Director
CEO
CEO in
Committees
Committees
2.7 STRUCTURE OF THE STOCK EXCHANGE (CSE)
2.8 COMMITTEES OF CHITTAGONG STOCK EXCHANGE (CSE)
Administrative Committee
Finance Committee
Human Resource Committee
Trading Committee
Technical & Development Committee
Surveillance & Inspection Committee
Clearing House Committee
Default Committee
Attribution Committee
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CHAPTERTHREE
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3.1 General rules and regulation of CSE to protect Bangladesh Economy
Resignation, expulsion & suspension of members, member of an association, fine and penalties
suspension of a member, reconsideration of resolution of expulsion, no action maintainable
against notice of exchange, creditors of expelled or suspended members,suspension/reinstatement/expulsion, expulsion entails forfeiture or card, liabilities to subsist
disposal of forfeited card and proceeds thereof, authorized assistants, unauthorized assistants
excluded from market, power of authorized assistants, register of authorized assistants, notice of
authorization - termination & withdrawal, undertaking from the authorized assistants, liability of
the employer to continue until notice, admission during food behavior, badges, penalty for
improper use of badge, loss of badge, return of badge, members ceasing to do business, expelled
members, report of violation of rules, sub-committees, chairman and member-secretary,
removal/retirement of member, arbitration committee, dispute to be referred to arbitration,
application for arbitration, appointment of arbitrators, disagreement between arbitrators, late
claims barred, appeal to arbitration committee, award of committee final in certain cases
members interested not to attend, adjourned meetings etc are discussed in general rules and
regulation of CSE.
3.2Chittagong Stock Exchange (Direct Listing) Regulations, 2006
1) These regulations may be called the Chittagong Stock Exchange (Direct Listing)
Regulations, 2006.
(2) These Regulations shall be applicable for direct listing of shares of public limited companies.
Requirements concerning capital and operation:
The concerned company-------
i) shall have minimum paid up capital of taka 100(one hundred) million;
ii) shall have no accumulated loss;
iii shall be in commercial operation for at least immediate last five years
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iv) shall have profit in three years out of the immediate last five completed accounting/financial
years with steady growth pattern; and
v) is regular in holding annual general meeting.
Legal Documents of Listing of Concerned Companies:-
i) The Company shall apply to the stock exchanges with application fee of Tk. 10,000/-(ten
thousand) only, and shall simultaneously furnish a copy thereof, along with the copies of
documents mentioned under sub regulation (ii), to the Securities and Exchange Commission
(SEC).
ii) The Company shall, among others, submit the following documents along with the application
:
(a) Memorandum of Association and Articles of Association
(b) A brief profile of the company, including brief particulars of existing sponsor-directors of the
company;
(c) Certificate of incorporation and certificate of commencement of business
(d) Audited financial statements for the last five years
(e) Members/ shareholders list together with shareholding position
(f) Return of allotment(s) filled with the Registrar of Joint Stock Companies and Firms
(g) Existing material agreements including deed of mortgage (if any);
(h) Status of loan including information concerning loan default, if any, of the company;
(i) VAT and Tax identification numbers;
(j) Due diligence certificate from the directors as per format prescribed by the Exchange;
(k) No objection certificate from the lending bank(s) /financial institutions of the company, if
any, where applicable;
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(l) Undertaking in the prescribed form as laid down in the listing regulations of the Exchange
to the effect that the company shall comply with the securities laws including requirements of the
said listing regulations upon listing with the Exchange;
(m) Relevant resolution(s) of the shareholders in the general meeting of the company and the
Boards resolution, if so authorized, for the purpose of listing with the Exchange;
(n) Credit rating report issued by the credit rating company registered with the Commission
with minimum investment grade of BBB;
(o) Information Document as per format prescribed by the Exchange;
(p) The shareholders resolution in respect of disposal of shares in accordance with theregulation.
3.3 Chittagong stock exchange (short - sale) regulations, 2005
These regulations may be called the Chittagong Stock Exchange (Short-Sale) Regulations
2005.
1. Owning security: A person shall be deemed to own a security only if2. he has title to the security; or3. he has purchased the security which is available in his own account (including his BO
account); or
4. he has entered into an unconditional contract, as prescribed by the SEC legally bindingon him to buy the security, even if the buyer does not yet have title to them; or
5. he has unconditional right or interest to or in the security; or6. he owns a security convertible into or exchangeable for the relevant security and has
tendered such security for conversion or exchange or has issued irrevocable instructions
to convert or exchange such security; or
7. he has an option to acquire the security and has exercised such option; or
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8. he has rights or warrants to subscribe to the security and has exercised suchMannerof short-selling: (1) Subject to the provisions of regulations 3 and 4, a stock dealer or
stock broker may short-sell a security
for its own account; or for the account of its clients provided it knows or is informed in writing that an order to
sell is a short-sale, and shall, when placing a short-selling order, indicate in such manner
as the stock exchange concerned shall, from time to time, determine that the order is a
short-selling order.
On receipt of an order for the sale of a security, a stock dealer or stock broker shall enquire of the
client whether at the time of placing the order such client owns the security offered for sale.
A stock dealer or stock broker shall take all reasonable steps to ensure that the clients
disclosures pursuant to these regulations are accurate.
3.4 Chittagong Stock Exchange Investors' Protection Fund Regulations, 1999
These Regulations shall be called the Chittagong Stock Exchange Investors Protection Fund
Regulations, 1999.
On the commencement of these regulations, there shall be established a Fund to be calledthe Chittagong Stock Exchange Investors Protection Fund.
The Fund shall be irrevocable. The Fund shall consist of contributions of CSE and its members, value of securities or
amounts collected by the Board of Trustees on account of the customers of or a
defaulting member, accumulations thereof, interest or profits received by the Board of
Trustees in respect of such contributions, accumulations of investment in securities with
such contributions, securities or amounts lapsed or forfeited, and of any capital gains
arising from the transfer of the capital assets of the Fund and any other amounts as may
be vested in or accrued to the Fund from time to time.
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All moneys forming part of the Fund shall be deposited into a bank account opened withany scheduled bank in the name of Chittagong Stock Exchange Investors Protection
Fund.
All investments and banking accounts of the Fund shall be operated jointly by at leasetwo of the Trustees as decided by the Board of Trustees
The Fund shall be used to satisfy the claims of the investors and expenses under3.5 REGULATORY UPDATE
from October 2010 to September 2011
Circuit breaker on the index
SEC has introduced circuit breaker on the capital market index which halts the market if theindex gains or losses more than 225 points. The move came in a bid to prevent unusual
fluctuation inthe market on January 19, 2011. It was removed from January 25, 2011.
Suspension of book Building method
The Securities and Exchange Commission postponed the book building method for initial public
offering until further order.
SEC/CMRRCD/2008/186/Admin dated January 20.2011.
Amends to the Securities and Exchange Commission (Stock Dealer, Stock Broker and
Authorized Representative) Rules, 2000
The Securities and Exchange Commission (SEC) added new criteria to obtain license of stock
broker or dealer. As per the new rule any company or statutory organization is not eligible for
stock dealer stock broker registration certificates if more than fifty percent of its directors are
members or associated with the sponsor or Sponsor Company.
(SEC/CMRRCD/2001-002/66/Admin/03-04 dated October 10, 2010)
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Branch opening allowed only in divisional Cities:
The commission suspended the approved to open the branch offices by stock brokers outsides
divisional on October 20, 2010.
Initial Public offering Rule:
Several changes have been made in the initial public offering (IPO) rukes undaer athe Book
building method through SEC notification no. SEC/CMMRCD/2009-193/67/Admin/Dated
November 14, 2010. The thrust Sectors (namely power and Gas infrastructure) companies with
at least one year of commercial production and profits would now be eligible to raise funds under
the book building method. Earlier minimum three years of commercial operation and two years
profits were the required minimum qualification criteria. The eligible institutional investors who
participate in the indicative price discovering process must compulsorily take part in the fina
bidding for price determination.
Issuance of Capital
The Securities and Exchange Commission shorten the eligibility public flotation by companies
having paid up capital of tk. 30 crore (thirty crore) only instead of tk 40 crore as set earlier,
provided that the IPO portion should not be less than tk 12 crore but not less than 10% of their
total paid up capital
Margin Ratio:
Securities and Exchange Commission reduced the margin ratio once again in an effort to tame a
heated market through SEC notification no. SEC/CMRRCD/2001-43/68 &
SEC/CMRRDCD/2001-43/69 dated November 21, 2010. The previous ratio for margin was 1:1
which set at 1:0.5. Credit providers will have to follow a net asset value (NAV) based method
while giving loans to their clients or investors. The members of the stock exchange and the
merchant ;bankers were also restricted to provide credit facility to the clients during the first 30
trading days of opening the clients account for and depositing clients own fund into such
account for trading purpose.
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Members margin:
Securities and Exchange Commission on November 25, 2010 decided that members of the stock
exchange would have to double their deposits with the stick exchange against any additional
trade exposure from December 5, 2010. Under the new directive, a stockbroker or a stock
exchange member will have to deposits 40% of the value of an additional trade value crosses
BD:T1 crore after the free limit for BDT 5 crore. For up to trade value of BDT 8 crore, the SEC
raised the rate to trade value of BDT 9 crore. The ratio is unchanged at 100%. However this
directive of sec was suspended indefinitely on December 19, 2010 before application.
Margin Issues
/the margin ratio for member and Merchant Bank had been increased affair from to 1: 0.5 to 1:1
through SEC notification Nos. SEC/CMRRCD/2001-43/74 & SEC/CMRRCD/2001-43/75 dated
December 13, 2010.
Margin Issues:
Securities and Exchange Commission (SEC) raised the margin loan ratio to 1:1.5 instead of 1:1
and suspended the net asset value based margin loan calculation system on December 19, 2010.
That means from now on investors will get margin loan worth taka 150 from the brokerage
houses and merchant banks.
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CHAPTERFOUR
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4.1 Role of CSE for the Economic Development
CSE has been performing different investment related jobs, and undertaking and implementing
different programs in order to accomplish its objectives. The performances of Chittagong Stock
Exchange have been judged on different performances such as number of listed companies,
number of listed securities, volume of trade, market capitalization, market share, share price
fluctuations etc. these have been discussed in the following :
Growth in listing Market capitalization in economy Market Capitalization and Turnover Market share of CSE Sales performance Company Wish Financial performance of listed Companies Sector-Wise Financial Performance of Listed Securities Stock Market Performance and CSE Index Variances in Share Prices of Some Selected Companies Test of Randomness of the Changes in Share Prices
Now I try to discuss one by one, to realize the performance of CSE on Economic growth of
the Bangladesh capital Market.
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4.2 Comparative Statement of Chittagong Stock Exchange for Economic
development.
The comparative statement of CSE at the end of FY2008-09 and FY2009-10 is shown below:
ndicators As on 30th June 2009 As on 30th June
2010
% Increas
umber of listed securities (include
utual funds and debentures)
245 232 -5.30
ssued capital of all listed
securities
13,742.05 20,111.56 46.35
arket Capitalization of all
isted
96,247.70 2,53,439.33 163.32
ll Share Price Index 10,477.67 18,116.05 72.90
Source: Chittagong Stock Exchange.
*All share price index is calculated on General Share Price Index (excluding Z group) by
withdrawing weighted average method from 9 December, 2003.The index base was 1000 for
CSE from the year 2000. Previously it was 100.
The number of securities (including mutual funds and debentures) listed with the CSE stood at
232 as of June 2010 which was 245 as of June 2009. By the end of June 2010, the issued capital
of listed securities stood at Tk. 20,111.56 crore which is 46.35 percent higher than that of end
June 2009. As of June 2010, market capitalization of securities reached Tk.2, 53,439.33 crore
(36.6 percent of GDP) which is 163.32 percent higher than that of end June 2009 . General shareprice index of the CSE reached 18,116.05 as on June 2010, which was 10,477.67 on June 30,
2009. The trading operation in the Chittagong Stock Exchange since 1995 to June 2010 is shown
in table 5.9 below:
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Trading Operation in CSE for Economic Dvelopment
Calendar
Year/ Month-
End
No. of
Listed
Securities
Initial Public
Offering
(IPO)
Issued
Capital
(In crore Tk.)
Market
Capitalization
(In crore Tk.)
Turnover
(In crore
Tk.)
Price
Index*
1995 61 1036.80 2413.90 1.97 409.43
1996 117 16 1872.60 14704.30 608.90 1157.90
1997 141 19 2276.14 5283.23 854.51 332.98
1998 150 6 2418.03 4138.25 1403.60 232.80
1999 159 9 2508.09 3654.24 1153.79 197.83
2000 165 3 2726.60 5776.55 1293.38 1412.25
2001 177 9 2965.27 5636.35 1479.62 1836.87
2002 185 9 3107.99 6046.77 1358.61 1841.14
2003 199 10 4196.76 8531.23 668.86 1642.78
2004 195 3 4697.87 21501.08 1755.13 3597.70
2005 210 16 5551.93 21994.28 1404.27 3378.68
2006 213 6 6937.84 27051.07 1589.31 3724.39
2007 227 13 8917.39 61258.00 5259.03 7657.06
2008 238 - 12160.32 80768.40 9980.37 8692.75
2009 217 18 15512.49 147080.70 16256.26 13181.37
2010 232 7 20677.4 224176.8 21711.2 23449.0
Source: Chittagong Stock Exchange.
*All share price index is calculated on weighted average method from 24 November,
2001.The index base was 1000 for CSE
From the year 2000. Previously it was 100.
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*All share price index is calculated on General Share Price Index (excluding Z group) by
withdrawing weighted average
Method from 9 December, 2003. The index base was 1000 for CSE from the year 2000.
Previously it was 100
4.3 Growth in listing to contirbiute Economy
A public limited company having a minimum paid up capital of TK 10 Million can get
enlisted with CSE and make a public issue. CSE also encourages direct listing of a company
having minimum paid up capital TK 100 Million. Government has provided tax incentives to
listed companies. All these are aimed at bringing more companies into the net of stock
market.
YearNumber of Companies listed
Dhaka Stock Exchange Chittagong Stock Exchange
2001 249 177
2002 260 185
2003 267 196
2004 256 198
2005 286 210
2006 310 213
2007 350 227
2008 412 238
2009 415 217
2010 437 232
2011 445 240
Source: Bangladesh Economic Review, Chittagong Stock Exchange, Dhaka Stock Exchange
and Securities and Exchange Commission (Annual Report and quarterly review), various issues.
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4.4 .Market Capitalization in the Economy
Market capitalization is an indicator of economic development. It includes 204 equity
securities, 4 corporate bond, 37 mutual funds, and issue of performance shares which has
not yet been sponsored by any company. The higher the amount of market capitalization,The better performance of stock exchange.
YearTotal Market
Capitalization
(in million taka)
GDP (million taka)
Market
Capitalization
2002 131,730 2,732,010 4.82
2003 182,899 3,005,800 6.08
2004 439,934 3,329,730 13.212005 453,018 3,707,070 12.22
2006 593,879 4,157,280 14.28
2007 1,366,530 4,724,770 28.92
2008 1,708,765 5,458,220 31.53
2009 3,357,984 6,147,950 54.61
2010
Descriptive Statistics of Market capitalization to GDP
Mean 20.71
Standard deviation 16.78
Skewness 1.30
Minimum 4.82
Maximum 54.61
Market capitalization ratio equals the value of listed shares divided by GDP. In terms of
economic significance, the assumption behind market capitalization is that market size is
positively correlated with the ability to mobilize capital and diversify risk on an economy wide
basis (Agarwal 2001). La Porter et al. (1997, 1998) used the market capitalization to GDP
ratio as an indicator of market development. Above table shows the size of Bangladesh stock
market. Market Capitalization ratio has i n c r e a s e d f r o m 1 4 . 2 8 % i n 2 0 0 6 t o 54.61% in
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2009. Then the stock market experienced a sudden growth in market capitalization in the next
two years, 28.92% in 2007 and nearly 31.53% in 2008.
4.5 Market Capitalization of CSE for the dvelopment of Economy
Year Market Capitalization(million take)
GDP (million taka) Market Capitalizationto GDP (%)
2002 60,468 2,732,010 2.15
2003 85,312 3,005,800 2.8
2004 215,011 3,329,730 6.07
2005 220,353 3,707,070 5.61
2006 267,501 4,157,280 6.44
2007 612,479 4,724,770 12.00
2008 807,875 5,458,220 14.80
2009 1,470,807 6,147,950 23.92
2010 2,983,929 6,905,710p 43.20
Mean 12.99
SD 13.24
Coefficient ofSkewness 1.76
Table -05: Market Capitalization of CSE as a % of GDP
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4.6 CSE contribution in the Bangladesh Economy
Year Market Capitalization
(in million taka)
Turnover
(in million taka)
Ratio of
Turnover toMarket
Capitalization
2002 60,468 13,581 22.46
2003 85,312 6,719 7.88
2004 215,011 14,808 6.89
2005 220,353 13,933 6.32
2006 267,501 16,530 6.18
2007 613,175 52,328 8.53
2008 807,875 100,747 12.47
2009 1470,807 162,563 11.05
Mean 10.22
SD 5.43
Coefficient of
Skewness
1.97
Table: CSE contribution in the Bangladesh Economy
Source: CSE Portfolio
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Role of Chittagong Stock Exchange for the economic development of Bangladesh
CHAPTERFIVE
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5.1 Share Pricing
Share is nothing but dividing the total capital in small units. Share price is determined two times:
1. At the time of initial public offering
2. In the secondary market.
1. At the time of initial public offering
Share pricing during the IPOs are 3 categories:
a. At per
b. At premium
c. At discount.
A. At per: Normally share is issued at per basis. Here face value and issue price both are same. Face
value of a share depends on the no of shares.
B. At premium: If share is issued above face value.
C. At discount: If share is issued below the face value
Continuous Trading Index: Calculated considering the trade price of scripts and it changed with
respect of the share price changed.
Close index: Calculated the basis of close price of the shares. It is treated as the open index for the
next day.
5.2 Trading Procedure & Types of Trading System
There are three types of trading system. These are:
1. Cry out System2. Automated Trading System3. Internet Trading System
Cry Out System:
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Before starting on line trading at the Chittagong Stock Exchange trading were conducted through
Cry out system. Under this system members and there authorized assistant of the Stock
Exchange who have license to trade from the Securities and Exchange Commission would come
to the Stock Exchange Floor and participate in trading. But there were a number of shortcomings
of this trading system.
Automated Trading System:
To fulfill the need of Chittagong Stock Exchange a vector (Standard product of CMC Ltd.) was
customized. The program is window based and user friendly. The system has three modules-
(1)Brokers Workstation (BWS)(2)Market Operation (MOP)(3)Surveillance.
The brokers workstation module is available from each brokers office. This module provides
the facility to view the market scenario and input order. This department handles the market
operation is exclusively for the trading department of the Exchanges issues like disclosure and
circuit breaker. The surveillance department of the exchange will use the third module. This
module facilitates on-line surveillance adding new dimensions to the issue of overseeing the
market in this country.
5.3 Internet Trading System
Internet Trading System or ITS is CSEs venture on behalf of the brokers. This site has been
provided by the Chittagong Stock Exchange so as to give customers the convenience to trade or
put orders on CSE from anywhere in the world irrespective of the trading hours of the stock
exchange. The trading is done by registering on the site under some existing broker of the stock
exchange.
5.4 EVALUATION OF CSE
Evaluation of nay organization needs more concentrated effort. Here a brief subjective
evaluation of CSE is done in the form of SWOT:
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Role of Chittagong Stock Exchange for the economic development of Bangladesh
Strength:The nationwide connectivity and recently the worldwide connectivity throughthe Internet is the superiority over the other stock exchange of Bangladesh. Efficient
management and effective Corporate Governance gives CSE an edge over the competitor
Weakness:CSEs operation is less effective due to the lack of professional attitude of themembers, lack of Dhaka based member, non-availability of the dual listing facilities,
small number of active members, regional image problem, etc.
Opportunity:With the growth of Internet users and governments interest in the capitalmarket ushers new opportunity for CSE. As a member of SAFE, CSE will get the
opportunity to trade regional (Sough Asian) shares in future.
Threat: New regulations of the different regulatory bodies (e.g. Government, SECBangladesh Bank, etc.) change the trade volume in the exchange. Besides connectivity
to the Internet also increased the security concern of the network.
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CHAPTERSIX
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Problems and Recommendation for Economy development
On the basis of this tour I found some problems and they are shown below with
recommendation:
Some companies offering shares are lower because of some firms do not eventually list fortrading through they nominally complete their offering.
Here the companies date are not searched in an "Advanced Data Search" in prime to securedata on the following basic issue and issuer characteristics after filtering for 1PO's.
Financial information for each offering is not available from "public pricing parameters". Other firms list at varying periods of time after the offer, typically about a month after the
offer date. This lack is zero in the most recent period.
The offer date is the date on which the offer opens for bidding. "There should be allowedoffer proceeds equal the issue size and the issue price.
Among the control variables, firm age is negatively related to under - pricing, so olderfirms are less under - priced.
High IPO activity may follow high under pricing because underwriters encourage morefirms to go public when public valuations turn out the higher than expected and because
underwriters discourage firms from filing or Proceeding with an offering when Public
valuations turn out to be than expected. One interpretation of the result is that older firms are easier to value and can be sold at
lower levels of under - pricing the other controls firm size and a technology dummy are
not significant.
For each offering, company obtain data the face value of equity, earnings per share, price-earning ratio, industry average price-earning ratio and weighted average return on net
worth prior to the issue and net asset value post issue.
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CHAPTERSEVEN
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7.1 Policy implication for Eonomic develoment
In view of the foregoing analysis of findings of the study, the following suggestions have been
put forwarded for consideration of Government, policy makers, SEC, Stock exchanges and other
concerned parties in order to develop the performance of stock market, especially of CSE:
a) SEC Along with stock exchanges should make a provision to compel every member ofstock exchanges either to tread or to give-up membership of exchanges. Besides,
regulation is warranted for checking the fraudulent activities of stock exchange.
b) Government should promulgate macro-economic policy such as fixation of interest ontreasury securities considering the interest of stock market of the country. Besides, it
should come out with policy for bringing profitable SOEs and MNCs into the net of stock
market.
c) SEC in Corporation with CSE and DSE should establish a training institute for researchand development of human resources in the different level of security industry. This will
help improve the awareness of investors.
d) SEC Should comes out with full-field get guideline for introducing carport governance tolisted companies. This may improve not only financial disclosure practice; but also stock
market operation of the country.
e) Listed companies should disclose financial information through different vehicles such asnewspaper, websites, report from etc. this will give investors easy accessibility to the
information.
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7.2 Conclusion
CSE has been found to play a pioneering role in boosting the confidence of all participates
including investors. It has implemented different revolutionary programs for developing a
congenial regulatory and administrative environment in its operations. Of course, it has exerted
influence in the entire stock market of the country. The study has identified different impediment
of development of stock market; and also suggested some policy measures for improvement of
the operational efficiency of CSE. The suggestions are expected to develop the stock market of
the country as well. The analysis of the three measures of CSE development indicators reveals
that CSE shows a smooth and steady growth over the decade under study but low market
capitalization as a percentage of GDP is reflecting shallowness as well as the lack of depth of the
market. This sort of market is always subject to manipulation.
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References
1. "Foreign Investment in Asian Stock Markets" ESCAP, Monograph No. 6,1996;2. Ahmed, M. Farid, Khan, Harunur Rashid and Islam Md. Sadiqul, 'Industrial Finance
Through 'Capital Market in Bangladesh; A study on the Demand Side'. The Asia
Foundation and Bureau of Economic Research, Dhaka University;
3. Annual Report and monthly Review of DSE and CSE, various issues; SEC QuarterlyReview and Annual Report, various issues.
4. Annual Report of Bangladesh Bank, Various issues.5. Annual reports of 2010, 2009.2008,2007,2006,2005,2004,2003,2002 of Chittagong Stock
Exchange.
6. Bangladesh Capital Market" A publication of Chittagong Stock Exchange March-20017. Bangladesh Economic Review, 1999.8. BIBM Bulletin, Vol.2 No. 3, May-June, 1999.9. CSE Bazar Porikroma" -May 2007.10.Levin, Ross "Stock Markets: "A Spur to Economic growth", Finance & Development,
March, 1996.
11.MCCI, Chamber News, Various issues12.Portfolio" of Chittagong Stock Exchange (Jan-Mar; 2005).13.Rouf, M.A and Nabi, Md Golzare "Stock Market in Bangladesh Challenges Ahead"
"Thoughts on Economics", July December 1998.
14.Share-e- Binioge" A publication of Chittagong Stock Exchange.15.The Financial Express, Various issues.