I hereby submit my internship report on 'Analysis on the Recent Capital Market Downfall of Bangladesh.' In writing this internship report, I have made my efforts to post all the relevant information that was needed to strengthen this report. Firstly, I would like to thank Almighty Allah for giving me the ability to carry out my regularities and complete the internship report. Secondly I want to express my special thanks to my respected faculty Nusrat Farzana ma'am who gave me the special opportunity to report on the topic of capital market which helped me to do a lot of research.
Special recognition must be given to two other people who helped me a lot during my internship and understanding of the capital market. Finally, I would also like to thank my friends and classmates for their help and support whenever I needed them. As a student with financial experience, I have always been interested in the stock market and how it works.
I chose this topic for my report because I wanted to dive deep into the stock market of Bangladesh. Especially after the stock market crash of 2010, the stock market in Bangladesh has not improved completely. So here I wanted to find out the downside of stock market developed in Bangladesh and what forces people not to invest much in stocks.
Since there was a major market downturn recently in the year, I decided to understand all the reasons behind this and how our country can solve these problems in the future.
Introduction
- Background of the report
- Objective of the report
- Limitations of the report
- Methodology of the report
The data collection method was limited; some information has not been disclosed by the company due to their privacy. Primary Source: The primary source of this report was mainly the interview with the officials of our organization. I have taken most of the information from LankaBangla website, LankaBangla annual report, DSE website, capital market reports and capital market articles.
Industry Analysis
Overview of Bangladesh Capital Market
Bangladesh House Building Finance Corporation long term loan provides long term financing for housing construction. Investment-ready money is produced by foreign direct investment through borrowing from the Bangladesh Bank, loans from international financial institutions and allocations from public sources. Medium and long-term loans from the National Cooperative Bank are available for the purchase of land and agricultural equipment.
Companies had to borrow money in the bond market because there was no stock market. Current participants in Bangladesh's capital market include two stock exchanges (one in Dhaka and one in Chittagong), 45 commercial banks, investment bankers, corporations and commercial banks. Banks (26), insurance companies (39), pension funds/systems, DFIs (5), postal savings, life insurance, deposits/pension schemes, employee insurance, security deposits, gift voucher deposits, other deposits, development cost allowances, leasing Companies, non-banking financial institutions and cooperative mortgage banks are some examples of institutional investors that do not use instruments.
Stock market instruments in Bangladesh include shares, bonds, shares of ICB, mutual securities, Salaryman Development Bonds, term deposits and under the National Savings Scheme (Bangladesh Sanchaya Patra for 5 years, Salaryman Development for 5 years). Various savings certificates. 3-year savings bond, 3-year national investment bond, 5-year family savings bond, 8-year Pratirakkha Sanchaya Patra). The companies authorized to carry out banking activities of service providers include the Industrial Development and Leasing Company of Bangladesh (ipdc), Uttara Finance and Funding, Banco Trans World (BD), Millennium Investment Management Company, Fidelity Assets and Security Company, Raspit Securities and Management Company, Capital Market Services, Bay Leasing and Funding, Swadesh Investment Management, Vanik Bangladesh, Grameen Securities Management and South Asian Capital Market.
Established in 1993, the Securities and Exchange Commission (SEC) regulates standard sports of the capital market in Bangladesh. The targets of the SEC are to defend the pursuit of buyers in securities, to enlarge the securities market and to make sure that legal guidelines referring to proper issuance and alternatives / buying and selling of securities are observed. The growth of the capital market is accelerating as a result of the government's move towards privatisation.
Investors and issuers, the two main participants in the capital markets, reacted positively and acted on the growth of the market. The International Finance Corporation (IFC) Emerging Markets Facebook page features data on the Bangladeshi securities market.
Capital Market Size of Bangladesh
B In a given year they have a General Meeting and a dividend cut of at least 10% is announced. Registered organization refers to a registered private organization that has a trading interest by the end of the year, including an external organization that is only registered. Organizations that pay minimal attention to legal status, such as holding or speculative organizations, venture capital funds, unit trusts and organizations whose primary purpose is to own shares of other registered organizations, will all be rejected.
The number of registered stock exchanges in Bangladesh is a sign of development in the financial trading sector. Clearly, the number of organizations officially registered in Bangladesh and other countries also reflects the size of the economy, with larger economies having more companies.
Market Crashes of Bangladesh
Market crash of 1996
BSEC Chairman Professor Shibli Rubayat-Ul-Islam recently stated, "We are trying to make the market alive." Investors should invest in core stocks instead of being lured by quick profits in junk stocks, he continued.
Market crash of 2010 -11
The commission found that among the 65 companies, the most visible were the ones where the extent of the manipulations was evident. 34;The absence of errors in rules and regulations has been addressed by learning from the past," he said. Besides the fall that occurred during the 1996 market crash, it was the biggest fall in the stock market's 55-year history.
Analysts who believed the market was overvalued viewed the decline as "natural." Investors demonstrated in the streets. Several things, including wood and paper, were set on fire in front of his DSE office in Motijheel. The Bangladesh Securities and Exchange Commission, the industry watchdog and the Bangladesh Bank have eased previous cautious efforts to stem the decline.
After private investors formed the Bangladesh Capital Markets Investors Council on October 16, the fall eventually led to collapse. The last demonstration, which lasted all night in front of the DSE offices in November 2011, continued for several months.
After the general election on December 30, 2018, the market rallied more than 700 points in three weeks in January this year, but lost momentum and never recovered. The market then lost about 1,500 points in the last 11 months, reducing its market capitalization by about TK 80,000 kroner. Looking at the overall market scenario over the past two years, investors feel that the market crashes of 1996 and 2010 were sporadic.
This overall down market situation along with covid - 19 has damaged the country's capital market for a very long time.
Findings & Discussions
- Market Condition in 2019
- Market Condition in 2020
- Market Condition in 2021
- Findings (Reasons behind market falling down)
As can be seen from the chart, the market fell even more in the first six months of the year 2020. The market closed in mid-March 2020 and therefore in the span of one month there was a drop of almost 500 points. Even though there was some recovery, but it was not enough to say that the market was better than the year 2019.
The market has also recorded its highest index achieved in the history of our capital market. Private commercial banks have significantly expanded their access to the financial market and have gone above the risk limit of the stock market. Banks and other financial organizations made significant investments in the capital market prior to the market downturn.
But in other cases, as stock market volatility became apparent, Bangladesh Bank increased the bank's cash reserve ratio and statutory liquidity ratio, setting a deadline to reduce the ratio of investment to deposits. Another crucial aspect of the market crash that contributed to the market's liquidity problem and increased selling pressure on stocks is that it did so. According to a study by the Center for Policy Dialogue (CPD), 238 brokerage businesses have opened in 32 districts. Rahman, Hossain and Habibullah, 2017) Investors were encouraged to invest in the stock market by some of their activities, such as trading operations based on interest rates, easy access to market information and opening branches across the country.
Another factor that contributed to the fall in the stock market is that it drove up stock prices. There were not enough new shares available to satisfy the demand of financial investors through IPOs at a time when there were so many uninformed investors in the market. The Bangladesh National Bank's misguided plan to grow the economy through tariffs and increased risk ultimately led to a stock market bubble, a bubble that grew when public funds were used to increase black money through tax breaks and other tactics.
Psychological Factors and Ignorance of Investors: The stock market crisis was also caused by psychological elements including overconfidence of investors and feelings of envy, greed and speculation. Due to continued market volatility over the past year and ongoing confidence issues, investors have been selling their stocks. Uncertain and Insufficient Liquidity: Liquidity refers to the market availability of liquid assets for the purchase and sale of securities.
The history of the capital market in Bangladesh leads to the conclusion that market liquidity is insufficient and extremely volatile. Lack of investor knowledge: Another obstacle preventing the growth of capital markets is the lack of awareness among investors about the stock market.
Internship experience
Introduction
Work description at LBSL
I was only obliged to do this if I was only told by my seniors if anyone was absent on a day.
Internship outcomes
Recommendations & Conclusion
Recommendations
Conclusion
