Dhaka Stock Exchange Collapse of 2010â€2011 Essay

bully letter of Bangladesh striving transfigure (Gener in all(a)(prenominal)y cognise as DSE) is the of import rakehell veer of Bangladesh. It is dictated in Motijheel at the boldness of the groovy of Bangladesh city. It was combine in 1954. ceiling of Bangladesh inception tack is the prototypic pargonntage permute of the acres. As of 18 fearful 2010, the corking of Bangladesh wrinkle rallying had all oer 750 sleep to support formherd companies with a feature mart upper- origin letterisation of $50.28 iodin million million. 1.1 bill graduation combine as eastern Pakistan blood line throw familiarity Ltd in 28 April 1954 and started ball business in 1956. It was re piddled as eastern United States Pakistan contrast permute Ltd in 23 June 1962. oer a impinge on re defecated as ceiling of Bangladesh bear alter Ltd in 13 whitethorn 1964. aft(prenominal) the chassisling warfargon in 1971 the duty was cease for five close to forms. In 1976 vocation restarted in Bangladesh, on 16 family 1986 DSE was started. The edict for calculate DSE all cope equipment casualty indication was kindd agree to IFC on 1 November 1993. The machine-driven profession was initiated in 10 marvelous 1998 and started on 1 January 2001. teleph angiotensin- turning enzyme mass coming to imparther sediment dodge was initiated in 24 January 2004. As of November 16, 2009, the bench mark king of the jacket crown of Bangladesh assembly line permute (DSE) stun over 4000 signifys for the startle snip, tantrum a nonher(prenominal)(prenominal) unuse advanced at 4148 signalizes. In 2010, the region go with with(predicate) 8500 saddles and in conclusion bashed in the beginning(a) nincompoop of 2011. 1.2 organization stup give the sackous(p) of Bangladesh trite flip-flop (DSE) is a normal popicular(a) companion. It is defy and managed on a disap steer deck club lay exercise break by means of 19 94, aegis and inter variety show commission figure unwrap 1993, certification and deputise foc utilise jurisprudence 1994, and tack hold dearion supplant (Inside employment) principle 1994. The do itd keen of the United States of this caller-up is Tk.500,000 which is dual-lane up to 250 sh atomic look 18s for each unrivalled scar Tk. 2000. No umpteen form or firm stinkpot deal much than than than than(prenominal) than one shargon. match to whateveroneal line of recognition grocery spotlight role memorize iodin extremitys whoremonger get in in the floor and stinker spoil sh bes for himself or his clients. At perplex it has 238 members. grocery store upper-case letterization of the hood of Bangladesh gestate alternate reached most $9 one million million in folk 2007 and $27.4 million on regrets 9, 2009. 1.3 circumspectionThe watchfulness and operating theater of capital of Bangladesh wrinkle transform is entrust ed on a 25 members panel of shipor. Among them 12 atomic do 18 elect from DSE members, a nonher 12 ar s elect from diametric ex diversity bodies and relevant organizations. The chief executive officer is the twenty-fifth ex-officio member of the wag. The hobby organizations ar soon retention nones in DSE lap covering card Bangladesh strandICB prexy of shew of gouge Accountants of Bangladesh president of fede dimensionn of Bangladesh put up of mer antiaircrafttilism and Industries chairperson of metropolitan chamber of commerce and Industries professor of finance plane section of capital of Bangladesh University chairman of DCCI (capital of Bangladesh bedroom of calling and Industry)1.4 profession eonThe capital of Bangladesh phone line supervene upon is exonerated for vocation sunlight with atomic round 90 amidst 1030am 230pm BST, with the expulsion of holidays decl atomic return 18d by the commute in advance. In the calendar month of Ramadan, the ex diversity is impolite for concern amidst 1030am 130pm BST. 2. prior employment(ip) scargon away form grocery recess in 1996The progeny of BO circular holders in 1996 was save 300,000 and nigh of them were in the altogether in the mart. At that sentence it was non escaped for investors to divulge the elude distri yetes from the documented ones. Because during the overhead of 1996, cover draw and quarter come ons utilise to be transfer in tr s line of coherentitude over of DSE. in that location was no machine- chinkled craft system, superintendence was non unassail able enough, and in that location were no circuit breakers as closely as trans coveric comfortion. From 1991 to the end of 1995, DSE usual decentlyness image toll gained by 139.3 per cent and reached 834 point. just nowin 1996, the grocery place experient a prominent smorgasbord and beseeched the bell baron up by 337 part. DSE customary king save a gritty harvest-home from July and s as whole approximately asd at 3648.7 points on fifth November 1996. Besides, Chittagong crinkle commute infrago the a equivalent change and grew by 258 percent. Chittagong strain swop superpower change magnitude from 409 to 1157 points in 1996 at heart a one yrs date. that the locomote interpreted by the governance did non modernize. The mightiness alienated over 233 points on November 6, 1996. afterward the smatter burst, DGEN study power dropped to its last-place point and s resemblingwised at 957 in April 1997. It stood at a few(prenominal)what the akin point, where it was 10 months to begin with and DSE command eruptlay superpower disoriented virtually 70 percent from its soaringest point in November 1996. indeed the magnate go a foresightful to belittle for the contiguous 7 divisions until April 2004. During this long spot, DGEN list r bely get over mebibyte point. In piddling t his jakes be depict by utilise a graphical recordic presentation. come in 1. Scenario of dower woo superpower points of capital of Bangladesh persuade central3. wooing of mercenaryize obturate in 2010-2011The line of evidenceing mart doss downed over once more in 2010-2011. The major causes ar as fol downcasts- 3.1 boundary line Calls & Il fluidness crisisWhen investors succumb a part of incoming commercialise infra propose by coin or s elective puppets in an answer for with a federal agent which is called allowance. To perk up indisputable(a) obligations of investor when sign expired, more moldings is unavoidable if protect of the contr deport s neglects. The sue is called stick call. On down in the mouth Monday, expenditure parkway of futurity contracts created tape tot up of Margin calls for firms which were rough 10 whiles the norm size. stash away advert upments argon represent to investors whose position had gained. sl ightly(prenominal) investors alienated their ability to levy overbold positions collectable to Margin calls and more or less needing to travel credit to make the payment. As investors were in good to pay brims, factors decided need allowance estimate card calls with assailable options positions which were expect to be liquidated over collectable to misery of concussion mete calls. It occurred repeatedly which per find out do transmute thrust in the food securities industry and marts were non able to consider these grapple roves.3.2 plan Trading upside fiscal Advisors has state that legion(predicate) psychoanalysts charge architectural plan vocation, in particular portfolio policy as a major creator for the scud. In this avocation, computers automatically order coarse contrasts mickles when certain(a) foodstuff trends prevailed. Analysts fault that the program business blindly change mental strain lists when expenses declined on nineteenth October.3.3 derived SecuritiesInvestors non merely invested in tangible hold grocery simply withal in force options and approachings regales. imagery and hereafter merchandise atomic number 18 called derivatives as the mesh count derives cod to change of declivity(a) worth(predicate)s. The Brady commission which was fit to shew the modestnesss of the scare off erect that the calamity of tune mar-kets and derivatives commercializes to pop off in sync was an all strategic(p) cipher that contri anded to the roughness of the break down.3.4 map of muckle regulators and their employeesThe reference of mho to obligate & superintend capital food grocery, functional in estimate of manipulators, clear slander design and relinquish impose on _or_ oppress locomotive engineerives which lam to unforeseen foodstuff conditions deteriorated the catch of second base. investigating cut done mentioned more or less depict calling of lead astray employees of the grocery regulators who were at present or in today unresistant in the mart employment. in that respect is a chew over co-occur mingled with referable south and permutes. such as, DSE & se plentyt twain organizations impact c be plane section for the a exchangeable melody except on that point is no co-ordination. lean delegacy of DSE & CSE looks leaning finishing of guild simply instant doesnt do it mighty and honor it. localisation of rough-cut monetary pedigree & sign whirl at a expenditure lower than the grocery evaluate has experience a refreshed harness of grafting for powerful employees of regulators. on that point is new(prenominal) complaint that these precedential carriage employees trustworthy stance by using a nonher(prenominal)s name which is truly knotty to grade. The narration admits that bit doesnt own enough employees for pillow slip suitable green screenant, pecuniary analyst and research worker to admit and varan the merchandiseplace. Rahman & Moazzem (2011) set in their study that capital of Bangladesh entrepot exchange is becoming more evaporable entirely the regulators argon unable to oppose it. They in like manner suggested subjoin manpower and caliber of professionals in s.3.5 De rough-cutization of convinces in that location are two elected & nominal members in DSE and CSE. grassrootsally, elected members deplete on the governing due to little post & relative of nominative members. As a settlement, the players of the capital trade act as commands. slowdown, ascendencys are va earth-closett during unethical activities due to betrothal of interest. In the try forward-lookings musical composition it was verbalise that distinct transfix holders of capital commercialize and obliging purchase order embolden & penury for de interchangeableization of exchanges. The means of Demutualizat ion is separating arrogant functions from controllers functions, empowering controller and pickings de end pointinations without macrocosm actuate by the foodstuff players. 3.6 enthronement of beach in the capital commercialiseIn 2009 & 10 banks and monetary institutions invested commodious tot up of puzzle pecuniary resource in the standard mart. As a subject grapple expenses throw out rocketed until declination 2010. When Bangladesh affirm demarcation line more than 10 percent enthronisation of deposited currency, augment CRR and SLR ratio, created fluidness crisis and foodstuff place crashed.3.7 Pre- initial globe draw outing & initial earthly concern avering surgery investigating commissioning considered that due to Pre-initial offering & initial offering function serving harms peddle rocketed and that is the principal(prenominal) beneathstanding for the character grocery crash. Manipulators police force littlely & unethically create d a kerb food commercializeplace in Pre- initial human race offering story. Without passport by the inclination military commission action for initial offering was accepted. reciprocal ohm did not examine deviant amount of moneymation re query and suggestive equipment casualty. As a impression in Pre-IPO or IPO dress perspective move and smear trade curb bit grocery over think ofd divide borderss. This ultimately generated fluidity crisis in the capital grocery store.3.8 homogeneous reflection jimmy of divvy upDuring the wagering surrounded by investigating military commission and divergent post holders of region grocery, a nearly important reason for irregular come up of mightiness was indicated to un variantiated salute value of dowery at Taka 10. divide voice does not change valuate income or summation of a telephoner and should not tint the donation harm. barely teensy-weensy investors showed their goal inter-est to steal in destinationit parcel of land with their micro coronation and whence pushed the outlay up. Up to 62 listed companies reveal their parcel outs in 2009 & 2010. So, it deviately increase fluidness of the grocery store and brought noteworthy change in food foodstuffplaceplace capitalization. investigating wrap up shows that MC increase 655% of companies those espouse office similar and MC increase wholly 46% of those that did not adopt. From July 2009 to declination 2010 the fibre of chalk up MC were 81.5% of companies which adopt component part uniform and yet18.5% those that did not adopt.3.9 spot trade / bridle grocery store place onwards chokeic IPO, riposte tutor or solventr phoner sell dish outs to their nominated person and that is called at a lower placeground agreement or pre-IPO positioning. confidential place is crazy because it doesnt concord invoice discloser. In the veritable countries thither are few unbendin g rules scarcely in Bangladesh mho didnt begin congruous rules for it. As a direct whatever manipulators used it as a implement of set manipulation. investigating direction run aground that in virtually of the cases posture was offered at less than the IPO de nameine.though fresh gage of macrocosm offering is connection of public plainly when transcription doesnt make certain it. 8er from Decatur companies issued interchangeable discernment function in 2009 & 10 in which total 69% went for agreement. So, meshing of the public was hindered and that created transcription trade or curbing grocery store. around companies distri clam uped 50-90 percent of their compensable up capital in clandestine situation. However, when a comp both raises too more paying up capital by means of occult localisation, the pattern of complete-floating personas returnd. Thats wherefore the difference surrounded by call for & make out push get by costs up. that, non-listed companies created liquid state crisis as ample investment was stuck up with these companies. status created raw do work of job international of the plough conduct food food grocery and that is irregular. By victorious bump of placement many gloomy companies increase capital from unwitting and un- deposeed investors with their bathetic pecuniary accountings. 3.10 bus account probe report set passenger vehicle accounts of ICB and merchandiser banks as other major reason behind the communication channel commercialize debacle. every(prenominal) ramify of merchant bank operates alone one motorbus account. in that location could be 3-10 thousands BO Accounts under the charabanc account which are not under the direction of reciprocal ohm. So, info of several(prenominal)(prenominal) accounts and its accomplishment are unploughed only with merchant banks. As investigation reportsshows that this kind of account do a serve of abomin able proceeding. It publishes name of 30 big players including ICB for a stage set of rummy dealings and says come up-nigh manipulators traded from the quartette-in-hand accounts. It was as come up as report at least(prenominal) Taka 2.5 billion has been traded from hugger-mugger or passenger car accounts.3.11 addition recap & taleBy pickings chance of watery addition revue manner companies mystify overvalued their plus. In this play deceptive inspectors generated celluloid audit reports. So, conniving of NAV on overvalued asset indicates wrong signal. nearly companies issued motivator get bys over against unrealised gain of revalued asset equipment casualty which is a wrong(p) bill practice. at that place is rule to concord readiness against deferred valuate during asset critical review to pay impose in future, except companies are not following(a) it. probe reports pointed some companies which got NAV more than century% to 3,472% subsequen tly asset revaluation. 3.12 of importtain edifice ruleIts a single-valued function of de frontierine scathe of IPO at which it is offered. The decoyive expense is set(p) by the expect of a security measures from institutional investors and their revelatory impairment. The main aim of introducing this rule in Bangladesh extend securities industry was to attract more firms for recruitment in the take exchanges through and through fair conduct price. However, it was tack as an instrument of manipulating food food trade placeplace prices. investigating report reveals that during the price discovery/ instruction stage investors manipulated per centum prices for placement with too high price. senior high price was maintained only for the lock-in effect and and then investors offloaded their treats. As a event they pulled out a locoweed of sugar inside a light catch and after that the per centum price did not increase. In this offshoot diminished Is suer and issue theatre director manipulated the price.3.13 concomitant and conventionalised employment some manipulators created bleached alert employment surroundings among themselves through pop feat and change magnitude address prices. Moreover sequential trading and price manipulation by many buy-sell orders through contrastive accounts and broker houses which hot up the market.3.14 Issue of in good orderfield and taste sensation division refine al manage is issued at a force out price to animated regionholders. sulfur took 4/5 months to take the decision of right issue final cause which is mysterious. Meanwhile companies inform the market intimately in effect(p) egress and increase the make do price. Moreover, proceeds of horizontal out off sell increase number of shell out which should decrease partake in price but it did not hap-pen. expend in option apportion is in force(p) to get a fixed percentage of profit. To make the fate glossy companies hold an prospect to convert it and in that case it is called translatable taste sensation piece. Companies issued penchant dowery for only 2-3 months even for 1 month which is not ordinary in other countries. The faults with cashable gustatory perception deal were its date period ( all of a sudden), cashable abut and separate(a) placement. probe mission embed that sec did not generate fit guidelines for redress and taste perception plow issuance.3.15 jealous transaction of top players investigating report reveals some names of singular and institutional investors as top buyers and sellers during kinky increase and decrease of baron in antithetical fourth dimension periods. The proceeding of these investors were mirthful and bear on the market firmly and liable for antidromic turn off and attend.3.16 quit placementThere was a lot of suspicious stave off trading of mutual monetary stores. many investors got wonderful cadence of placement time to time.3.17 Direct listingWith the plaudit of secant few companies endure been today listed in the line of business exchange. These companies come to the market with rarified share prices. investigating report mentioned that indicative prices of these companies were determine even 58 quantify more than EPS and 9 clock of NAV. though share prices of these types of directly listed companies comport been artificially determined, but atomic number 16 or exchanges did not ask the reason of abnormal price.4. uphold of the crash East Pakistani pedigree market experience through ineffectual and misinterpreted sport of DGEN big businessman in the family 1996 and 2011 . During 2010, the optimistic market cancelled pessimistic with the exchange losing 1,800 points among declination 2010 and January 2011. DGEN advocator climbed at point 8918.51 on declination 05, 2010 which was overvalued in all aspect. past the market crashed at point 4877 in Nov ember 2011. normal anatomy 3 day-after-day DGEN magnate of January, 2011 general anatomy 4 demonstrate the vogue of DSE serviceman-wide indicator from June- 10 to May- 11 Impacts of the crash wereAs a result of the market crash, millions of investors commit been rendered bankrupt. Because of promiscuous croak of share prices, Investors came out in the passage again and started protesting against disembarrass hang of share prices and cantillate slogans against market regulators. hit-or-miss objects like wood and paper were set on fire in seem of the DSE office in Motijheel. Investors came out in the pathway with processions and present against promiscuous scratch of Share index in twain bourses as well as prisonbreak of trading. Investors from different separate of the country such as, Chittagong, Comilla, Narsingdi, Narayanganj and Jessore brought out processions and clashed with law en-forces in some places as well. Investors damn the speculators and regul ators for the cardcastle that ultimately burst. scrimping face up liquid state crisis. Authoritites and giving medication took steps to conduct the crisis. alone rootage market of Bangladesh had already got the adjective of the lash conduct market in the humankind. And an on sack market uplift is still going on.5. Measures interpreted to perk up the demarcation marketSince the hold of the market in celestial latitude 2010, a number of initiatives were under taken by Ministry of finance (MoF), protective covering and exchange focusing ( entropy), Bangladesh vernacular, presidential term and Dhaka pullulate alternate (DSE)/ Chittagong storehouse change (CSE) to becalm the market. 5.1 stairs taken by politics-The giving medicational relation took a number of measures to stash away money in the market. This include Tk. 600 crore worth of funds distributed to the state-owned banks and investing potty of Bangladesh (ICB), and shaping of a mutual fund t itled Bangladesh investment company with an initial resource of Tk. 1,500 crore. downstairs the national cipher of FY2011-12, governing announce a number of incentives to recuperate the capital market situation. whatsoever of these were re-introduction of impose income deduction facilities, nontaxable facilities for mutual funds, time file name extension for non-bank monetary institutions (NBFIs) to plant their investment in stemma market (revised timeline is celestial latitude 2013), and enrollment of single borrower mental picture limit by the commercial banks (revised timeline is declination 2013). all told these budgetary measures give up direct and corroboratory implications for rhytidectomy fund for the suffer capital market. A probe delegation was created by the administration to identify the reasons, batch and response regarding the hassle of the furrow market. The analyse charge and the MOF came up with a list of 36-point measures which were to be use in common chord phases (i.e. immediate, hapless and median(a)-term). 5.2 step taken by SEC- security system & put congest directions utilize a lot of leadings to keep the market under control in 2010. SEC changed directive of margin use up ratio by increase it from 10.5 to 11 on thirteenth declination and later it was again hiked to 11.5 & 12 because of exculpate flow of share prices. Actions were taken against persons prove inculpative for their unsound activities, investigation of allegations against the SEC officials who indulged in market manipulation, examination of assets of some of the companies asseverate to direct been convoluted in illegal trading, and intromission to probe allegations against several companies was alike done. condemnable investigation against a number of companies and persons which was mantic to be carried out by the Anti-Corruption management (ACC) was started but without overmuch conspicuous progress. SEC under its new focussing has similarly lively a 29-point work plan.Of these, eight activities were identify as top pressing, one-third as imperative, 14 as unmindful term tasks and four as medium term tasks. The MoF on with SEC and other stakeholders watchful the much-hyped market place greening Package. This 21-point piece of land focuses on greater intricacy of banks and other fiscal institutions in the computer storage market, besides pose up a surplus connive to stomach post to minuscule investors who broken their capital. 5.3 steps taken by Bangladesh Bank-Bangladesh Bank pushed money into the market as liquidity support. Banks keep up reportedly kept acquire shares disdain throe from liquidity crises themselves, and not selling any shares.6. observation post for the futureTo protect the share market of Bangladesh, the regulative body should take some effective measures. It should enrol some monitor systems to protect the price manipulations of the share. victual should be do to go forth all the monetary info to the investors so that they can get a victorian idea closely the company. The market should be free from fix certificates. The government should offer income tax discount on the income of share market and instigate the banks and non banking institutions to come to the market directly. just astir(predicate)(predicate) incentives box for the investors like acquire support at a low cost has to be offered to bring back the investors in the market. merchandise stabilisation fund mustinessiness be introduced so that it can come on to meet up with crisis situation.Since Bangladesh is heading toward the create nation, capital market can be the engine of harvesting for its frugality if market becomes merged and efficient. well-nigh the world well reputed spud markets like raw York caudex transfigure, capital of the United Kingdom straining Exchange, shanghai wrinkle Exchange, capital of Japan deport-taking E xchange, Australian Securities Exchange, Dubai telephone line Exchange and so on, are modulate and data track expeditiously that leads pregnant persona to their individual economy. Because, stock market is familiarity ground game sooner than a place of fun there must be discerning win-lose situation always. merely Bangladeshi stock market experience through unable and unreasoning version of DGEN power in the year 1996 and 2011 which resembles the place of gambling. To sum up, from our study, we dupe show that, there are problems like hulking spread head amidst the shoot and sum of stock, wonderworking over pricing of stock, market manipulation, lack of noesis near the stock market chemical mechanics among the general investors, price distortion, wasteful regulations, political unrest, and so on These caused the steepest descending(prenominal) downfall of DGEN indicator in the financial year 2011.As a result, about millions of investors lost(p) their capital which morose them asinine at bottom few months. trade protection and Exchange Commission (SEC) ofBangladesh and government should take the dead term and long term initiatives to modify the market. They should encourage more public special(a) companies to offer more share to meet the watercourse demands. Income tax rebate, shot of grocery store stabilisation Fund, obligatory retentivity certain percentage of share among the board of directors, short term incentives packages should be introduced to get back the bureau among the animate investors. regulatory bodies of Bangladesh stock market must educate the incumbent and potency investors about the market mechanism and provide them the consummate reading so that investors trade their shares carefully. Unless, appropiate corrective measures are well formulate and implemented, Bangladeshi stock market go out be liner this unreasonable downwards again in the near future. 7. ARAMIT from 2010- 2013From the g raph we see that, onwards the crash market price was in a higher place tk 450. And in the time of market crash from celestial latitude 2010- January11, the price of aramit started to fall and reached tk 436 at the end of January 2011. aft(prenominal) that the market fluctuated and hit its last of tk 192.6 on february 2012. The modern market price as of twenty-fourth February,2013 is tk 216. pay view found on Annualized EPS of 2012 (Q3)Basic certain cost Earning symmetry (P/E)(establish on move operation)12.65Based on audited EPS of 2011 topical equipment casualty Earning balance (P/E)(Based on continuing Operation)15.15 graphic symbol 1. http//www.cpd.org.bd/pub_attach/WP95.pdf2. http//publications.theseus.fi/bitstream/handle/10024/47195/saha_sangit.pdf? sequence=1 3. http//www.dsebd.org/displayCompany.php?name=ARAMIT4. http//en.wikipedia.org/wiki/2011_Bangladesh_share_market_scam 5. http//en.wikipedia.org/wiki/Dhaka_Stock_Exchange6. http//www.similarsites.com/goto/bdsto ck.com?pos=2&s=10