WELCOMEPRESENTATION ON BANGLADESH SHARE MARKET CRASH

WE ARE- GROUP 5

SAYRA NUSRAT 02

MAHMUDA SULTANA 94

FATEMATUZ ZAHRA

SAQUI

99

WAHIDA MASHRURA

SHUKH

100

NASEEF- US SAKIB 110

OUR AGENDA• CENTRAL IDEA• ANALYSIS OF THE ARTICLE• TO AGREE OR NOT TO AGREE• IMPORTANCE OF MARKET

STABILTIY • FUTURE OF STOCK EXCHANGE

CENTRAL IDEA-Bangladesh Stock Market

• Platforms for raising fund• Intermediary role between SBU and DBU• Considered more liquid than any other investment choice• Wasn’t affected by global recession 2007-2008• Since 2007, stock prices started increasing• Lured investors with small savings and small to no knowledge about market • Market crashed in 2011

TIME LINE OF STOCK MARKET CRASH

TIME LINE OF STOCK MARKET CRASH

DGEN gained its all-time

highest 8, 918.51 point

whose market value was

36.8 billion taka3/12/20104/12/20105/12/2010 6/12/20107/12/20108/12/20109/12/201010/12/2010 13/12/2010 14/12/2010 15/12/2010 18/12/2010 19/12/2010 20/12/2010 21/12/2010 7/1/2011 8/1/2011 9/1/2011 10/1/2011 11/1/2011 12/1/2011 18/1/2011 19/1/2011 20/1/201125/1/201110/2/201112/2/201113/2/201114/2/201115/2/201116/2/201117/2/201118/2/201119/2/2011

THE ARTICLE

ARTICLE TITLE: Share Market Crash And The Reasons Behind The DisasterPUBLISHED : Tuesday, 16 October 2012AUTHOR: Md Noor Solaiman Jewel, Senior Executive, the Premier Bank Limited (Brokerage Division), Chittagong

ANALYSIS OF THE ARTICLE

• Share market crash defined• Timeline of the crash history• Reasons behind the crash• Margin Call defined

• Similarity between 2011 and 1996 crash• Recommendation

ARTICLE ANALYSIS (CONT’D)• The biggest one day fall in the 55 year history of Bangladesh

stock market• Grameenphone’s market entry And price hike• Panic of small investors led to more losses• Fluctuation of DGEN throughout 2010• Liquidity crisis in the financial and non-financial institutions• Share market was overvalued

ARTICLE ANALYSIS (CONT’D)

Recommendation • Sponsor-directors' should hold 2% shares • Adoption of actual book-building process• Margin loan decision should be taken by

brokers• Insider trading should be strictly prohibited• SEC needs honest officials • Action must be taken against the responsible

parties• Improvement in security laws and penalty for

breaking those

TO AGREE OR NOT TO AGREE- OUR ARGUMENT

TO AGREE OR NOT TO AGREEReasons for share market crash

Agree/Disagree

Why

1. Role played by SEC, DSE and CSE

Agree

• Overvalued market• Heavy manipulation• Lack of proper investigation• Failing to monitor and control the

market• Computation of non-tradable

shares as tradable & creating loophole (directors’ share)

• Dishonest employees

2. Faulty IPO & asset valuation procedure

Agree

• Entrance of GrameenPhone hiked price up

• Pre IPO and Post IPO manipulation• Overvaluation of Assets• Issuance of Bonus shares against

unrealized gain of revalued asset price

Reasons for share market crash

Agree/Disagree

Why

3. Omnibus accounts of major market players

Agree

• Each omnibus account can have 3000 to 10000 BO accounts

• Are not under the surveillance of SEC

• Used in illegal and unethical transactions and causing price hike

5. Insider trading Agree• Creation of artificial active trading

environment

6. Margin call Agree • 10 times the average amounts

of margin calls for firms and it created liquidity crisis

TO AGREE OR NOT TO AGREE

TO AGREE OR NOT TO AGREEReasons for share market crash

Agree/Disagree

Why

1. Conservative monetary policy of Bangladesh Bank

Disagree

• Increased CRR by 0.5%• Restricted more than 10%

investment of deposited money in the share market for commercial banks

• Less like a reason and more like a consequence

• Double digit inflation• Real industry growth was

hamperedSome one had to take extreme measure sooner or later to control the market.

2. Trust issue of small investors

Disagree

• Trust is earned• Previous history of market bubble

creation and the fall• Analysts’ report about overvalue

market• Little or no knowledge about the

market

OUR ARGUMENT- Flaws in the DGEN Index

• Counted the index for IPO shares on the very first day though it didn’t show the real price• DSE did not follow the correct

method of index calculation while incorporating new securities under direct listing rules• Other technical errors regarding

right shares and bonus shares

IMPORTANCE OF SHARE MARKET STABILITY

• Investment facilitation• Exchange rate• Employment in the

private sector • Standard of living• Business operation• Liquidity

FUTURE OF STOCK EXCHANGE• Capital markets' growth as a whole

has been good • The only viable low cost option to

raise capital• Is in the right path with necessary

infrastructure• Has a huge number of investors• Government, regulatory bodies

and investors all has to play their parts to stop future similar incidence• Lessons can be learnt from other

stock exchange crash

THANK YOU