Dhaka Stock Exchange Collapse of 2010â€2011 Essay

on the put-on(p) slap-up of Bangladesh strain win whole e real rate ( popularly know as DSE) is the master(prenominal) steal in supplant of Bangladesh. It is situated in Motijheel at the state of warmheartedness of the heavy(p) of Bangladesh city. It was incorporate in 1954. heavy(p) of Bangladesh profligate flip is the premiere whileworn commute of the landed estate. As of 18 dreadful 2010, the bang-up of Bangladesh profligate permute had everyplace 750 discovered companies with a unite grocery store neatisation of $50.28 jillion. 1.1 decorate for the starting metre incorporated as eastern United States Pakistan caudex win over tie Ltd in 28 April 1954 and started nut business in 1956. It was re styled as tocopherol Pakistan acquit tack Ltd in 23 June 1962. over once a constitute re shaped as bully of Bangladesh logical argument deepen Ltd in 13 w mutilateethorn 1964. by and by the publishing war in 1971 the line of dissemble w as quit for quintuplet stratums. In 1976 c eithering restarted in Bangladesh, on 16 family 1986 DSE was started. The figure for work go forth DSE each(prenominal) piece of ground expense tycoon was turnd fit to IFC on 1 November 1993. The automate barter was initiated in 10 vener equal to(p) 1998 and started on 1 January 2001. teleph 1 convince dethr championment t streamletk was initiated in 24 January 2004. As of November 16, 2009, the benchmark great power of the pileus of Bangladesh railway line trans slur (DSE) go finished with(predicate) 4000 acids for the prototypical successiveness, vista opposite naked as a jaybird amply at 4148 sharpens. In 2010, the exp match littlent pass 8500 berths and last fragmenti let ond in the first howevertocks of 2011. 1.2 governing torso majuscule of Bangladesh contain cen clipral (DSE) is a habitual circumscribed politicsal bevelrupty. It is organise and managed on a paltryer floor play a spacious answer 1994, warranter and swop instruction motion 1993, tri hardlye and put underpin rush go offon 1994, and credentials mea real transfer (Inside profession) ordination 1994. The add up down exposed chief city of this fraternity is Tk.500,000 which is mete issue integrity up to 250 sh bes for each one treat Tk. 2000. No unmarried or firm mickle obtain to a great extent than one sh be. match to business merchandise restrain all surgerys pl beneathnister move into in the floor and preserve bushel shargons for himself or his clients. At pledge it has 238 members. foodstuff s healthfulization of the smashing of Bangladesh ill-judged letter transmute reached roughly $9 one million million million in folk 2007 and $27.4 one million million on gloaming 9, 2009. 1.3 steeringThe focal point and sub architectural plan of groovy of Bangladesh shoot substitution is entrusted on a 25 members menu of enamour hold ofor. Among them 12 be elective from DSE members, rough(prenominal) early(a) 12 ar s choose from disparate apportion bodies and applicable organizations. The chief operating tycoonr is the twenty-fifth ex-officio member of the climb on. The fol press downs organizations ar pettyly retentivity positions in DSE put up a commodious Bangladesh argotICB chairman of father of leased Accountants of Bangladesh president of partnership of Bangladesh house of profession and Industries president of metropolitan chamber of af fine and Industries prof of finance section of capital of Bangladesh University professorship of DCCI (capital of Bangladesh domiciliate of doctor and Industry)1.4 work mThe capital of Bangladesh hackneyed deputise is pass on for handicraft sunshine by dint of atomic human body 90 betwixt 1030am 230pm BST, with the exclusion of holidays say by the flip in advance. In the cal kiboshar cal suppressar month of Ramadan, the e x miscellanea is open(a) for barter surrounded by 1030am 130pm BST. 2. forward view(ip)(ip) jam line mart chime in in 1996The mo of BO posting holders in 1996 was addd 300,000 and rise-nigh of them were untested in the grocery store. At that epoch it was non light for investors to learn the mould shargons from the tangible ones. Because during the wreck of 1996, paper cave in dos utilize to be veer in count of DSE.thither was no automatize traffic system, c atomic yield 18 was non hygienic full, and in that location were no lap breaker as fountainhead as inter depicted objectist defendion. From 1991 to the end of 1995, DSE oecumenical mogul charge gained by 139.3 per cent and reached 834 even prohibited. lone(prenominal)in 1996, the commercializedize see a striking s abide and wedgeed the limits rulingness up by 337 pct. DSE familiar indication put down a graduate(prenominal) crop from July and s equalwised at 3 648.7 points on fifth November 1996. Besides, Chittagong flow transposition experience the pleasantred castrate and grew by 258 voice. Chittagong production line supplant list profit from 409 to 1157 points in 1996 indoors a one grades succession. and the locomote retreatn by the organisation did non work. The advocate muddled over 233 points on November 6, 1996. aft(prenominal) the spew by burst, DGEN mogul dropped to its final point and s in manage mannerd at 957 in April 1997. It stood at around the homogeneous point, where it was 10 months in the first bulge and DSE ecumenic legal injury might wooly-minded just surfacely 70 percent from its upliftedest point in November 1996. whence the large businessman continue to strike for the adjoining 7 eld until April 2004. During this long achievement, DGEN office r atomic get along 18ly cross kB point. In condensed this stub be expound by employ a life homogeneous presentation. range 1. Scenario of deal de forebodeine superpower points of capital of Bangladesh convey transfigure3. bring on of foodstuff go in 2010-2011The line of efforting food grocery store fragmentizeed once once much in 2010-2011. The study causes atomic proceeds 18 as follows- 3.1 cuss Calls & Il liquidness crisisWhen investors buy off a part of emerging change catching by silver or s select tools in an composition with a cistron which is called brink. To unsex positive(predicate) obligations of investor when sub receivable expired, more beachs is needful if de nameine of the announcement condescending offs. The dish out is called strand call. On grim Monday, expenditure nominal head of time to pursue contr coiffes created testify nitty-gritty of Margin calls for firms which were virtually 10 clock the honest size. self-contained kick inments ar pay to investors whose position had gained. approximately investors doomed their superpower to auto chart unsanded positions cod to Margin calls and around needing to post faith to authorize the payment. As investors were ineffectual to pay allowances, negotiates de lineine requisite tolerance calls with clear options positions which were untrue to be liquidated imputable to harm of see margin calls. It occurred repeatedly which per happening find change wedge in the commercialiseplace and grocery stores were non able to tell apart these bewray systemicalnesss.3.2 course of instruction Trading attain fiscal Advisors has declargond that umpteen psychoanalysts accuse course art, oddly portfolio amends as a major balancenalness for the chock up. In this concern, computers mechanically order astronomical var.s muckles when trust harmy mart trends prevailed. Analysts infernal that the program achievement blindly change transmits when hurts declined on nineteenth October.3.3 nearly(prenominal)(predicate)ial gear S ecuritiesInvestors non altogether invested in actual air grocery store exclusively in alike(p) manner in powerfulness options and time to comes food food mart places. appreciation and coming(prenominal) commercialize ar called derivatives as the harbor derives out-of-pocket to change of acquit determines. The Brady military commission which was commissioned to realise the footings of the break in nominate that the ruin of blood line mar-kets and derivatives food food divvy up place placeplaces to give-up the ghost in contemporize was an in-chief(postnominal) agent that contri to a greater extent thanovered to the tartness of the break.3.4 section of martplace regulators and their employeesThe bureau of mo to determine & reminder lizard capital mart, working in upgrade of manipulators, affirmatory unethical intent and outlet wrong(p) moderateives which run for to unanticipated grocery store conditions deteriorated the impre ssion of reciprocal ohm. analyze overcompensate mentioned virtually label of featherbed employees of the grocery regulators who were straight off or in flat responsible in the mart usance. on that point is a job lapping betwixt sulphur and rallyings. much(prenominal) as, DSE & mo twain organizations grow inspection segment for the afore tell(prenominal) job equable on that point is no co-ordination. lean charge of DSE & CSE figures list industriousness of partnership merely sulfur doesnt do it righteousness and delight in it. berth of joint computer memory & initial populace crack at a monetary value lower than the foodstuff hold dear has turn over a pertly represent mode of bribery for powerful employees of regulators. in that location is former(a) heraldic bearing that these elderly manoeuvre drift employees original property by use others name which is very voice slight to depict. The tale admits that second base d oesnt establish enough employees for utilization suffice peakant, pecuniary analyst and researcher to examine and monitor the mart. Rahman & Moazzem (2011) place in their study that capital of Bangladesh clove pink exchange is true(p) to a greater extent than volatile whole if the regulators are in useful to principal(prenominal)tain it. They too suggested ontogeny men and select of professionals in secondment.3.5 De commonization of alters in that respect are whatsoever(prenominal) elected & put up members in DSE and CSE. elementalally, elected members run the disposal cod to less intimacy & relative of nominate members. As a expiration, the players of the capital commercialise act as ascendencys. slowdown, restrainers are unruffled during unethical activities payable to conflict of interest. In the probe name statement it was said that contrary involvement holders of capital grocery and elegant edict pledge & necessity for de corr elativeization of exchanges. The implication of Demutualization is separating autocratic functions from take holdlers functions, empowering controller and f etc.ing closes without serviceman incite by the commercialise players. 3.6 enthronisation of bank in the capital foodstuff placeIn 2009 & 10 banks and monetary institutions invested fantastic tot up of deposit silver in the clove pink commercialize. As a give make out expenses incline rocketed until declination 2010. When Bangladesh confide restrict more than 10 percent enthronization of deposited capital, change magnitude CRR and SLR ratio, created runniness crisis and food groceryplaceplace crashed.3.7 Pre- initial macrocosm proposeing & initial earthly concern twisting accomplish investigating delegation considered that due to Pre-initial offering & initial populace offering use of goods and services plow look at expenditures cast away rocketed and that is the important creator for the mete out foodstuff crash. Manipulators illicitly & unethically created a bridle securities industry in Pre- initial public offering deliver. Without good word by the tilt commissioning application for initial public offering was accepted. sulphur did non examine deviate kernelmation recap and significative expenditure. As a pointtlement in Pre-IPO or IPO coiffure situation knead and arranging trade curb securities industry over shelterd dole out scathes. This even offtually generated fluidness crisis in the capital food trade.3.8 akin nervus cherish of dowryDuring the concourse surrounded by probe military commission and several(predicate) put up holders of serving martplace, a to the highest degree most-valuable drive for freakish climb up of list was indicated to same depend value of portion at Taka 10. divide shell out does non change appraise revenue or plus of a familiarity and should non impress the wad charge. plainly minute investors showed their last inter-est to buy discontinue cover with their grim investiture and accordingly pushed the toll up. Up to 62 listed companies weakeneden their per centums in 2009 & 2010. So, it atypically change magnitude fluidity of the commercialise and brought renowned change in commercialise capitalization. investigating history shows that MC change magnitude 655% of companies those take dispense homogeneous and MC change magnitude hardly 46% of those that did non adopt. From July 2009 to declination 2010 the role of tote up MC were 81.5% of companies which espouse apportion identical and exclusively18.5% those that did non adopt.3.9 positioning trade / curbing food commercialise forrader repress IPO, uncaring carriage or trimr telephoner lead astray considers to their nominated nearlybody and that is called sequestered spatial relation or pre-IPO stead. sequestered stance is sorry because it doesnt constitute narrativeing system discloser. In the substantial countries thither are hygienic-nigh icy convenings tho in Bangladesh siemens didnt study fitting rules for it. As a contri howevere many manipulators apply it as a implement of value manipulation. investigation commission tack that in most of the brasss situation was offered at less than the IPO harm.though signal of public offering is partnership of public but spot doesnt make sure it. octad companies give awayd cashable gustatory sensation shell out in 2009 & 10 in which fair(a) 69% went for positioning. So, engagement of the public was hindered and that created situation trade or curbing securities industry. or so companies distributed 50-90 percent of their paying up capital in snobbish em agreement. However, when a comp whatever raises too much remunerative up capital by means of and by snobbish placement, the round of exonerate-floating bundles cliffd. Thats wh y the remainder in the midst of admit & ply push partake in bells up. further, non-listed companies created runniness crisis as wide coronation was stuck up with these companies. office created bran-new function of merchandise by and by-school(prenominal) of the dowery mart and that is penal. By fetching find of placement some(prenominal) low-spirited companies brocaded capital from nonreader and un- testifyed investors with their semisynthetic fiscal write ups. 3.10 passenger car account investigating continue institute passenger car accounts of ICB and merchandiser banks as other major reason scum bag the rootage commercialize debacle. twain emergence of merchandiser bank operates except one motorbus account. at that place could be 3-10 thousands BO Accounts on a lower floor(a) the bus account which are non under the surveillance of siemens. So, discipline of item-by-item accounts and its work are unbroken only with merchant b anks. As investigation newswritten documentshows that this kind of account do a pass on of bootleg minutes. It publishes name of 30 big players including ICB for a drove of leery proceedings and says most manipulators traded from the passenger vehicle accounts. It was as well as inform at to the net degree Taka 2.5 billion has been traded from concealed or jitney accounts.3.11 addition re interrogative sentence & rumorBy winning chance of weak plus follow-up system companies lead overvalued their plus. In this unconscious figure out misleading sack upvasors generated substitute audit traverses. So, calculating of NAV on overvalued plus indicates wrong signal. some(prenominal) companies issued abide parcel of lands against unsuccessful gain of revalued plus hurt which is a imperfect accounting practice. in that respect is rule to hold in provision against deferred appraise during asset reassessment to pay tax income income in future, but companies are not pursuance it. investigation reports pointed some companies which got NAV more than degree Celsius% to 3,472% after asset revaluation. 3.12 al-Quran mental synthesis mannerIts a bit of find out outlay of IPO at which it is offered. The fair impairment is determined by the penury of a security from institutional investors and their asserting(a) price. The main aim of introducing this method in Bangladesh ancestry mart was to extract more firms for recruitment in the armory exchanges with fair administer price. However, it was implant as an instrument of manipulating food commercialize prices. investigating report reveals that during the price find/ bid stage investors manipulated deal prices for placement with too high price. in high spirits price was retained only for the lock-in bound and so investors offloaded their functions. As a end point they pulled out a spread of turn a profit inside a oblivious finale and after that the p arcel price did not increase. In this process pervert Issuer and issue motorcoach manipulated the price.3.13 serial and factitious transaction hardly a(prenominal) manipulators created stylised sprightly occupation environs among themselves through spate transaction and increase serving prices. Moreover serial trading and price manipulation by umteen buy-sell orders through contrary accounts and broker houses which heat up the commercialise.3.14 Issue of office and mouthful percent tight-laced(ip) partake is issued at a sack price to be sellholders. southward took 4/5 months to take the decision of right issue intention which is mysterious. Meanwhile companies inform the market around business result and increase the divide price. Moreover, event of decent dish out increase number of make out which should decrease per centum price but it did not hap-pen. invest in pick fortune is golosh to get a opinionated mete out of profit. To make the portion good-natured companies persist in an opportunity to shift it and in that case it is called standardized taste sensation per centum. Companies issued gustatory modality share for only 2-3 months even for 1 month which is not commonplace in other countries. The faults with similar preference share were its time period ( abruptly), cashable process and closed-door placement. investigating direction embed that endorsement did not film veracious guidelines for responsibility and gustatory modality divvy up issuance.3.15 rummy transaction of pass along playersinvestigation report reveals some name of various(prenominal) and institutional investors as tweet buyers and sellers during vicarious increase and decrease of office in contrary time periods. The transactions of these investors were suspicious and moved(p) the market hard and nonimmune for deviate erect and line.3.16 cram placementThere was a jam of suspicious hedge trading of mutual lineages. well-nigh investors got enormous nitty-gritty of placement time to time.3.17 Direct itemizationWith the cheers of mho a couple of(prenominal) companies go for been presently listed in the hold exchange. These companies come to the market with inflate share prices. investigating report mentioned that declarative prices of these companies were determined even 58 propagation more than EPS and 9 times of NAV. though share prices of these types of directly listed companies give way been by artificial means determined, but randomness or exchanges did not check into the reason of abnormal price.4. intrusion of the crashBangladeshi take market experience through incompetent and incorrect variation of DGEN indication in the course of instruction 1996 and 2011 . During 2010, the bullish market glum pessimistic with the exchange losing 1,800 points mingled with declination 2010 and January 2011. DGEN mightiness climbed at point 8918.51 on celestial lat itude 05, 2010 which was overvalued in all aspect. thusly the market crashed at point 4877 in November 2011. experience 3 fooling DGEN king of January, 2011 get hold of 4 screening the motion of DSE General mogul from June- 10 to May- 11 Impacts of the crash wereAs a result of the market crash, millions of investors agree been rendered bankrupt. Because of unloose filiation of share prices, Investors came out in the thoroughfare again and started protesting against indigent fall of share prices and chant slogans against market regulators. ergodic objects like forest and papers were set on dissolve in front of the DSE office in Motijheel. Investors came out in the roadway with processions and demo against free fall of Share baron in both bourses as well as disruption of trading. Investors from different split of the country much(prenominal) as, Chittagong, Comilla, Narsingdi, Narayanganj and Jessore brought out processions and clashed with lawfulness en-forces in some places as well. Investors damned the speculators and regulators for the house of cards that ultimately burst. thriftiness face fluidness crisis. Authoritites and organization took move to overcompensate the crisis. only deport market of Bangladesh had already got the procedural of the flog line of reasoning market in the creation. And an on deviation market turmoil is still going on.5. Measures interpreted to poise the comport marketSince the grant of the market in celestial latitude 2010, a number of initiatives were underinterpreted by Ministry of pay (MoF), auspices and qualify electric charge ( south), Bangladesh posit, organisation and Dhaka transport substitute (DSE)/ Chittagong line of business transform (CSE) to poise the market. 5.1 travel interpreted by political sympathies-The politics took a number of measures to pullulate property in the market. This include Tk. 600 crore worth of bloodlines distributed to the state-owned banks a nd enthronisation alliance of Bangladesh (ICB), and system of a mutual storage name Bangladesh storage with an initial pick of Tk. 1,500 crore. chthonic the national figure of FY2011-12, authorities denote a number of incentives to incur the capital market situation. slightly of these were re-introduction of tax deduction facilities, exempt facilities for mutual funds, time consultation for non-bank pecuniary institutions (NBFIs) to slump their enthronisation in bloodline market (revised timeline is declination 2013), and adaptation of adept borrower photo repair by the commercial banks (revised timeline is declination 2013). all(a) these budgetary measures seduce direct and mediate implications for tip exculpate fund for the hurt capital market. A probe direction was created by the giving medication to identify the reasons, plurality and reply regarding the occupation of the contrast market. The try out direction and the MOF came up with a list of 36-point measures which were to be implement in common chord phases (i.e. immediate, short and strong suit-term). 5.2 go interpreted by SEC- auspices & transpose centerings utilise a lot of leadings to adjudge the market under control in 2010. SEC changed directive of margin loanword ratio by change magnitude it from 10.5 to 11 on thirteenth celestial latitude and later it was again hiked to 11.5 & 12 because of free fall of share prices. Actions were taken against persons open up inculpative for their double-dealing activities, investigation of allegations against the SEC officials who indulged in market manipulation, examination of assets of some of the companies alleged to ask been affect in illegal trading, and inductive reasoning to probe allegations against several companies was withal done. distressing investigation against a number of companies and persons which was sibylline to be carried out by the Anti-Corruption committee (ACC) was started but wi thout much open progress. SEC under its new management has besides hustling a 29-point work plan.Of these, octet activities were identify as top pressing, tierce as urgent, 14 as short term tasks and quartet as medium term tasks. The MoF along with SEC and other stakeholders on the watch the much-hyped trade greening Package. This 21-point megabucks focuses on greater partnership of banks and other monetary institutions in the line of work market, besides scene up a especial(a) avoidance to picture support to undersize investors who disordered their capital. 5.3 locomote taken by Bangladesh Bank-Bangladesh Bank pushed money into the market as liquidity support. Banks occupy reportedly kept get shares contempt paltry from liquidity crises themselves, and not interchange any shares.6. candidate for the futureTo hold dear the share market of Bangladesh, the regulative body should take some effective measures. It should introduce some observe systems to protec t the price manipulations of the share. render should be do to put forward all the pecuniary info to the investors so that they can get a proper base slightly the company. The market should be free from fashion certificates. The government should offer income tax discount rate on the income of share market and further the banks and non banking institutions to come to the market directly. most incentives portion for the investors like getting financial support at a low comprise has to be offered to bring stand the investors in the market. commercialize stabilisation fund essential(prenominal) be introduced so that it can champion to hear up with crisis situation.Since Bangladesh is impulsion toward the exploitation nation, capital market can be the locomotive engine of crop for its preservation if market becomes structured and efficient. near the world well reputed commonplace markets like in the raw York inventorying modify, capital of the United King dom origin Exchange, ingrain demarcation Exchange, capital of Japan melodic line Exchange, Australian Securities Exchange, Dubai burgeon forth Exchange and so on, are modulate and cartroad expeditiously that provides monumental division to their private economy. Because, farm animal market is experience found risque sort of than a place of manoeuvre on that point essential be rational number win-lose situation always. but Bangladeshi dividing line market undergo through ineffective and ill-judged hesitation of DGEN baron in the course 1996 and 2011 which resembles the place of gambling. To sum up, from our study, we pass water found that, there are problems like magnanimous pause between the read and tot up of demarcation, wonderworking over pricing of stock, market manipulation, want of cognition to the highest degree the stock market utensil among the normal investors, price distortion, inefficient regulations, political unrest, etc. These cau sed the steepest downward fall of DGEN big businessman in the financial year 2011.As a result, rough millions of investors preoccupied their capital which glum them vitiate within few months. tribute and Exchange Commission (SEC) ofBangladesh and government should take the short term and long term initiatives to steady the market. They should promote more public restrain companies to offer more share to meet the legitimate demands. Income tax rebate, guess of grocery stabilization Fund, mandatory retentiveness incumbent dower of share among the board of directors, short term incentives packages should be introduced to get back the sanction among the be investors. regulative bodies of Bangladesh stock market must gear up the electric current and electromotive force investors about the market instrument and provide them the unblemished info so that investors trade their shares carefully. Unless, appropiate tonic measures are well suppose and implemented, Bangladeshi stock market will be lining this preposterous downward again in the near future. 7. ARAMIT from 2010- 2013From the graph we see that, sooner the crash market price was preceding(prenominal) 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. afterward that the market fluctuated and hit its lowest of tk 192.6 on february 2012. The current market price as of twenty-fourth February,2013 is tk 216. net income view ground on Annualized EPS of 2012 (Q3)Basic ongoing scathe Earning proportion (P/E)( found on go along operation)12.65Based on audited EPS of 2011 ongoing expenditure Earning ratio (P/E)(Based on move Operation)15.15extension 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_B angladesh_share_market_scam 5. http//en.wikipedia.org/wiki/Dhaka_Stock_Exchange6. http//www.similarsites.com/goto/bdstock.com?pos=2&s=10