December 3, 2017

Mahnoor Sattar
Senoir Lecturer
Department of Business Administration
East West University
Subject Submission of Term Paper.
Dear Mam,
We are glad to submit this term paper on the study of the "Analysis of Dhaka
Stock Exchange". The term paper deals with several important aspects on Dhaka Stock Exchange.
The issues include the study of different indicators which measure the performance of Dhaka Stock
Exchange. This term paper also analyzed the overall condition of Dhaka Stock Exchange, policies
taken by DSE, its problems and the solutions that can overcome the problems.
Thank you for your sincere co-operation throughout the duration of the study.
I would once again like to express my sense of gratitude towards you for giving me this
opportunity, and sincerely hope that my Term Paper would give you immense satisfaction. We will
always be available to respond to any queries that you may have in this regard.
Sincerely,

Name ID
Md. Towkikur rahamn 2014-2-10-170

1
Acknowledgement
We are very much pleased to complete the research paper under the supervision of Mahnoor sattar.
In this particular research paper we tried to find out different aspects which indicate the overall
performance of Dhaka Stock Exchange. We are very much obliged to our supervisor Mahnoor
sattar who gave her valuable time and opinion to complete this Term Paper. We also like to thank to
my friends who help me to gather information related to this topic from different sources. Besides,
our profound gratification goes to Mahnoor sattar, the honorable supervisor of our term paper for
his apt supervision to complete the term paper successfully. Not only this, he has also contributed
much in this project by giving me proper guideline. Then, I would like to thank for her participation
with me through an interview session and sharing the required information about different
perspective to complete this research paper. We are also acknowledging to all of those web sites
from which I have taken necessary helps. Again my gratitude goes to Mahnoor sattar who provided
me such a wonderful topic and also gave opportunity to gather knowledge about Dhaka Stock
Exchange.

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Executive summary
The Dhaka Stock Exchange is the prime bourse of the country. The bourse at present offers
trading facilities of 750 securities through 238 of Member Companies and worth U.S$50.28
million which accounts for 19.74% of the GDP of the country. Monitoring, investigation and
compliance are one of the most vital activities of DSE in controlling the market, enlisted
companies as well as the member companies. This is an internship report titled as Analysis of
Dhaka Stock Exchange". A Study on Monitoring, Investigation & Compliance (MIC) & corporate
image of Dhaka Stock Exchange Ltd..This term paper includes five chapters where all the chapters
have distinguished objectives to be performed. The first chapter, introduction, explains mainly the
purpose, scope and limitation of the study. The 2nd chapter presents the introduction of DSE and its
various aspects. The 3rd chapter questionnaire survey os 30 invesrors . The 4th chapter highlights
the problems of DSE. The 5th chapter presents the remedial measures and contains some
suggestions and the conclusion. This was a great pleasure for me to get such an opportunity to work
in prime bourse of the country and offered another chance for me to approach different department
to know verity operational procedure of DSE and easy to collect data and thereby enhanced my
knowledge for this topic.

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SL Page
Title
No. No.
1. Letter of Transmittal 1
2. Acknowledgement 2
3. Executive Summary 3
4 Chapter 1 4
Introduction
1.1 Introduction 5
1.2 Objective of the study 6
1.3 Scope and methodology of the study 7
1.4 Limitations of the study 8
Chapter 2 10
Overview Of Dhaka Stock Exchange
2.1 Background of DSE: 11
2.2 Functions of DSE: 12
2.3 Listing Requirement of DSE 12
Chapter 3 15
Questionnaire and Survey of 30
Investors

3.1 Age 16
3.3 Primary purpose of investing in capital 16
market

3.4 How much capital have you invested in 17

4
 stock market and is this your primary
source of income?
The Sources of finance which is
3.5 17
invested in stock market
Opinion about fluctuation of Dhaka
3.6 18
Stock Exchange of Price and Index
Satisfaction level of return on
3.7 investment and matching expect and 19
actual return on investment
Chapter 3
4 21
Preblems of DSE
4.1 Problems of DSE 22
Lack of Knowledge of the investors 23
Quality Research and Analysis 23
Lack of Professional Standards for
23
Licensing
Small Market Size 23
Improper Financial Statement 23
Low and unstable liquidity 24
Insufficient technical Expert 24
Delay in Settlement 24
Index Calculating 24
Lack of Professional Portfolio
24
Management

5 Chapter 5 27
5
 Remedial Measures for Development
of DSE

5.1 Conclusion 29
5.2 References 31

6
Chapter - 1

Introduction

7
1.1 Introduction

The capital market is the engine of boom for an economic system, and performs a vital role in
acting as a middleman between savers and companies seeking additional financing for enterprise
expansion.

There are stock markets in Bangladesh, one is called Dhaka Stock Exchange (DSE) in Dhaka and
the other one is referred to as Chittagong stock exchange (CSE) in Chittagong. A critical
regulatory company that's the Securities and Exchange Commission (SEC) overseeing the
activities of the whole capital market which includes problem of capital, tracking the difficulty of
stocks, and operation of the stock markets.

Dhaka Stock Exchange is the prime capital market of Bangladesh. It provides the listed
companies with a channel to seek capital fund from the public and at the same time it provides
the investors a place to buy and sell shares of the listed companies. It provides a list of public
companies that operates on long term finance in Bangladesh with a broader picture of how public
companies are performing on daily basis and helps the investors to finance their money by
providing regular updated information.

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1.2 Objective of the study

The objectives of the study are as follows:

To highlight the role of DSE in the economic development of BD.

To give a birds eye view of Monitoring, Investigation & Compliance of DSE.

To apprise the principal activities of DSE.

To pick out the troubles of Dhaka stock exchange.

To suggest some remedial measures for improving the activities of DSE to improve the
capital market of BD.
To formulate recommendations for possible improvement.
To identify the problems.
To suggest solution for the problems

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1.3 Scope and methodology of the study

Scope of the study

The scope of this Term Paper is to find out the overall performance of DSE in the stock
market. The Term Paper is basically divided into two parts:

The Organization Part

The Analysis Part

The organization part of the Term Paper gives an overview of Dhaka Stock Exchange. It focuses
upon the history of DSE, formation, management, objectives and functions of DSE. The study
also concentrates upon the different functions performed by DSE including surveillance
activities.

The analysis part of the Term Paper basically evaluate the performance of Dhaka Stock
Exchange through different performance measurement indicators such as performance of
different indices, IPO offering, performance of enlisted securities, DSE turnover, market
capitalization etc. We have concluded by assessing the problems of DSE and provided some
recommendations based on our analysis.

Methodology of the study:

Different data and information are required to attain the objective of the Term Paper. Those data
and information were collected from various sources and then classified, analyzed, interpreted
and presented in a systematic manner. Detailed analysis working variables and working
definition are embodied in this Term Paper.

Sources of data collection: Data collected from secondary sources. Such as-

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 Different publication regarding Stock Exchange Function.

Different newsletters of Dhaka Stock Exchange Ltd.

Annual Term Papers of Dhaka Stock Exchange Ltd

Journals and Monthly reviews of Dhaka Stock Exchange Ltd.

Website of Dhaka Stock Exchange Lt.

1.4 Limitations of the study

Some of the limitations that we faced while preparing this Term Paper are listed below:

Time frame of the Term Paper was limited due to which extensive in-depth study of the Term
Paper was not possible.
Collecting actual information was very difficult as all the information is not available on the
internet.
The calculations were difficult to understand without proper guidance

Had to face some technical problems like computer access and internet connection.

Collecting information from files, brochures etc. were also very difficult.

Despite such limitations, we continued on our quest and succeeded in completing the term paper
meticulously

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12
 Chapter 2

Overview of
Dhaka Stock
Exchange
13
Background of DSE:
The Dhaka Stock Exchange (DSE) located in Motijheel, Dhaka, is one of the two stock
exchanges of Bangladesh (the other being the Chittagong Stock Exchange). It was incorporated
as East Pakistan Stock Exchange Association Ltd on 28 April 1954 and started formal trading
in 1956. It was renamed as East Pakistan Stock Exchange Ltd on 23 June 1962. It was again
renamed as Dacca Stock Exchange Ltd on 13th May 1964. After the liberation war in 1971 the
trading was discontinued for five years. In 1976 trading restarted in Bangladesh, on 16
September 1986 DSE was started. The formula for calculating DSE all-share price index was
changed according to IFC on 1st November 1993. The automated trading was initiated on 10
August 1998 and started on 1st January 2001. A Central Securities Depository System was
initiated on 24 January 2004. In 2015, the combined market capitalization of listed companies
on the Dhaka bourse stood at over $40 billion. As of 16 November 2009, the benchmark index
of the Dhaka Stock Exchange (DSE) crossed 4000 points for the first time, setting another new
high at 4148 points. In 2010, the index crossed 8500 points and finally crashed in the first
quarter of 2011. Millions of investors lost their money and came out onto the street blaming the
speculators and regulators for the bubble that finally burst in what became known as the 2011
Bangladesh share market scam. Currently there are total 22 industrial sectors in DSE which
accommodates 553 listed companies.
Formation:
Dhaka Stock Exchange (DSE) is formed and managed under Company Act 1994, Security and
Exchange Commission Act 1993, Security and Exchange Commission Regulation 1994, and
Security Exchange (Inside Trading) regulation 1994. The issued capital of this company is Tk.
500,000 which is divided up to 250 shares each pricing Tk. 2000. No individual or firm can
buy more than one share. According to stock market rule only members can participate in the
floor and can buy shares for himself or his clients. At present it has 230 members. Market
capitalization of the Dhaka Stock Exchange reached nearly $9 billion in September 2007 and
$27.4 billion in December 9, 2009.
Objectives of DSE:
The objects for which the Exchange is established are:-
To advance and ensure the character, status and normal interests of Stock and Share
Brokers and Stock Share Dealers.

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 To provide, regulate and maintain a suitable building, room or rooms for a Stock
Exchange in Bangladesh.
To direct the undertakings of the Stock Exchange.
To encourage the exchange of business on the Stock Exchange and to make laws, Bye-
Laws and Regulations subject to which business on such Stock Exchange should be
executed and the direct of the people executing the same and all inclusive statement for
the great other and administration of the individuals from Exchange.
To alter discussions between its individuals, to build up just and impartial Principles in
the business, to advance fair practices among individuals and to choose all inquiry of
utilization or civility between or among individuals from the Exchange.
To Purchase, go up against lease on tenure or generally secure for any domain or
intrigue at all and to hold, create, manage and swing to account choices, leases, property
genuine and individual which the Exchange for the reason thereof, may every once in a
while think appropriate to get.
To sell, exchange, mortgage let to lease or sublet disposes of account or otherwise deal
with all or any part of the property of the exchange.
To borrow or raise or secure the payment of any money in such manner as the
Exchange shall think fit and in particular by the issue of debentures or debenture stock
perpetual or otherwise charged upon and or any of the property of the Exchange both
present and future including its uncalled capital and to purchase, redeem and payoff and
such securities.
To invest any moneys of the Exchange not for the time being required such investment
(other than shares or stock in the Exchange) as may be thought proper and to hold, sell
or otherwise deal with such investments.
To subscribe for or guarantee money for any National, charitable, benevolent general or
useful object.
To go into any courses of action and to make all fundamental and legitimate strides
with Government or with different specialists National, lawful civil or generally of
wherever in which the Exchange or its individuals may have intrigue and to advance or
help the advancement whether specifically or in a roundabout way of any enactment
which may have all the earmarks of being in light of a legitimate concern for the

15
 Exchange and to contradict and oppose whether straightforwardly or by implication any
enactment which may appear to be disadvantageous to the Exchange or its individuals.

Functions of DSE:

The major functions are:

Listing of Companies. (As per Listing Regulations).
Providing the screen based automated trading of listed Securities.
Settlement of trading. (As per Settlement of Transaction Regulations)
Gifting of share / granting approval to the transaction/transfer of share outside the
trading system of the exchange (As per Listing Regulations 42)
Market Administration & Control.
Market Surveillance.
Publication of Monthly Review.
Monitoring the activities of listed companies. (As per Listing Regulations).
Investor's grievance Cell (Disposal of complaint bye laws 1997).
Investors Protection Fund (As per investor protection fund Regulations 1999)
Announcement of Price sensitive or other information about listed companies through
online.
These above listed functions are the main functions of DSE. But it has some other functions
also.

Listing Requirement of DSE:

A public limited company may apply for listing if it has minimum paid-up capital of Taka 20
(twenty) million and shall make a public issue which is subscribed by not less than 400
applicants. The applicant company among others shall furnish the following documents to the
exchange:
Application for listing as per Form I,
Memorandum & Articles of Association,
Copy of the Certificate of incorporation,
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 Copies of all material contracts and agreements entered into or exchanged with foreign
participants, machinery suppliers and any other financial institutions,
Copy of Consent order issued by the Commission,
Names of Directors along with directorship of other companies listed on the Exchange,
Statement of audited accounts for the last 5 years or for a shorter number,
An undertaking regarding full compliance of Exchange's Listing Regulations and other
securities laws.

17
 Chapter 3

Questionnaire and
Survey of 30 Investors
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Age: Most of investor age level of our country is 30-40. It is a matter of great sorrow that is a little bit investor
is young in our country and there is almost zero investor whom age level is below 20.

Age
Below 20
0% 10%

40% 20 - 30

30 - 40

Above 40
50%

Primary purpose of investing in capital market: Most of the investors have said that
their main purpose of investing in the stock market is to earn profit by regular trading and many of said that this
provides more liquidity than other investments. But no one not invest is only for getting tax be t and dividend.(
from our survey)

To get dividends
76%
To earn profit through
24% regularly trading
This provides more liquidity
than other investments

0% To get tax benefit

0%

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How much capital have you invested in stock market and is this your
primary source of income?
Under this questionnaire almost 50 percent investor have said that their investment is 3 lac to 5 lac because they
have invested it from own fund. A little bit take loan from because our capital market is more risky than other.
And other thing is that the capital market is not anyones primary income source. They have invested their
deposited money in stock market to earn money.

The capital invested in stock market

34%
8%

15% Less than 100,000

100,000-300,000
300,000-500,000
500,000-1,000,000
43%

The Sources of finance which is invested in stock market:

Most of the peoples financial sources of investing in stock market are their own money. A few people take bank
loan for investment. Almost all the people reinvest their profit which is earned by selling share, in the stock
market to gain more profit.

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 The Sources of finance which is invested in
stock market

13% 10%
10% With own money
Borrowed from family or friends
67%
Combination of both
Bank loan

Opinion about fluctuation of Dhaka Stock Exchange of Price and Index:

The index of every stock exchange is volatile. But the investors have said the index of DSE is very volatile than other. For
any normal and abnormal information the index has changed very rapidly as well as price. Most of the investors have said
index fluctuation is high but price fluctuation is moderate. The price fluctuation cannot predict easily.

Opinion about fluctuation of Dhaka Stock

Exchange of Price and Index
11% 0%

36%
Very high

53% High
Moderate
Low

The situation of severe political unrest and the people start selling their share out of panic:

21
 In this situation some people said that they will sell their share but most of the said that they will wait and observe what
will happen until the market back to the good position. One of them said that he will calculate all the financial ratios and
take decisions accordingly and one said that he will purchase since price will go down.

The situation of severe political unrest and the

people start selling their share out of panic
I will sell all my shares

5%
I will purchase since price
will go down
25%
I will wait and what happens

65%
5% I will calculate all the
financial ratios and take
decisions accordingly

Satisfaction level of return on investment and matching expect and actual

return on investment: Majority of the people think that they are satisfied on return but their expectation didnt
match up all the time with return. Sometime they got more return that they expected and sometime got very little. Due to
some political and sensitive information the market got panic extremely and that time the investor suffered more than they
thought. For example, In time of BDR Bidroho many armed officer of Bangladesh Shena Bahini killed by BDR solder that
time every companys was downward. DSE index point was fallen by almost 500.

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 Satisfaction level of return on investment and
matching expect and actual return on investment

10% 10%

Very satisfied
Satisfied
80% Dissatisfied

23
 Chapter 4

Problems of DSE

24
Problems of DSE

The problems of the capital markets in Bangladesh are structural and actually quite far-
reaching than what meets the eye. As we all know, the capital markets here notably the Dhaka
Stock Exchange (DSE) is way overvalued due to:

Firstly, the DSE index calculations being incorrect.

Secondly, there are big syndicates acting together to artificially influence the prices
resulting in huge profits for them at the expense of the average investors who put in their hard
earned lifetime savings.
And last the Securities and Exchange Commission (SEC) whose total policy and
regulations favors the syndicates which primarily consists of high net worth people and the
stock exchange members resulting in an artificial demand driven market.

Until and unless these fundamental issues are addressed the capital markets here will fail to see
the light of the day. After so many analysis, we have identified some basic problems of DSE
which should be solved as soon as possible, otherwise our capital market can not improve its
performance and our economy will face huge problem. The problems are given below-

1. Lack of Knowledge of the investors: Like any other enterprise people who make
investments or are worried in capital market activities do not have enough information about
the market. Even, they dont recognize how to make a valuation of a proportion. As a result,
they ought to go through losses. If we study the history of DSE we can see that the turnover of
DSE was much higher in 2007 compared to other years. It was because of the lack of
knowledge of the general investors. But after that, DSE faced huge market crash in 2010,
which resulted unaccounted loss to the investors.

2. Quality Research and Analysis: There is no qualitative research based organization

operated by SEC or DSE. Quality research and data analysis is essential to the stakeholders of
the market to cope with the present state of the market.

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3. Lack of Professional Standards for Licensing: The types of marketplace individuals
requiring a license from the SEC include (i) brokers, who provide trading offerings to
customers (ii) Dealers, who're authorized to exchange for his or her very own account; (iii)
service provider bankers, who offer underwriting, issue management, and portfolio
funding offerings; (iv) funding advisors, who provide investment advice to customers; and (v)
legal representatives, who're engaged in a dealers office to exchange on the change on behalf
of a dealer or supplier. But, there were no requirements or minimum qualification necessities
imposed by means of the SEC or the alternate on any of the intermediaries.

4. Small Market Size: Market capitalization to GDP ratio or Market capitalization ratio
equals the value of listed shares divided by GDP. Analysts frequently use the ratio as a measure
of stock market size. 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 economy wide basis. The market size of DSE is quite small compared
to the other stock exchanges of the world.

5. Improper Financial Statement: Many businesses does not show the actual function of the
organization as some audit corporations contain in corruption even as making ready economic
statements. As a result the shareholders in addition to investors do not have clear
perception about function of that organization.

6. Low and unstable liquidity: The term liquidity normally refers to the ability of the
marketplace to shop for or promote securities. Measures are typically used to measure
liquidity are turnover (overall value traded) inside the inventory market as a ratio of (i)
stock market capitalization and (ii) GDP, The primary measure is likewise referred to as
turnover ratio. The mean turnover ratio is 78.4% which indicates low liquidity of the
marketplace.

7. Insufficient technical Expert: DSE is functioning with very efficient, skilled and
innovative employees. As all of the structures are occurring manually, subsequently, device
branch need to paintings a great deal. Similarly, they've or render offerings to various dealer
Workstations to resolve the technical issues of the BWS. As an end result, more personnel are
26
required for device branch to lessen the weight of work. However, they may be not getting
employees as in line with their requirement.

8. Delay in Settlement: Financing procedures and delivery of securities sometime take

an unusual long time for which the money is locked for nothing.

9. Index Calculating: At present all share price index are used at the DSE. But this is not the
right methodology. Via the use of this technique of calculating index, suitable price of
index cant be ascertained.

10. Lack of Professional Portfolio Management: The institutional investors bring stability
through non-speculative long-term investments. However, the ratio of institutional-to-retail
investors remains low.

11. Access Information: The access to credible information is strictly restricted for general
investors. Most of the retail investors are forced to look to brokers for advice that may consist
of market rumors. However about 80 per cent business executives stated in a recent survey
that insider trading is pervasive in the countrys stock market. Weak monitoring and
enforcement of existing rules as well as absence of specific rules related to these practices
help manipulate the
market, and act as a major obstacle for rulebased operation of the market.

12. Absence of Strong Corporate Governance: Some members being the administrators of
DSE search for their personal interest and use their internal records. As a result there
had been requires a demutualization of the stock trade and also merging of the
exchanges to put off inherent conflicts of hobby, eliminate opportunities for arbitrage
between the exchanges, and enhance liquidity and public trust. The listed groups are also
partly responsible for the bad performance of this stock exchange. They run the danger of
alienating traders via continuing their opaque management practices. Sturdy company
governance and transparency are not but ingrained in the corporate machine.

27
13. Lagging Development of Bond Market: Bond markets link issuers having long-term
financing needs with investors willing to place funds in long-term, interest-bearing securities.
Bangladesh has both the issuers and the investors in place but it still has not been able to
link them effectively through a bond market. The extraordinarily high-yield structure on
savings schemes is the major impediment to the development of a bond market. The lack of an
efficient long-term bond market makes it even more difficult to set a benchmark to determine
long-term borrowing and lending interest rates. Financial institutions and corporate
entities relying on banks for funds constantly experience difficulties stemming from maturity
mismatches in their asset liability positions. According to the recent World Bank Term Paper
on the South Asia bond market, there has been no infrastructure bond financing in
Bangladesh though one corporate bond is enlisted on DSE.

14. Price Manipulation: It has been observed that share values of some organization have
been increased fictitiously sometimes that hampers the smooth operations of stock
exchange.The organizations along with the supervisor of the DSE take the advantage at their
access to information.They manipulate the price by artificially increasing the demand.

15. Inadequate Systems and Surveillance: The trading and surveillance systems and
standards are inadequate. Good governance depends on having sound technical infrastructure
in place, but neither the SEC nor the exchange has effective automated systems of surveillance
to help them detect market abuse. Surveillance at the exchanges concerns the issuers
obligation of disclosure and monitoring of the trading portfolio of brokers, market
manipulation, and insider trading. The staff at the exchange lack training in market
surveillance, evidence gathering, and analysis of data. The SEC does not have an independent
system for monitoring the DSE.

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Chapter 5

29
Remedial measures
for the Development
of DSE

30
The world is being absorbed by the capitalistic system day by day. To survive in a
world like this the system of any market should be appropriate, corruption free and
filled with efficiency and proper opportunities for the parties involved with it. Stock
market of a country will obviously hold one of the leading position in the concern.
Capital market reflects many things of a countrys market and economic condition.
That obviously goes for our country as well. In the above chapter we talked about
many problems of our system. In a developing country like us problems in capital
market is not unusual. But we have to make sure to prosper, so we need to resolve all
the problems as much as possible. So some suggestions that can contribute to the
development of DSE are as follows:
First of all we have to make sure our system works properly meaning it wont
be influenced by individuals who wants to make them benefited
inappropriately.
We have to solve the problem of inadequate and inefficient manpower. There
should be enough employee to do the job completely and competent enough to
make it perfect.
It should be well facilitated with high technological support necessary for the
job meaning necessary office compliance should be adequate.
Specific rules and regulations should be made and those rules and regulation
should be followed strictly.
Proper monitoring and investigation should be implemented.
Finding a way to make sure all the listed company follow full disclosure
principle meaning all the material information should be disclosed properly.
Making sure that information is not manipulated.
Identifying the syndicates and terminate their manipulation of price or other
inappropriate activity.

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 Investors should also be knowledgeable about stock market to run the system
properly. So they should find a way to train the investors and enrich their
knowledge about the stock market.

Conclusion

The world is being absorbed by the capitalistic system day by day. It provides listed
companies with the opportunity to raise necessary fund to finance their activity. To
survive in a world like this the system of any market should be appropriate,
corruption free and filled with efficiency and proper opportunities for the parties
involved with it. Stock market of a country will obviously hold one of the leading
position in the concern. Capital market reflects many things of a countrys market
and economic condition. That obviously goes for our country as well. A healthy
capital market is vital to run a countrys economy. Our capital market faced some
ups downs and its system and many rules and regulations changed in response to
those events accordingly. But its better to take precautions so that unpleasant events
like 2010-2011 crash dont occur. So if it is possible to find all the problems of the
capital market system and implement appropriate suggestions, our capital market can
be equally profitable for the parties involved with it and contribute to the
development of our economy as well.

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33
References:

Barriers to the Development of Bangladesh Capital Market, Dr. M. Serajur Rasul, International

Journal of Economics, Finance and Management, 2003

https://www.bb.org.bd/monetaryactivity/treasury.php
http://www.stockbangladesh.com/resources/sector_beta/
http://www.dsebd.org/ilf.php
http://www.investopedia.com/

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