Date of Submission:
17-11-2014
Introduction
We are given Tk. 1,000,000 and we thought of investing this amount in secondary market by buying
equities/shares of some companies. So we went to ‘BLI Securities Ltd.’ which is a brokerage firm to
open a Beneficiary Owners (BO) account to invest in companies. It is mandatory to open a BO account
with a brokerage firm to be an investor. ‘BLI Securities Ltd.’ is a Full-Service Broker. They advised us to
invest in 6 companies and we chose to invest in six different companies within a same industry which
is ‘Pharmaceuticals & Chemicals’. The companies are ACI Formulations Limited, Beximco
Pharmaceuticals Ltd, GlaxoSmithKline, Kohinoor Chemical Co. (Bangladesh) Ltd, Orion Pharma LTD
and Square Pharmaceuticals Limited.
There are some requirements that an investor should meet up prior to open a BO account. The
requirements are:
1. ‘BLI Securities Ltd.’ maintains Margin A/C for their clients. A client of ‘BLI Securities Ltd.’ can borrow
Tk. 500,000 minimum from Margin A/C. But the maximum limit is not defined.
2. ‘BLI Securities Ltd.’ does not provide it’s investors any privilege of borrowing loans for personal
purpose from margin account.
3. This security trading firm has Asset Management A/C for their clients.
4. ‘BLI Securities Ltd.’ has Wrap Account by which the firm collects 50% Brokerage fee per transaction.
5. ‘BLI Securities Ltd.’ has Dividend Reinvestment Plan for their clients.
6. ‘BLI Securities Ltd.’ clients should pay 50% amount of their own money as Initial Margin to initiate a
transaction.
7. ‘BLI Securities Ltd.’ clients should maintain at least 30% margin requirement as Maintenance Margin
and 50% as Actual Margin. ‘BLI Securities Ltd.’ Performs Margin Call if the margin gets below 30%.
8. ‘BLI Securities Ltd.’ doesn’t provide Short-Sale Service in fact Shot-Sale didn’t even start yet in
Bangladesh.
Report Summary
Average Expected
14.69% 4.97% 0.57% -0.91% 2.57% 2.42%
Return
Standard Deviation 30.30% 12.10% 2.61% 4.80% 11.81% 6.98%
Variance 9.18% 1.47% 0.07% 0.23% 1.39% 0.49%
Beta 30.30% 12.10% 2.61% 4.80% 11.81% 6.98%
Risk Free Rate 12.47% 12.47% 12.47% 12.47% 12.47% 12.47%
Market Expected
21.46% 21.46% 21.46% 21.46% 21.46% 21.46%
Return, RM
Market Risk Premium,
8.99% 8.99% 8.99% 8.99% 8.99% 8.99%
MRP
Portfolio Beta 20.36%
Portfolio Required Rate
of Return
14.30%
There are 6 companies which are off same industry. In terms of standard deviation (which
means the volatility of the investment) the more it is, the more it get deviate from the mean
(average) as a result there are more risk which might lower the stock of the company as a result
less profit. For example, here the greater risk is in ACIFORMULA (30.30%), then BXPHARMA
(12.10%), ORIONPHAR (11.81%), SQUARPHARMA (6.98%), KOHINOOR (4.80%) and at last
GLAXOSMITH (2.91%). But yet ACIFOMULA has highest returns of 14.69%, then BXPHARMA
(4.97%), then ORIONPHAR, SQUARPHARMA, GLAXOSMITH and at last KOHINOOR. This results
clearly explains the Efficient Market Hypothesis that- The higher the returns, the higher the
risks. But all the individual companies’ returns are below the Market Expected Return. The
portfolio beta also illustrates the same thing that risk is greater than the return. The portfolio
return is 14.30% whereas portfolio beta is 20.36%.