Bangladesh Stock Market Crash 2010-2013
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What explains the stock market crash in Bangladesh starting from 2010
Transcript of Bangladesh Stock Market Crash 2010-2013
2010-11 Capital Market Crash
An analytical postmortem
Asif Khan, CFA
Deputy Head of Research,
BRAC EPL Stock Brokerage
Venue: UIU
Date: June 10th, 2014
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December 19, 2010: Market down by 6.7%
December 20, 2010: Market up by 4.0%
December 21, 2010: Market up by 2.6%
Dates etched in memory
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2,000
4,000
6,000
8,000
10,000
Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13
DGEN DSEX
What happened next?
Source: DSE
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2,000
4,000
6,000
8,000
10,000
Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13
DGEN DSEX
60% decline from the top!!!
60% drop
Source: DSE
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Let us check
the past
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2,000
4,000
6,000
8,000
10,000
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10
DGEN
196% return in last 4 years!!
Source: DSE
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The full picture
Source: DSE
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2,000
4,000
6,000
8,000
10,000
De
c-0
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Jun
-08
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8
Jun
-09
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Jun
-10
De
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Jun
-11
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1
Jun
-12
De
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Jun
-13
De
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DGEN DSEX Linear (DGEN)
It is all about valuations
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0
5
10
15
20
25
30
35
De
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4
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5
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De
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8
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9
De
c-1
0
De
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1
De
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Trailing P/E Mean
Source: DSE
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What creates bubbles?
Macroeconomics o Misallocated capital
o Excessive leverage
Microeconomics oPrice and demand having positive relationship
Psychology o Overconfidence
o ‘This time is different’
Moral Hazard o Excessive risk taking promoted
Herd behavior o Biological
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Bubbles are not new
Tulip mania (1637)
South sea company (1720)
Japanese asset price bubble (1980s)
Bangladesh stock market (1996)
Asian financial crisis (1997)
Dot-com bubble (1995-2000)
US Housing bubble (2007)
Many more to come….
The end
