Industrial tour Report on CSE(Chittagong Stock Exchange)

7/28/2019 Industrial tour Report on CSE(Chittagong Stock Exchange)

1/42

ONRole of Chittagong Stock Exchange for the economic development of

Bangladesh

SUBMITTED TO

Mohammed Shahedul Quader

Assistant Professor,

Department of Marketing Studies and International Marketing

University of Chittagong.

SUBMITTED BY

Name ID

Mohammad Atikuer Rahman bhuyan 08304013

Md.Mahmodul Hasan Rone 08304034

Bibi Joynab 08304083

Md.Ibrahim 08304083

Srimangal Das 08304110

Tajkia Sherefin 08304132

DATE OF SUBMISSION: Jul y 6, 2013


2/42

2

Role of Chittagong Stock Exchange for the economic development of Bangladesh

Letter of Submission

Date: January 7, 2012

To

Mohammed Shahedul Quader

Assistant Professor,

Department of Marketing Studies and International Marketing

University of Chittagong.

Subject: Submission of Industry Report.

Dear Sir,

We have great pleasure to submit you my industrial tour report title Role of Chittagong Stock

Exchange for the economic development of Bangladesh. During preparation of this paper, I

have tried my best to ensure completeness.

We have put my best effort to overcome my shortcoming and prepare the report to the best of

my ability. However, if any clarifications are required, I would be glad to provide them as best as

we can.

Thanking you

Yours sincerely,

Name ID

Mohammad Atikuer Rahman bhuyan 08304013

Md.Mahmodul Hasan Rone 08304034

Bibi Joynab 08304083

Md.Ibrahim 08304083

Srimangal Das 08304110

Tajkia Sherefin 08304132


3/42

3


PREFACE

Stock market is an essential part of capital market. The economy of our country largely depends

on a strong capital market. Contribution of any stock exchange generally leads to economic

growth by increasing the funds to finance industry and other enterprise

The Industrial Tour is a program that is common for the BBA student. The program intends to

provide practical training in handling of jobs as well as to integrate the knowledge of theories

formulas, frameworks and models with current management practices in business community

This paper titled Role of Chittagong Stock Exchange for the economic development of

Bangladesh is conducted as a part of Industry Tour arranged by department of Finance And

Banking, University of Chittagong. In this report I have tried to give an idea about Role of

Chittagong Stock Exchange for the economic development of Bangladesh in our country.

This report is prepared on the basis of study and submitted in partial fulfillment of BBA course

requirements of the department of Finance and Banking, University of Chittagong.


4/42

4


EXECUTIVE SUMMARY

This report concentrates on the Performance evaluation of the Chittagong Stock Exchange.

From the very beginning of taking birth, this organization is playing an outstanding role for the

betterment of the capital market in this country

Stock markets contribute to the development of economy through the development of businesses

and Industries. It can perform will to meet financial needs of business enterprises on a

continuous basis if there exist a congenial legal, administrative and infrastructural environment

for boosting confidence of all stock market participants including investors. Stock market in

Bangladesh has two exchange-CSE and DSE. The study has examined the performances of CSE

on different important such as growth in listed companies and securities, market capitalizationsales volume, market shares ; changes in stock index, changes in share prices by employing both

statistical and financial techniques. It has also tested the randomness of changes in share prices

of some listed securities. It has identified some important problems such as political instability

lack of supply of good certificates, demand listed members, lack of awareness of investment, etc

to the development of stock market. The study has put especially of Chittagong stock exchange

(CEG). The policy measures are promulgation of lows for activating dormant listed members

bringing good securities into the net, curbing fraudulent activities in the stock market

introduction of full-flagged corporate governance, and disclosure of financial information. These

measures are for consideration of Government, policy markets, SEC, stock exchange and other

concerned parties in other to develop the performance of stock market, especially of CSE.


5/42

5


ACKNOWLEDGEMENT

First of all gratitude goes to almighty Allah who blessed me to accomplish the industry tour

report.

At first I like to thank my honorable teacher Mohammed Shahedul Quader Assistan

Professor, Department of Marketing Studies and International Marketing, University of

Chittagong. who sent us to the Chittagong Stock Exchange in lieu of visiting its various

departments and modes of operating CSE.

His assistance, instructions, advice, investigation were all along with me while working on the

issue. My report has seen the face of success because of his sincere assistance as well as

supervision..


6/42


7/42

7


1.1INTRODUCTIONStock market is considered to be a barometer of the Economy. The economic development of a

country depends largely on the effective performance of stock market. The stock market augment

the process of economic development though a number of ways: a) bringing together holders of

surplus funds and users of such funds; b) offering a broad spectrum for investment and financing

choices to both investors and issuers, c) drawing more institutions into investment, and e)

reducing the dependence of industrial enterprises on non security market for capital. Thus stock

market contributes to the development of economy through the development of businesses and

industries.

Stock market can perform well to meet the continuous financial needs of business enterprises ifexist a congenial environment for boosting confidence of both stock market operations and

investors. The growth and development of stock market in a market economy largely depend

upon the creation of enabling environment for boosting up investors confidence. Lassitier has

identified five prime environment ingredients that contribute to the enhancement of investors

confidence and in turn, healthy growth of stock market. .These are: a) stable political

environment, b) investment sensitivity tax and regulation environment c) reliability flow of

information d) liquidity and e)fair financial disclosure practice, codes of conduct and smooth

trading guidelines

1.2 OBJECTIVE OF STUDY

The objective of the study is to evaluate the performance of the Chittagong Stock Exchange. The

study covers the period from 2000 to 2011 and the study in confined to analyze the capital

market indicators of CSE only. The study is purely based on primary and secondary data

supplied by CSE. The study attempts to evaluate and examine the performance of CSE in terms

of securities analysis and market capitalization under the auspice of market development

indicators of the same. Though the principal objective of the study is to observe the growth

pattern of CSE, The study attempts to strive at the following specific objectives:

To evaluate the securities listed with CSE during the period from 2000-2011.


8/42

8


To examine and evaluate the growth of the issued capital and market capitalizationof the securities during the period under study.

To analyze the indicators of the development of CSE during under study. To highlight the performance of CSE on different parameters such as number of

listed companies, number of listed securities, volume of trade, capitalization market

market share, and share price fluctuation etc.

To identify the weakness with the stock market operation, especially of CSE. To suggest some sound policy measured for the improvement of the performance of

CSE.

1.3 METHODOLOGY OF THE STUDY

The present study is a part of academic curriculum. The collected data and information have

been tabulated, processed and analyzed carefully. It has been prepared in present from to make

the study more informative and useful. The study period has been made only by one month. I

tried my best to be acquainted with all the sections and departments of this organization.

The information of the term paper has been collected through primary and secondary sources

Most of the data have been collected from secondary sources. The primary data had been

collected by direct interviews and discussions all the secondary information helps a lot. Thesecondary information is collected from various books, financial papers, document articles

related with the capital market, stock exchange, and security & exchange commission etc.

Analysis of data

The data thus collected have been tabulated first manually. Then they have been analyzed by

employing techniques such as percentage for measuring the growth in listing of companies and

securities in CSE; average, standard deviations and coefficient of correlation foamed r measuring

financial & turnover performance of listed securities, ratio analysis for market capitalization &

turnover, diagrammatic and graphical presentation for seeing the trend of CSE price index

variance & coefficient of variance for measuring the price volatility of some selected companies

,securities. It has also used the test of randomness of changes in share prices of sample listed


9/42

9


companies. Different calculations using the data made by the researchers themselves, average

ratios, percentage and necessary calculations have been done by using statistical methods. A

number of different indicators over time have also been prepared

1.4 SCOPE OF THE STUDY

As I was involved myself a Chittagong Stock Exchange I know various areas of the stock exchange

its managing procedures, working systems and environments which are very helpful to know & to

increase our knowledge & to get more information and data regarding my topic. The information

section of Chittagong Stock Exchange is very rich thats why I as able to collect the required books

magazines, periodicals, journals, brochures, portfolio and the Internet facilities.

1.5 LIMITATIONS OF THE STUDY

A good report sells the result of the study but should not over sell. In spite of my sincerest

endeavor, the report has the following lacking:

The study was confined in CSE & Internet Primary & secondary data were not available in the organization form Short Time: I had to conduct the whole survey alone in this very short time, which also

hindered my study.

There was shortage of adequate literature in the CSE Low facility of the Internet and personal computer.Lacks of enough previous experience also limit my performance in conducting the study.

In spite of above limitations, I have tried with all of my efforts to know and find out the response

pattern of the subject and consultation of relevant record and document. Data have reached a

fairly acceptable degree of accuracy


10/42

10


CHAPTERTWO


11/42

11


2.1 HISTORICAL BACKGROUND OF THE CSE

The Chittagong Stock Exchange (CSE) is a nonprofit making organization. It was incorporated on 1 s

April 1995 as a limited company by guarantee. After six month, on 10th October 1995 floor trading

was started with open cry- out auction system. In the backdrop of a strong need to institute a dynamic

automated and transparent stock exchange in the country, seventy reputed business personalities

under the leadership of Mr. Amir Khosru Mahmud Chowdhury MP, the founder president

established this bourse in the commercial capital Chittagong. Only 30 securities were listed on the

first day trade when market capitalization stood at US$ 0.2 Billion. Now CSE is a completely

automated exchange with screen based trading facility on countrywide communication network.

The Chittagong stock exchange will create an effective, efficient and transparent market of

international standard to save and invest in Bangladesh in order to facilitate the entrepreneurs to raisecapital and accelerate industrial growth for overall benefit of the economy.

2.2 MISSION OF THE CSE

The Chittagong Stock Exchange will create a successful well-organized and transparent market of

international standard to save and invest in Bangladesh in order to facilitate the competent

entrepreneurs to raise capital and speed up industrial growth for overall benefit to the economy.

2.3 OBJECTIVES OF THE CSE

The prime objectives of the CSE are to create a nation-wide stock market also beyond the national

boundary, which will simultaneously act as a platform for industrial entrepreneurs and genera

investors. Explicitly the objectives of CSE are following:

To develop a strong platform for the entrepreneurs for raising capital.

To provide an investment opportunities for small and large scale investors. To develop a transparent market ensuring investors interest. To provide a fully automated trading, Clearing and settlement system to ensure quick,

easy, accurate and easily accessible to all transactions.

To attract non-resident Bangladeshis to invest in Bangladesh Stock Market.


12/42

12


2.4 MANAGEMENT & ORGANIZATION

CSE has a policymaking Body of 24 members, of whom 12 are nominated and 12 are elected

This Board comprises of one president, three Vice-Presidents and 20 Directors. The Chittagong

Stock Exchange was in corporate on 1st April 1995 as a limited company by guarantee. Its

activities are regulated by the following a Acts & Regulation:

1. Companies Act, 1994.2. Securities and Exchange Commission Act, 1993.3. Securities & Exchange commission Act, 1993 (Act repelling controller brokers)

Regulations, 1994.

4. Chittagong Stock Exchange.a) By laws

b) Listing Rules

c) Memorandum of Association

d) Articles of Association

e) Settlement to Transaction Regulations.

In 1998 CSE had many new rules and regulations as well as amendments in the rules &regulations of Stock Exchanges, Issuers and in the overall capital market. Some major ones are

as follows:

1. The National Parliament passed The Depository Act, 1999 on the 5the of April 1999.2. SEC adopted public Issue Rules 1998 which was gazette on the 25th January 1999 and

subsequently brought some amendments in this rule on the 28th April 1999.

3. SEC has approved the Merging Rules 1999 to facilitate proper administration of creditfacilities extended by the brokers to their clients and to enhance liquidity in the exchange.

4. The cabinet on June 7th, 1999 approved the amendment to the Trust Act 1882 tofacilitate the investment of 25% of person and insurance funds in the capital market.

5. SEC has extended the time limit for brokers/dealers to continue underwriting businessform June 30 to December 31, 1999.


13/42


14/42

14


Continuous trading session 11.00 a.m. To 3.00 p. m

Closing session 3.00 p.m. To 3.10 p. m

Close price trading session 3.10 p. m To 3.30 p. m

Post closing session 3.30 p. m To 4.15 p. m

Odd lot session 11.30 a. m To 2.30 p. m


15/42

15


2.6.1ORGANIZATIONAL CHART OF CSE

Board ofDirectors

Chief Executiveofficer

GeneralManager

Deputy General

Manager

AssistantGeneral

Manager

Manager

Senior Manager

Officer


16/42

16


General

Body

Board of

Director

CEO

CEO in

Committees

Committees

2.7 STRUCTURE OF THE STOCK EXCHANGE (CSE)

2.8 COMMITTEES OF CHITTAGONG STOCK EXCHANGE (CSE)

Administrative Committee

Finance Committee

Human Resource Committee

Trading Committee

Technical & Development Committee

Surveillance & Inspection Committee

Clearing House Committee

Default Committee

Attribution Committee


17/42

17


CHAPTERTHREE


18/42

18


3.1 General rules and regulation of CSE to protect Bangladesh Economy

Resignation, expulsion & suspension of members, member of an association, fine and penalties

suspension of a member, reconsideration of resolution of expulsion, no action maintainable

against notice of exchange, creditors of expelled or suspended members,suspension/reinstatement/expulsion, expulsion entails forfeiture or card, liabilities to subsist

disposal of forfeited card and proceeds thereof, authorized assistants, unauthorized assistants

excluded from market, power of authorized assistants, register of authorized assistants, notice of

authorization - termination & withdrawal, undertaking from the authorized assistants, liability of

the employer to continue until notice, admission during food behavior, badges, penalty for

improper use of badge, loss of badge, return of badge, members ceasing to do business, expelled

members, report of violation of rules, sub-committees, chairman and member-secretary,

removal/retirement of member, arbitration committee, dispute to be referred to arbitration,

application for arbitration, appointment of arbitrators, disagreement between arbitrators, late

claims barred, appeal to arbitration committee, award of committee final in certain cases

members interested not to attend, adjourned meetings etc are discussed in general rules and

regulation of CSE.

3.2Chittagong Stock Exchange (Direct Listing) Regulations, 2006

1) These regulations may be called the Chittagong Stock Exchange (Direct Listing)

Regulations, 2006.

(2) These Regulations shall be applicable for direct listing of shares of public limited companies.

Requirements concerning capital and operation:

The concerned company-------

i) shall have minimum paid up capital of taka 100(one hundred) million;

ii) shall have no accumulated loss;

iii shall be in commercial operation for at least immediate last five years


19/42

19


iv) shall have profit in three years out of the immediate last five completed accounting/financial

years with steady growth pattern; and

v) is regular in holding annual general meeting.

Legal Documents of Listing of Concerned Companies:-

i) The Company shall apply to the stock exchanges with application fee of Tk. 10,000/-(ten

thousand) only, and shall simultaneously furnish a copy thereof, along with the copies of

documents mentioned under sub regulation (ii), to the Securities and Exchange Commission

(SEC).

ii) The Company shall, among others, submit the following documents along with the application

:

(a) Memorandum of Association and Articles of Association

(b) A brief profile of the company, including brief particulars of existing sponsor-directors of the

company;

(c) Certificate of incorporation and certificate of commencement of business

(d) Audited financial statements for the last five years

(e) Members/ shareholders list together with shareholding position

(f) Return of allotment(s) filled with the Registrar of Joint Stock Companies and Firms

(g) Existing material agreements including deed of mortgage (if any);

(h) Status of loan including information concerning loan default, if any, of the company;

(i) VAT and Tax identification numbers;

(j) Due diligence certificate from the directors as per format prescribed by the Exchange;

(k) No objection certificate from the lending bank(s) /financial institutions of the company, if

any, where applicable;


20/42

20


(l) Undertaking in the prescribed form as laid down in the listing regulations of the Exchange

to the effect that the company shall comply with the securities laws including requirements of the

said listing regulations upon listing with the Exchange;

(m) Relevant resolution(s) of the shareholders in the general meeting of the company and the

Boards resolution, if so authorized, for the purpose of listing with the Exchange;

(n) Credit rating report issued by the credit rating company registered with the Commission

with minimum investment grade of BBB;

(o) Information Document as per format prescribed by the Exchange;

(p) The shareholders resolution in respect of disposal of shares in accordance with theregulation.

3.3 Chittagong stock exchange (short - sale) regulations, 2005

These regulations may be called the Chittagong Stock Exchange (Short-Sale) Regulations

2005.

1. Owning security: A person shall be deemed to own a security only if2. he has title to the security; or3. he has purchased the security which is available in his own account (including his BO

account); or

4. he has entered into an unconditional contract, as prescribed by the SEC legally bindingon him to buy the security, even if the buyer does not yet have title to them; or

5. he has unconditional right or interest to or in the security; or6. he owns a security convertible into or exchangeable for the relevant security and has

tendered such security for conversion or exchange or has issued irrevocable instructions

to convert or exchange such security; or

7. he has an option to acquire the security and has exercised such option; or


21/42

21


8. he has rights or warrants to subscribe to the security and has exercised suchMannerof short-selling: (1) Subject to the provisions of regulations 3 and 4, a stock dealer or

stock broker may short-sell a security

for its own account; or for the account of its clients provided it knows or is informed in writing that an order to

sell is a short-sale, and shall, when placing a short-selling order, indicate in such manner

as the stock exchange concerned shall, from time to time, determine that the order is a

short-selling order.

On receipt of an order for the sale of a security, a stock dealer or stock broker shall enquire of the

client whether at the time of placing the order such client owns the security offered for sale.

A stock dealer or stock broker shall take all reasonable steps to ensure that the clients

disclosures pursuant to these regulations are accurate.

3.4 Chittagong Stock Exchange Investors' Protection Fund Regulations, 1999

These Regulations shall be called the Chittagong Stock Exchange Investors Protection Fund

Regulations, 1999.

On the commencement of these regulations, there shall be established a Fund to be calledthe Chittagong Stock Exchange Investors Protection Fund.

The Fund shall be irrevocable. The Fund shall consist of contributions of CSE and its members, value of securities or

amounts collected by the Board of Trustees on account of the customers of or a

defaulting member, accumulations thereof, interest or profits received by the Board of

Trustees in respect of such contributions, accumulations of investment in securities with

such contributions, securities or amounts lapsed or forfeited, and of any capital gains

arising from the transfer of the capital assets of the Fund and any other amounts as may

be vested in or accrued to the Fund from time to time.


22/42

22


All moneys forming part of the Fund shall be deposited into a bank account opened withany scheduled bank in the name of Chittagong Stock Exchange Investors Protection

Fund.

All investments and banking accounts of the Fund shall be operated jointly by at leasetwo of the Trustees as decided by the Board of Trustees

The Fund shall be used to satisfy the claims of the investors and expenses under3.5 REGULATORY UPDATE

from October 2010 to September 2011

Circuit breaker on the index

SEC has introduced circuit breaker on the capital market index which halts the market if theindex gains or losses more than 225 points. The move came in a bid to prevent unusual

fluctuation inthe market on January 19, 2011. It was removed from January 25, 2011.

Suspension of book Building method

The Securities and Exchange Commission postponed the book building method for initial public

offering until further order.

SEC/CMRRCD/2008/186/Admin dated January 20.2011.

Amends to the Securities and Exchange Commission (Stock Dealer, Stock Broker and

Authorized Representative) Rules, 2000

The Securities and Exchange Commission (SEC) added new criteria to obtain license of stock

broker or dealer. As per the new rule any company or statutory organization is not eligible for

stock dealer stock broker registration certificates if more than fifty percent of its directors are

members or associated with the sponsor or Sponsor Company.

(SEC/CMRRCD/2001-002/66/Admin/03-04 dated October 10, 2010)


23/42

23


Branch opening allowed only in divisional Cities:

The commission suspended the approved to open the branch offices by stock brokers outsides

divisional on October 20, 2010.

Initial Public offering Rule:

Several changes have been made in the initial public offering (IPO) rukes undaer athe Book

building method through SEC notification no. SEC/CMMRCD/2009-193/67/Admin/Dated

November 14, 2010. The thrust Sectors (namely power and Gas infrastructure) companies with

at least one year of commercial production and profits would now be eligible to raise funds under

the book building method. Earlier minimum three years of commercial operation and two years

profits were the required minimum qualification criteria. The eligible institutional investors who

participate in the indicative price discovering process must compulsorily take part in the fina

bidding for price determination.

Issuance of Capital

The Securities and Exchange Commission shorten the eligibility public flotation by companies

having paid up capital of tk. 30 crore (thirty crore) only instead of tk 40 crore as set earlier,

provided that the IPO portion should not be less than tk 12 crore but not less than 10% of their

total paid up capital

Margin Ratio:

Securities and Exchange Commission reduced the margin ratio once again in an effort to tame a

heated market through SEC notification no. SEC/CMRRCD/2001-43/68 &

SEC/CMRRDCD/2001-43/69 dated November 21, 2010. The previous ratio for margin was 1:1

which set at 1:0.5. Credit providers will have to follow a net asset value (NAV) based method

while giving loans to their clients or investors. The members of the stock exchange and the

merchant ;bankers were also restricted to provide credit facility to the clients during the first 30

trading days of opening the clients account for and depositing clients own fund into such

account for trading purpose.


24/42

24


Members margin:

Securities and Exchange Commission on November 25, 2010 decided that members of the stock

exchange would have to double their deposits with the stick exchange against any additional

trade exposure from December 5, 2010. Under the new directive, a stockbroker or a stock

exchange member will have to deposits 40% of the value of an additional trade value crosses

BD:T1 crore after the free limit for BDT 5 crore. For up to trade value of BDT 8 crore, the SEC

raised the rate to trade value of BDT 9 crore. The ratio is unchanged at 100%. However this

directive of sec was suspended indefinitely on December 19, 2010 before application.

Margin Issues

/the margin ratio for member and Merchant Bank had been increased affair from to 1: 0.5 to 1:1

through SEC notification Nos. SEC/CMRRCD/2001-43/74 & SEC/CMRRCD/2001-43/75 dated

December 13, 2010.

Margin Issues:

Securities and Exchange Commission (SEC) raised the margin loan ratio to 1:1.5 instead of 1:1

and suspended the net asset value based margin loan calculation system on December 19, 2010.

That means from now on investors will get margin loan worth taka 150 from the brokerage

houses and merchant banks.


25/42

25


CHAPTERFOUR


26/42

26


4.1 Role of CSE for the Economic Development

CSE has been performing different investment related jobs, and undertaking and implementing

different programs in order to accomplish its objectives. The performances of Chittagong Stock

Exchange have been judged on different performances such as number of listed companies,

number of listed securities, volume of trade, market capitalization, market share, share price

fluctuations etc. these have been discussed in the following :

Growth in listing Market capitalization in economy Market Capitalization and Turnover Market share of CSE Sales performance Company Wish Financial performance of listed Companies Sector-Wise Financial Performance of Listed Securities Stock Market Performance and CSE Index Variances in Share Prices of Some Selected Companies Test of Randomness of the Changes in Share Prices

Now I try to discuss one by one, to realize the performance of CSE on Economic growth of

the Bangladesh capital Market.


27/42

27


4.2 Comparative Statement of Chittagong Stock Exchange for Economic

development.

The comparative statement of CSE at the end of FY2008-09 and FY2009-10 is shown below:

ndicators As on 30th June 2009 As on 30th June

2010

% Increas

umber of listed securities (include

utual funds and debentures)

245 232 -5.30

ssued capital of all listed

securities

13,742.05 20,111.56 46.35

arket Capitalization of all

isted

96,247.70 2,53,439.33 163.32

ll Share Price Index 10,477.67 18,116.05 72.90

Source: Chittagong Stock Exchange.

*All share price index is calculated on General Share Price Index (excluding Z group) by

withdrawing weighted average method from 9 December, 2003.The index base was 1000 for

CSE from the year 2000. Previously it was 100.

The number of securities (including mutual funds and debentures) listed with the CSE stood at

232 as of June 2010 which was 245 as of June 2009. By the end of June 2010, the issued capital

of listed securities stood at Tk. 20,111.56 crore which is 46.35 percent higher than that of end

June 2009. As of June 2010, market capitalization of securities reached Tk.2, 53,439.33 crore

(36.6 percent of GDP) which is 163.32 percent higher than that of end June 2009 . General shareprice index of the CSE reached 18,116.05 as on June 2010, which was 10,477.67 on June 30,

2009. The trading operation in the Chittagong Stock Exchange since 1995 to June 2010 is shown

in table 5.9 below:


28/42

28


Trading Operation in CSE for Economic Dvelopment

Calendar

Year/ Month-

End

No. of

Listed

Securities

Initial Public

Offering

(IPO)

Issued

Capital

(In crore Tk.)

Market

Capitalization

(In crore Tk.)

Turnover

(In crore

Tk.)

Price

Index*

1995 61 1036.80 2413.90 1.97 409.43

1996 117 16 1872.60 14704.30 608.90 1157.90

1997 141 19 2276.14 5283.23 854.51 332.98

1998 150 6 2418.03 4138.25 1403.60 232.80

1999 159 9 2508.09 3654.24 1153.79 197.83

2000 165 3 2726.60 5776.55 1293.38 1412.25

2001 177 9 2965.27 5636.35 1479.62 1836.87

2002 185 9 3107.99 6046.77 1358.61 1841.14

2003 199 10 4196.76 8531.23 668.86 1642.78

2004 195 3 4697.87 21501.08 1755.13 3597.70

2005 210 16 5551.93 21994.28 1404.27 3378.68

2006 213 6 6937.84 27051.07 1589.31 3724.39

2007 227 13 8917.39 61258.00 5259.03 7657.06

2008 238 - 12160.32 80768.40 9980.37 8692.75

2009 217 18 15512.49 147080.70 16256.26 13181.37

2010 232 7 20677.4 224176.8 21711.2 23449.0

Source: Chittagong Stock Exchange.

*All share price index is calculated on weighted average method from 24 November,

2001.The index base was 1000 for CSE

From the year 2000. Previously it was 100.


29/42

29


*All share price index is calculated on General Share Price Index (excluding Z group) by

withdrawing weighted average

Method from 9 December, 2003. The index base was 1000 for CSE from the year 2000.

Previously it was 100

4.3 Growth in listing to contirbiute Economy

A public limited company having a minimum paid up capital of TK 10 Million can get

enlisted with CSE and make a public issue. CSE also encourages direct listing of a company

having minimum paid up capital TK 100 Million. Government has provided tax incentives to

listed companies. All these are aimed at bringing more companies into the net of stock

market.

YearNumber of Companies listed

Dhaka Stock Exchange Chittagong Stock Exchange

2001 249 177

2002 260 185

2003 267 196

2004 256 198

2005 286 210

2006 310 213

2007 350 227

2008 412 238

2009 415 217

2010 437 232

2011 445 240

Source: Bangladesh Economic Review, Chittagong Stock Exchange, Dhaka Stock Exchange

and Securities and Exchange Commission (Annual Report and quarterly review), various issues.


30/42

30


4.4 .Market Capitalization in the Economy

Market capitalization is an indicator of economic development. It includes 204 equity

securities, 4 corporate bond, 37 mutual funds, and issue of performance shares which has

not yet been sponsored by any company. The higher the amount of market capitalization,The better performance of stock exchange.

YearTotal Market

Capitalization

(in million taka)

GDP (million taka)

Market

Capitalization

2002 131,730 2,732,010 4.82

2003 182,899 3,005,800 6.08

2004 439,934 3,329,730 13.212005 453,018 3,707,070 12.22

2006 593,879 4,157,280 14.28

2007 1,366,530 4,724,770 28.92

2008 1,708,765 5,458,220 31.53

2009 3,357,984 6,147,950 54.61

2010

Descriptive Statistics of Market capitalization to GDP

Mean 20.71

Standard deviation 16.78

Skewness 1.30

Minimum 4.82

Maximum 54.61

Market capitalization ratio equals the value of listed shares divided by GDP. 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 an economy wide

basis (Agarwal 2001). La Porter et al. (1997, 1998) used the market capitalization to GDP

ratio as an indicator of market development. Above table shows the size of Bangladesh stock

market. Market Capitalization ratio has i n c r e a s e d f r o m 1 4 . 2 8 % i n 2 0 0 6 t o 54.61% in


31/42

31


2009. Then the stock market experienced a sudden growth in market capitalization in the next

two years, 28.92% in 2007 and nearly 31.53% in 2008.

4.5 Market Capitalization of CSE for the dvelopment of Economy

Year Market Capitalization(million take)

GDP (million taka) Market Capitalizationto GDP (%)

2002 60,468 2,732,010 2.15

2003 85,312 3,005,800 2.8

2004 215,011 3,329,730 6.07

2005 220,353 3,707,070 5.61

2006 267,501 4,157,280 6.44

2007 612,479 4,724,770 12.00

2008 807,875 5,458,220 14.80

2009 1,470,807 6,147,950 23.92

2010 2,983,929 6,905,710p 43.20

Mean 12.99

SD 13.24

Coefficient ofSkewness 1.76

Table -05: Market Capitalization of CSE as a % of GDP


32/42

32


4.6 CSE contribution in the Bangladesh Economy

Year Market Capitalization

(in million taka)

Turnover

(in million taka)

Ratio of

Turnover toMarket

Capitalization

2002 60,468 13,581 22.46

2003 85,312 6,719 7.88

2004 215,011 14,808 6.89

2005 220,353 13,933 6.32

2006 267,501 16,530 6.18

2007 613,175 52,328 8.53

2008 807,875 100,747 12.47

2009 1470,807 162,563 11.05

Mean 10.22

SD 5.43

Coefficient of

Skewness

1.97

Table: CSE contribution in the Bangladesh Economy

Source: CSE Portfolio


33/42

33


CHAPTERFIVE


34/42

34


5.1 Share Pricing

Share is nothing but dividing the total capital in small units. Share price is determined two times:

1. At the time of initial public offering

2. In the secondary market.

1. At the time of initial public offering

Share pricing during the IPOs are 3 categories:

a. At per

b. At premium

c. At discount.

A. At per: Normally share is issued at per basis. Here face value and issue price both are same. Face

value of a share depends on the no of shares.

B. At premium: If share is issued above face value.

C. At discount: If share is issued below the face value

Continuous Trading Index: Calculated considering the trade price of scripts and it changed with

respect of the share price changed.

Close index: Calculated the basis of close price of the shares. It is treated as the open index for the

next day.

5.2 Trading Procedure & Types of Trading System

There are three types of trading system. These are:

1. Cry out System2. Automated Trading System3. Internet Trading System

Cry Out System:


35/42

35


Before starting on line trading at the Chittagong Stock Exchange trading were conducted through

Cry out system. Under this system members and there authorized assistant of the Stock

Exchange who have license to trade from the Securities and Exchange Commission would come

to the Stock Exchange Floor and participate in trading. But there were a number of shortcomings

of this trading system.

Automated Trading System:

To fulfill the need of Chittagong Stock Exchange a vector (Standard product of CMC Ltd.) was

customized. The program is window based and user friendly. The system has three modules-

(1)Brokers Workstation (BWS)(2)Market Operation (MOP)(3)Surveillance.

The brokers workstation module is available from each brokers office. This module provides

the facility to view the market scenario and input order. This department handles the market

operation is exclusively for the trading department of the Exchanges issues like disclosure and

circuit breaker. The surveillance department of the exchange will use the third module. This

module facilitates on-line surveillance adding new dimensions to the issue of overseeing the

market in this country.

5.3 Internet Trading System

Internet Trading System or ITS is CSEs venture on behalf of the brokers. This site has been

provided by the Chittagong Stock Exchange so as to give customers the convenience to trade or

put orders on CSE from anywhere in the world irrespective of the trading hours of the stock

exchange. The trading is done by registering on the site under some existing broker of the stock

exchange.

5.4 EVALUATION OF CSE

Evaluation of nay organization needs more concentrated effort. Here a brief subjective

evaluation of CSE is done in the form of SWOT:


36/42

36


Strength:The nationwide connectivity and recently the worldwide connectivity throughthe Internet is the superiority over the other stock exchange of Bangladesh. Efficient

management and effective Corporate Governance gives CSE an edge over the competitor

Weakness:CSEs operation is less effective due to the lack of professional attitude of themembers, lack of Dhaka based member, non-availability of the dual listing facilities,

small number of active members, regional image problem, etc.

Opportunity:With the growth of Internet users and governments interest in the capitalmarket ushers new opportunity for CSE. As a member of SAFE, CSE will get the

opportunity to trade regional (Sough Asian) shares in future.

Threat: New regulations of the different regulatory bodies (e.g. Government, SECBangladesh Bank, etc.) change the trade volume in the exchange. Besides connectivity

to the Internet also increased the security concern of the network.


37/42

37


CHAPTERSIX


38/42

38


Problems and Recommendation for Economy development

On the basis of this tour I found some problems and they are shown below with

recommendation:

Some companies offering shares are lower because of some firms do not eventually list fortrading through they nominally complete their offering.

Here the companies date are not searched in an "Advanced Data Search" in prime to securedata on the following basic issue and issuer characteristics after filtering for 1PO's.

Financial information for each offering is not available from "public pricing parameters". Other firms list at varying periods of time after the offer, typically about a month after the

offer date. This lack is zero in the most recent period.

The offer date is the date on which the offer opens for bidding. "There should be allowedoffer proceeds equal the issue size and the issue price.

Among the control variables, firm age is negatively related to under - pricing, so olderfirms are less under - priced.

High IPO activity may follow high under pricing because underwriters encourage morefirms to go public when public valuations turn out the higher than expected and because

underwriters discourage firms from filing or Proceeding with an offering when Public

valuations turn out to be than expected. One interpretation of the result is that older firms are easier to value and can be sold at

lower levels of under - pricing the other controls firm size and a technology dummy are

not significant.

For each offering, company obtain data the face value of equity, earnings per share, price-earning ratio, industry average price-earning ratio and weighted average return on net

worth prior to the issue and net asset value post issue.


39/42

39


CHAPTERSEVEN


40/42

40


7.1 Policy implication for Eonomic develoment

In view of the foregoing analysis of findings of the study, the following suggestions have been

put forwarded for consideration of Government, policy makers, SEC, Stock exchanges and other

concerned parties in order to develop the performance of stock market, especially of CSE:

a) SEC Along with stock exchanges should make a provision to compel every member ofstock exchanges either to tread or to give-up membership of exchanges. Besides,

regulation is warranted for checking the fraudulent activities of stock exchange.

b) Government should promulgate macro-economic policy such as fixation of interest ontreasury securities considering the interest of stock market of the country. Besides, it

should come out with policy for bringing profitable SOEs and MNCs into the net of stock

market.

c) SEC in Corporation with CSE and DSE should establish a training institute for researchand development of human resources in the different level of security industry. This will

help improve the awareness of investors.

d) SEC Should comes out with full-field get guideline for introducing carport governance tolisted companies. This may improve not only financial disclosure practice; but also stock

market operation of the country.

e) Listed companies should disclose financial information through different vehicles such asnewspaper, websites, report from etc. this will give investors easy accessibility to the

information.


41/42

41


7.2 Conclusion

CSE has been found to play a pioneering role in boosting the confidence of all participates

including investors. It has implemented different revolutionary programs for developing a

congenial regulatory and administrative environment in its operations. Of course, it has exerted

influence in the entire stock market of the country. The study has identified different impediment

of development of stock market; and also suggested some policy measures for improvement of

the operational efficiency of CSE. The suggestions are expected to develop the stock market of

the country as well. The analysis of the three measures of CSE development indicators reveals

that CSE shows a smooth and steady growth over the decade under study but low market

capitalization as a percentage of GDP is reflecting shallowness as well as the lack of depth of the

market. This sort of market is always subject to manipulation.


42/42

References

1. "Foreign Investment in Asian Stock Markets" ESCAP, Monograph No. 6,1996;2. Ahmed, M. Farid, Khan, Harunur Rashid and Islam Md. Sadiqul, 'Industrial Finance

Through 'Capital Market in Bangladesh; A study on the Demand Side'. The Asia

Foundation and Bureau of Economic Research, Dhaka University;

3. Annual Report and monthly Review of DSE and CSE, various issues; SEC QuarterlyReview and Annual Report, various issues.

4. Annual Report of Bangladesh Bank, Various issues.5. Annual reports of 2010, 2009.2008,2007,2006,2005,2004,2003,2002 of Chittagong Stock

Exchange.

6. Bangladesh Capital Market" A publication of Chittagong Stock Exchange March-20017. Bangladesh Economic Review, 1999.8. BIBM Bulletin, Vol.2 No. 3, May-June, 1999.9. CSE Bazar Porikroma" -May 2007.10.Levin, Ross "Stock Markets: "A Spur to Economic growth", Finance & Development,

March, 1996.

11.MCCI, Chamber News, Various issues12.Portfolio" of Chittagong Stock Exchange (Jan-Mar; 2005).13.Rouf, M.A and Nabi, Md Golzare "Stock Market in Bangladesh Challenges Ahead"

"Thoughts on Economics", July December 1998.

14.Share-e- Binioge" A publication of Chittagong Stock Exchange.15.The Financial Express, Various issues.

Industrial tour Report on CSE(Chittagong Stock Exchange)

Documents

Transcript of Industrial tour Report on CSE(Chittagong Stock Exchange)