The history of the stock market in Bangladesh is relatively young compared to many other countries. It has experienced significant developments and changes since its inception. Here is a brief overview of the key milestones in the history of the stock market in Bangladesh.
Table of content
Establishment Of Stock trading in Bangladesh
Early years of stock market in Bangladesh
Growing periods of Stock Market in Bangladesh
Market crash and recovery stages
Present time and the evolving efforts of the Market
Stock Exchange Houses in Bangladesh
Dhaka Stock Exchange
Chittagong Stock exchange
Products and available investment opportunities in the stock market.
Basic regulations that stock markets are maintain now in Bangladesh
Conclusions
Establishment Of Stock trading in Bangladesh
1954-1971: Before the establishment of a formal stock market, trading of shares took place in the then East Pakistan (now Bangladesh) primarily in the informal and unregulated trading centers.
1971-1976: After the Liberation War in Bangladesh, which concluded in 1971, the Dhaka Stock Exchange (DSE) faced a period of significant disruption and challenges. The war had a profound impact on the economy, infrastructure, and institutions of the newly formed country.
Early years of stock market in Bangladesh
1976-1987: In the early years, trading activities were limited, and the market was relatively small. The regulatory framework and infrastructure were gradually developed during this period.
1987-1996: The stock market gained momentum during this period, and trading volume started to increase.. In the meantime, The Chittagong Stock Exchange (CSE) was later founded in 1995. These exchanges were established to facilitate organized and regulated trading of securities.
1996-2000: The stock market experienced significant growth and witnessed a surge in trading activities. The introduction of automated trading systems and electronic clearing systems helped improve market efficiency and transparency. Many new companies were listed, and the market capitalization increased substantially. In the mid-1996 period, both the Dhaka Stock Exchange (DSE) and Thhe Chittagong Stock Exchange (CSE) embarked on a bullish trajectory, characterized by soaring market values. At that time many new companies are entering the market and also new investors are pouring fresh money into the market.
Market has watched that some unknown and fundamentally weak stocks are gaining strength. New investors are putting the money on those stocks. DSE experienced a dramatic change and pushed the DSEX price index to 3648.7 points on November 5, 1996. Within a day, the DSEX index had fallen over 233 points on 6, November. As a result the DSEX price index dropped to its lowest point after the bubble burst and fell to 957 points in April, 1997. That event made the market crash and made new investors high and dry. That crash became one of the big crashes in Bangladesh stock market history.
Growing periods of Stock Market in Bangladesh
2000-2010: The stock market went through a period of rapid expansion, with a sharp increase in both trading volume and market capitalization. DSEX crossed 8500 points within mid-2010.
Market crash and recovery stages
2010-2011: The Bangladeshi stock market faced a severe crash, often referred to as the “2010-11 Bangladesh share market scam.” It led to a significant decline in market indices and investor confidence.
2011-2018: Following the crash, the stock market went through a period of recovery and stabilization. Regulatory reforms were introduced to enhance transparency and restore investor confidence.
Present time and the evolving efforts of the Market
2018-Present: The stock market has continued to evolve, with ongoing efforts to improve regulatory oversight, market infrastructure, and investor protection. The market has faced challenges but has also shown resilience and growth potential.
Stock Exchange Houses in Bangladesh
Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) are the two main stock exchanges in Bangladesh. They serve as platforms for buying and selling securities, including stocks, bonds, and other financial instruments. Here’s a brief overview of each exchange:
Dhaka Stock Exchange
The DSE was called the East Pakistan Stock Exchange Association Ltd. In 1962, the name was revised to East Pakistan Stock Exchange Ltd., and two years later, the name again changed to the current Dhaka Stock Exchange Ltd, holding the distinction of being the largest and oldest stock exchange in Bangladesh. Situated in Dhaka, the capital city, DSE plays a pivotal role in the country’s financial landscape. Its function encompasses the trading of various financial instruments, including equities, bonds, and mutual funds, rendering it a dynamic marketplace for diverse investment opportunities.
Chittagong Stock exchange
The Chittagong Stock Exchange Established on October 10, 1995, the Chittagong Stock Exchange (CSE) holds a prominent position within Bangladesh’s financial landscape. Located in Chittagong, the nation’s second-largest city, the CSE serves as a pivotal hub for economic activities.
Operating as the second-largest stock exchange, it plays a vital role in facilitating the trading of stocks and bonds, contributing to the vibrant dynamics of the financial markets.
Products and available investment opportunities in the stock market.
Here are some of the key products traded products traded on these stock exchanges:
Equity Shares: This is the most common type of product traded on the stock market. Investors buy and sell ownership stakes in publicly listed companies. Shares represent a portion of a company’s ownership, and their value can fluctuate based on the company’s performance and market conditions.
Bonds: Government and corporate bonds are also traded on the stock exchanges. Bonds are debt instruments where the issuer (government or company) borrows money from investors and promises to repay it with interest over a specified period.
Mutual Funds: Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. Units of mutual funds are traded on the stock exchanges.
Debentures: Debentures are a type of long-term debt instrument issued by companies. They carry a fixed interest rate and have a specified maturity date. Debentures can be traded on the stock exchanges.
Preference Shares: Preference shares represent ownership in a company but typically do not carry voting rights. They often offer fixed dividends and are considered a hybrid between equity and debt.
Derivative Products: Some exchanges may also offer derivative products like futures and options, which allow investors to speculate on the future prices of underlying assets without owning the assets themselves.
Basic regulations that stock markets are maintain now in Bangladesh
Bangladesh Securities and Exchange Commission (BSEC), is the regulatory authority responsible for overseeing and regulating the activities of the stock exchanges, intermediaries, and participants in the securities market.
Here are some regulations that you must maintain for listing and trading in the stock market in Bangladesh.
Listing Requirements: Companies seeking to be listed on the stock exchanges in Bangladesh must meet certain listing requirements set by the BSEC. These requirements include financial performance criteria, minimum paid-up capital, and adherence to corporate governance standards.
Disclosure and Transparency: Listed companies are required to provide regular financial disclosures and other relevant information to the public. This ensures transparency and helps investors make informed decisions.
Insider Trading Regulations: Regulations prohibit insider trading, which involves the buying or selling of securities based on non-public, material information. Insider trading is strictly monitored and can lead to severe penalties.
Market Manipulation: The stock market regulations prohibit any form of market manipulation, such as creating false or misleading information to influence stock prices.
Investor Protection: Regulations aim to protect the rights and interests of investors. Measures include ensuring fair treatment, timely access to information, and mechanisms for dispute resolution.
Clearing and Settlement: The stock exchanges have established mechanisms for the clearing and settlement of trades, ensuring the smooth transfer of ownership and funds between buyers and sellers.
Market Surveillance: BSEC and the stock exchanges have mechanisms in place to monitor market activities and detect any unusual or suspicious trading patterns.
Margin Trading: Regulations govern margin trading, which allows investors to borrow funds from brokerage firms to purchase securities. Margin trading is subject to specific rules to prevent excessive risk-taking.
Corporate Governance: Listed companies are expected to adhere to good corporate governance practices, including having an independent board of directors, transparent financial reporting, and shareholder rights.
Market Operations: The stock exchanges follow trading hours, opening and closing times, and trading sessions in line with regulatory guidelines.
Investor Education: Regulatory efforts include promoting investor education and awareness to help investors make informed decisions and understand the risks involved in trading and investing in the stock market.
Conclusion
Throughout its history, the stock market in Bangladesh has been influenced by domestic economic and political factors, as well as global market trends.
The market regulatory framework has been refined over the years to ensure fair trading practices and investor protection. The market has seen fluctuations in trading volume, market capitalization, and investor sentiment, but it remains an important avenue for raising capital and investing in Bangladesh’s economy.