COURSE CODE: MKT- 506Course Name: Financial ManagementMBA (Evening Program), Department of Marketing

Term Paper on:Capital Market of Bangladesh

Submitted To:

Shahin Ahmed ChowdhuryAssistant ProfessorDepartment of Marketing, DU

Submitted By:

NameBatchID Number

Muhammad Muzammal Haque24th41324063

Sohel Chowdhury29th41529013

Md. Sharif Hossain30th41530079

Semester: Summer, 2015

Submission Date:28.07.2015

UNIVERSITY OF DHAKA

TABLE OF CONTENTS

Capital Market of BangladeshSLChapterpage

01.INTRODUCTION01

02.THE PRIMARY MARKET03

03.THE SECONDARY MARKET03

04.BANGLADESH STOCK EXCHANGES04

05.THE ROLE OF CAPITAL MARKETS IN AN ECONOMY08

06.BANGLADESH CAPITAL MARKET OUTLOOK08

07.THE POTENTIAL OF THE BANGLADESH CAPITAL MARKET11

08.OPPORTUNITIES OF BANGLADESH CAPITAL MARKET12

09.RECOMMENDATIONS & CONCLUSION13

Page-101INTRODUCTIONCapital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Capital markets are defined as markets in which money is provided for periods longer than a year.

Capital Market mainly refers to the Stock and Share market of the country. When banking system cannot totally meet up the need for funds to the market economy, capital market stands up to supplement it. Companies and the government can raise funds for long-term investments via the capital market. The capital market includes the stockmarket, the bond market, and the primary market. Securities trading on organized cap-ital markets are monitored by the government; new issues are approved by authorities of financial supervision and monitored by participating banks. Thus, organized capital markets are able to guarantee sound investment opportunities. This paper reveals the various aspects of the Capital Market in Bangladesh. Financial regulators, such as the Bangladesh Financial Services Authority or the Bangladesh Securities and Exchange Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties.

Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.The Capital market, an important ingredient of the financial system, plays a significant role in the economy of the country.Product of capital market: a) Shares, b) Debentures, c) Mutual funds, d) Bonds, e) Derivatives, f) Future and options. Players of capital market: a) Investors, b) PLCs, C) Stock Exchanges, d) Brokers and Dealers, e) Merchant banks, f) Securities and Exchange Commission, g) CDBL. Operation of capital market: Each and every step of capital market operation is regulated. Regulations may come from SEC, Stock Exchanges and CDBL under Securities Act. Parameters used to measure size of capital market: a) Number of listed companies, b) Number of securities, C) Size of market capitalization, d) Index, e) Daily trade volume, f) GSP ratio to market capitalization, Efficiency indicators of capital market: a) PE multiple, b) Dividend yield, c) Liquidity, d) Visible presence of regulators, e) Exit route regulation for sick PLC. CSE role in Bangladesh capital market development: Automation, On-line trading, SAFE, Securities Institute, International Seminar, Investors training etc.

Page-2Future action plan for vibrant capital market in Bangladesh: a) Strengthen SEC, b) Capital Market Education: at school, college and university levels, c) Training of Directors of PLC, Regulator and Broker house officials etc, d) Certification system for certain level of officials, e) Introduction of new Products, f) Incentives for listing with Stock Exchange, g) New pricing mechanism for IPO, h) Appropriate fiscal measures, i) Fully automated settlement system, j) Separate bench at High Court. Institutional investor: Institutional Investor is a leading international business-to-business publisher, focused primarily on international finance. It publishes magazines, newsletters and journals as well as research, directories, books and maps. It also runs conferences, seminars and training courses and, is a provider of electronic business information through its capital market databases and emerging markets information service. Whether you are a first time investor, a seasoned pro, an "in and out" day trader or a long term investor the Dhaka Stock Exchange Ltd, Chittagong Stock Exchange Ltd, StockBangladesh.com and Securities and Exchange Commission will provide you with the necessary information you need for maximum profits and success in today's dynamic markets. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better investor.

The capital market includes all the bank, non bank financial institution as well as the stock market

Member of Capital MarketQuantity

State-owned commercial banks06

Private commercial banks32

Private Islamic Commercial Banks08

Foreign commercial banks09

Non-banking financial institutions35

Stock Market1. Dhaka Stock Exchange (DSE)2. Chittagong Stock Exchange (CSE)02

Securities and Exchange Commission (SEC)01

Central Depository Bangladesh Limited (CDBL)01

Page-302THE PRIMARY MARKET

The primary market is that part of the capital markets that deals with the issue of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. A primary market creates long term instruments through which corporate entities borrow from capital market.Features of primary markets are this is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issues new security certificates to the investors.Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy.Methods of issuing securities in the primary market are: Initial public offering; Rights issue (for existing companies); Preferential issue.

03THE SECONDARY MARKETThe secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold. [1]. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production). Another commonly referred to usage of secondary market term is to refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie Mac.

With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market.

The secondary market for a variety of assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the Dhaka Stock Exchange and Chittagong Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade over the counter, or by phoning the bond desk of ones broker-dealer. Loans sometimes trade online using a Loan Exchange.Page-404BANGLADESH STOCK EXCHANGESThe Securities and Exchange Commission exercises powers under the Securities and Exchange Commission Act 1993. It regulates institutions engaged in capital market activities. Bangladesh Bank exercises powers under the Financial Institutions Act 1993 and regulates institutions engaged in financing activities including leasing companies and venture capital companies. The SEC has issued licences to 27 institutions to act in the capital market. Of these, 19 institutions are Merchant Banker & Portfolio Manager while 7 are Issue Managers and 1(one) acts as Issue Manager and Underwriter.There are two stock exchanges ( the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) ) which deal in the secondary capital market.

Bangladesh capital market has two full-fledged automated stock exchanges namely Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) and an over-the counter exchange operated by CSE. It also consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it implements rules and regulations, monitors their implications to operate and develop the capital market. It consists of Central Depository Bangladesh Limited (CDBL), the only Central Depository in Bangladesh that provides facilities for the settlement of transactions of dematerialized securities in CSE and DSE.

DHAKA STOCK EXCHANGEDhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city. It was incorporated in 1954. Dhaka stock exchange is the first stock exchange of the country. As of 18 August 2010, the Dhaka Stock Exchange had over 750 listed companies with a combined market capitalization of $50.28 billion.

HistoryIt first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as Dacca Stock Exchange Ltd in 13 May 1964. After the liberation war in 1971 the trading was discontinued for five years. In 1976 trading restarted in Bangladesh. In 16 September 1986 was started. The formula for calculating DSE all share price index was changed according to IFC in 1 November 1993. The automated trading was initiated in 10 August 1998. In 1 January 2001 was started. Central Depository System was initiated in 24 January 2004.

FormationDhaka Stock Exchange (DSE) is a public limited company. It 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.

CHITTAGONG STOCK EXCHANGEChittagong Stock Exchange is a stock exchange located in the port city of Chittagong in southeastern Bangladesh. It was established in 1995 as the second stock exchange of the country. The exchange is located in the Agrabad commercial area of the city.Timeline 1 April 1995 CSE incorporated as a company. 10 Octabar Floor trading started in cri out system. 4 November 1995 formally opened by then former Prime Minister Begum Khaleda Zia. 30 May 2004 Internet based Trading system opened.Page-5

Vision of the stock exchange: Regulating the market structure through proper rules and strict compliance by members. Expansion of CSE trading network to cover 504 thanas. Introduce Book Building system in Bangladesh capital market. Introducing derivative market Create opportunity to cross border trading with SAFE countries. Introduce global depository receipts (GDR)

Mission:To create an efficient and transparent market facilitating entrepreneurs to raise capital so that it accelerates industrial growth for overall benefit of the economy of the country.

Objectives: Develop a strong platform for entrepreneurs for raising capital; Provide an investment opportunity for small and large investors; Develop a transparent market ensuring investors interest; Attract foreign institutional investors to invest in Bangladesh; Collect, preserve, disseminate date and information on stock exchange;

Management of stock exchanges:DSE and CSE comprises of 25 members of whom 12 are elected through direct election from the 235 and 134 shareholders respectively. Another 12 members representing distinguished personalities from different key economic and social arena of the country. The CEO of the exchange is also a Director of the Board.Categorization of listed company:Category: A, B, N & ZCategorization of listed company, 30th June, 2009 CategoryDSECSE

A 186158

B2718

G00

N1111

Z8399

Debenture (category A)81

Treasury Bonds1350

Total450287

Note: this information is collected from the current markets which are currently trading both in DSE and CSE. There are lot other companies in Z category which trading occur in OTC market.

Page- 6Criteria of the share Category:A Category Companies: Companies which are regular in holding the Annual General Meetings (AGM) and have declared dividend at the rate of 10 percent or more in a calendar year. (Mutual fund, debentures and bonds are being traded in this category).B Category Companies: Companies which are regular in holding the AGM but have failed to declare dividend at least at the rate of 10 percent in a calendar year.N Category Companies: All newly listed companies except Greenfield companies will be placed in this category and their settlement system would be like B-Category companies.Z Category Companies: Companies which have failed to hold the AGM or failed to declare any dividend or which are not in operation continuously for more than six months.DSE and CSE Scenario As of 30 June 2009 the total issued capital of all listed securities including treasury bonds of Dhaka Stock Exchange was Tk.457,944 million (US$ 6,634.94 million) which was Tk. 4, 16,024 million (US$ 6,034.58 million) on 31 March 2009. In Chittagong Stock Exchange the total issued capital on 30 June 2009 was Tk.137420.50 million (US$1991.60 million) which was Tk.1,30,420 million (US$1,890.15 million) on 31 March 2009. Total market capitalization of all securities including treasury bonds listed on the Dhaka Stock Exchange was Tk. 1,312,773 million (US$19,025.69million) as on 30 June 2009 compared to Tk. 10,17,057 million (US$14,753million) as on 31 March 2009.In the Chittagong Stock Exchange, total market capitalization of all listed securities was Tk. 962,477million (US$13,948.94million) as on 31 March 2009. Stock Market Operation:During October-December, 2009 the total turnover in Dhaka Stock Exchange was 2,420 million securities while the total amount traded on Dhaka Stock Exchange during the same period was Tk. 569,586.85 million In the same period, the total turnover in Chittagong Stock Exchange was 346.25 million securities while the total amount traded on Chittagong Stock Exchange during the same period was Tk. 48,910.73 million. Market Capitalization: Total market capitalization of all securities including treasury bonds listed on the Dhaka Stock Exchange was Tk. 1,887,177.00 million (US$27,283.00 million) as on 31stDecember. 2009 compared to Tk. 1,382,991.00 million (US$20,026.00 million) as on 30 September, 2009. In the Chittagong Stock Exchange, total market capitalization of all listed securities was Tk. 1,470,807.05 million (US$ 21,011.53 million) as on 31stDecember. 2009 compared to Tk. 1,032,307 (US$ 14,960.97 million) as on 30 September, 2009.

Page-7Bangladesh Capital Market Summary (As on 31stDecember, 2009)

IndicatorsDhaka Stock ExchangeChittagong Stock Exchange

No. of companies 236 197

No. of mutual funds 19 19

No. of debentures 8 1

No. of treasury bonds 151 -

No. of corporate bonds 1 -

Total No. of Listed Securities 415 217

Figures in millionNo. of shares of all listed companies 4167.00 4,030.99

No. of certificates of all listed mutual funds 450 450.27

No. of debentures of all listed debentures 0.41 3.00

No. of all listed govt. T-bonds 3.56 -

No. of all listed corporate bonds 3.00 -

Total No. of Tradable Securities 4624 4.00484.26

Figures in millionIssued capital of all companies TK. US$ 156,831.00 2,267.00 147,309.41 2,104.42

Issued capital of all mutual funds TK. US$ 4,816.00 70.004,815.50 68.79

Issued debentures TK. US$ 140.00 2.00 3,000.00 42.86

Figures in millionTotal Market Capitalization TK. US$1,887,177.00 27,283.00 1,470,807.05 21,011.53

All Share Price Index 3747.53 13181.3755

Market Performance of DSE & CSE, 30th June 2009

Particulars DSECSE

Member238134

Listed Securities443245

Issued Capital (core, TK)45,794.0013,742.00

Market Capital (core, TK)131,277.0096,247.00

Price index2520.1510477.67

Market cap. to GDP20%14%

Page-85.THE ROLE OF CAPITAL MARKETS IN AN ECONOMY Provides an important alternative source of long-term finance for long-term productive investments. This helps in diffusing stresses on the banking system by matching long-term investments with long-term capital. Provides equity capital and infrastructure development capital that has strong socio-economic benefits - roads, water and sewer systems, housing, energy, telecommunications, public transport, etc. - ideal for financing through capital markets via long dated bonds and asset backed securities. Provides avenues for investment opportunities that encourage a thrift culture critical in increasing domestic savings and investment ratios that are essential for rapid industrialization. The Savings and investment ratios are too low, below 10% of GDP. Encourages broader ownership of productive assets by small savers to enable them benefit from Bangladeshs economic growth and wealth distribution. Equitable distribution of wealth is a key indicator of poverty reduction. Assists the Government to close resource gap, and complement its effort in financing essential socio-economic development, through raising long-term project based capital. Provides a gateway to Bangladesh for global and foreign portfolio investors, which is critical in supplementing the low domestic saving ratio.

6.BANGLADESH CAPITAL MARKET OUTLOOK Success of Bangladesh capital market a) Capital markets continue strong performance Market capitalization is above US$20bn in 2009 from US$10bn in 2007. Average daily turnover is approximately US$75mm in 2009 from US$24mm in 2007. b) Key opportunities for future growth Institutionalization of market brings greater liquidity and lower volatility. Attracting large corporate for listing provides investors with viable investment options c) Challenges ahead Retail dominated market resulting in higher volatility from speculation. Large, well reputed companies prefer to source funds from traditional bank finance against capital markets d) Remittance inflow has been resilient to global turmoil Bangladeshis abroad sent home US$887.9mm in September09 Page- 9e) Inflation continues to decline Fell to 6.04% in July09, from 6.66% in June09 and 8.90% in December08 f) GDP growth forecast has been revised downwards to 5.88%, compared to 6.19% in the previous fiscal year g) Exports have been relatively sheltered due to low cost nature of Bangladeshi products Recovery in the US and Europe, the major buyers, expected to boost export earnings Failure:Dhakastock market started functioning in 1956. Sixty years have passed since then. But the Bangladesh stock market remained immature and failed to be an important force in shaping the economy of the country. The predominant source of funding for the private sector investments has always been the banking sector and contribution of the stock market has been marginal. Investments in recent years have been sluggish. Private sector credit growth has remained stagnant for some time. Many banks have started investing their surplus funds in government securities following lower demand for private sector credit. Due to the slow growth of private sector investment, access to long-term bank credit has been easy. This is one of the reasons why entrepreneurs prefer bank credit instead of raising funds from the capital market, notwithstanding the higher cost of funds from banks. Stock markets mobilize household savings and idle funds and can influence economic activity though the creation of liquidity. However this becomes complicated when the banking sector has enough liquidity to offer long-term financing. Therefore we cannot perhaps expect rapid development of the stock market unless private sector investments pick up to a level where banks cannot afford long-term loan with short-term borrowing.It is unfortunate that since the establishment of the Securities and Exchange Commission in 1993, the stock market has crashed twice. On both occasions, thousands of small and inexperienced investors lost everything they had. Stock market crash is not something unique and it happened in many other countries. But market collapses in other countries were normally linked to some internal or external economic shock or global recession. In case of Bangladesh, it has not been so. Bangladesh stock market is isolated and is not globally integrated. Foreign investment is insignificant. Both the crashes were neither due to external economic factors nor internal economic malfunctions. These crashes were the results of poor governance, unbridled manipulations, undue influences and unlimited greed. Let us hope that this does not happen again.

Page-10Reasons of Failure: Stock markets function in a regulatory regime and it is important that the regulators are professional, efficient and transparent. Bangladesh Securities and Exchange Commission (BSEC) is the apex regulator for the stock market. It was formed in 1993. More than twenty years after its formation, BSEC is yet to develop as an efficient watchdog competent to discharge its most important responsibility of protecting the interest of investors. The debacle of 2011 was basically a massive regulatory failure. Lack of quality professional manpower: BSEC lacks quality professional manpower, competent accountants, financial analysts and legal experts. Instead of developing as a highly professional organization, it has grown into more of a bureaucratic body. Credible financial reporting is vital for appropriate investment decisions. Auditors are required to examine data, statements, accounts, records, performance and operation of the company, and record their independent opinion. Auditors, in turn, should be provided with reliable information by the management. Lack of co-ordination: There is also a persistent lack of co-ordination between the Ministry of Finance, Bangladesh Bank, Securities and Exchange Commission, Insurance Development and Regulatory Authority, National Board of Revenue and other related organizations. This isolation of BSEC was, perhaps, a crucial factor for the regulatory failure in 2011. Close understanding and coordination between Bangladesh Bank and the Securities and Exchange Commission is particularly important because the money market often has an impact on the capital market. Therefore BSEC needs a close liaison with their regulators for stability of the market.Exposure limit of banks: The exposure limit of banks to the capital market has been decreased by amending the concerned law. This has probably been done in the interest of protecting the depositors. In the long run, such measures are likely to protect the safety of bank deposits and persuade the banks to focus on their core business. This is also likely to reduce volatility in the stock market and help improve its stability. However, in the short-term, this may have an adverse impact on the activities of the stock market.Cash flow problem of the merchant banks and brokerage houses: Due to the abrupt plunge of the price level, balance of many of these accounts has turned negative and a huge amount of fund has been trapped. This is affecting the operational capacity of these institutions. Mutual Funds: Ideally mutual funds ought to be the most important institutional investors in the market. Inexperienced investors should invest through mutual funds for professional management of their funds. There are 40 mutual funds operating in the market but their contribution to market performance is extremely limited. Page- 1107.THE POTENTIAL OF THE BANGLADESH CAPITAL MARKETThe capital market is the engine of growth for an economy, and performs a critical role in acting as an intermediary between savers and companies seeking additional financing for business expansion.

Vibrant capital is likely to support a robust economy. While lending by commercial banks provides valuable initial support for corporate growth, a developed stock-market is an important pre-requisite for moving into a more mature growth phase with more sophisticated conglomerates. Today, with a $67 billion economy and per capita income of roughly $500, Bangladesh should really focus on improving governance and developing advanced market products, such as derivatives, swaps etc.

Despite a challenging political environment and widespread poverty, Bangladesh has achieved significant milestones on the social development side. With growth reaching 7 percent in 2006, the economy has accelerated to an impressive level. It is noteworthy that the leading global investment banks, Citi, Goldman Sachs, JP Morgan and Merrill Lynch have all identified Bangladesh as a key investment opportunity. The Dhaka Stock Exchange Index is at a 10-year high, however, the capital market in Bangladesh is still underdeveloped, and its development is imperative for full realization of the country's development potential.Craig Brewer

It is encouraging to see that the capital market of Bangladesh is growing, albeit at a slower pace than many would like, with market development still at a nascent stage. The market has seen a lot of developments since the inception of the Securities and Exchange Commission (SEC) in 1993. After the bubble burst of 1996, the capital market has attracted a lot more attention, importance and awareness, that has led to the infrastructure we have in the market today.

Page- 1208.OPPORTUNITIES OF BANGLADESH CAPITAL MARKETThe capital markets in Asia are getting more and more focus with the growing corporatization of the Asian economies. Eastern Asia has progressed a lot with respect to attracting western companies to get listed in Asian bourses as well as supporting innovative instruments, and Southeast Asia is also coming up with India leading the way. Comparing the local market scenario with that of the rest of the region, Bangladesh is in pretty good shape as we have most of the infrastructure in place. Our market capitalization is relatively smaller and it currently stands at $9.3 billion, which is just over 13 percent of GDP. Higher liquidity is skewed towards a handful of scrips, while a stagnant situation exists for few less profitable issuers.

At present, the government is heavily focusing on developing a debt capital market. Such measures are certainly welcome as Bangladesh lacks a proper secondary market for bonds. The market is yet to support short-term capital requirements of corporations. Commercial Paper (CP) has not yet been tried primarily due to interest rate volatility and illiquid risk-free instruments that can be used as benchmark neither for short-term and hardly for long-term financing. It can, therefore, be said that we have a somewhat flat yield curve in Bangladesh at the moment.

Debut trading of state-owned oil companies like Jamuna Oil Company Ltd and Meghna Petroleum Limited on the local bourses in January 2008 has spurred a lot of encouragement among investors. This initiative taken by the government to list SOEs will increase market capitalization and improved liquidity. SEC is also contemplating the introduction of the book-building method in the valuation of IPOs in order to ensure a fair price within this year. This will encourage companies with sound financial health to come into the market.

Regulatory pressures are mounting on telecom companies to get listed. It is estimated that the listing of the top telecom companies will attract more foreign investment, increase the market capitalization by few folds, and bring about higher standards of corporate governance.

There is still huge potential in the market for securitization and other debt instruments like commercial papers and corporate bonds, and derivatives, which will help foreign investors hedge their exposure.

Page-1309.RECOMMENDATIONS & CONCLUSIONThe market needs more and more good scrips. The process would be easier if we could draw attention of good issuers by improving the market governance system and eliminating scope for manipulation. There are only limited instances, such as in commercial banks/leasing companies, where regulators can impose guidelines relating to capital structure. Hence, it may be difficult to force a corporate house to list unless it agrees at the time of licensing or registration. Inadequate disclosure requirement, and a culture of family-owned conglomerates deter the expansion of corporate governance into the local industry. The regulators need to play an active role in removing the bureaucratic bottlenecks, and promote rules that provide incentives to these groups of companies to list.

The missing link between the SEC, Bangladesh Bank, Bangladesh Telecom Regulatory Commission and other regulatory bodies is now getting established. Individually, they were not serving each others' interests, and there was no effective coordination among them, hence the country was deprived of great initiatives. A dedicated financial market cell at the Ministry of Finance could be formed to coordinate with these regulators as well as other ministries.

In terms of creating market depth, more profitable state-owned-enterprises should be listed. The supply of securities can be increased if the SOEs are allowed to operate through the stock exchanges. Floatation of SOE scrips is expected to expand the market by couple of times. Corporatization of SOEs will bring in transparency as well as confidence on the government financial system.

In a more developed market, institutional investors such as merchant banks, commercial banks, insurance companies, are major traders of securities. We need enforceable and more effective laws and rules to attract foreign institutional investors.

The Bangladesh capital market still has a long way to go. The recent measures taken by the transitional government have already begun to positively impact the markets. If more investor-friendly policy reforms were to be implemented, the capital market will undoubtedly play a critical role in leading Bangladesh towards being the next Asian tiger with growth comparable to India, Vietnam and the other most dynamic economies in the region.