Capital Markets and Financing: Stock Market Analysis in Bangladesh

This report provides a comprehensive overview of financing through the stock market, with a specific focus on the context of Bangladesh. It begins by explaining the concept of capital markets, differentiating between primary and secondary markets, and highlighting the role of regulatory bodies like the Bangladesh Securities and Exchange Commission (BSEC). The report delves into the mechanics of initial public offerings (IPOs), underwriting, and the functions of both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). It examines the crucial role of capital markets in economic growth, facilitating long-term investments and the distribution of wealth. The report also discusses market volatility, settlement cycles, and the importance of investor education. It concludes by emphasizing the potential of the capital market in Bangladesh and the need for collaboration among market participants to foster growth and stability. References to relevant literature are included.

Financing through the stock market
Introduction
By selling long-term assets like bonds and shares, companies and governments may raise long-
term money via capital markets (debt or equity). This market focuses on long-term investments,
whereas other markets focus on short-term investments. Capital markets include the stock market
as well as obligations and equity securities, as specified here: (debt). Investors in Bangladesh are
protected against financial fraud by securities and exchange commissions such the Bangladesh
Financial Services Authority (BFSA) and the Bangladesh Securities and Exchange Commission
(SEC).
There are two types of capital markets: primary and secondary. Underwriting is a term used in
the financial markets to describe the practice of promoting new stock and bond issues to
investors. Secondary markets, such as the stock exchange, over-the-counter, or someplace else,
are where investors and dealers purchase and sell already existing securities. markets for used
goods such as
The capital market has a considerable influence on economic growth as a key component of the
financial system.
Long-term capital may be raised on the capital market by businesses and governments alike. In
addition to the stock and bond markets, there is a capital market. The growth of capitalism is
made possible by the existence of capital markets. There is a growing dependence on the scale of
global marketplaces for the economies of the globe. Everyone may now possess a share of the
country's riches thanks to this arrangement. The ability to continually uncover new sources of
income is one of the most enticing aspects of having many different methods to generate money.
In order to boost investor confidence, the markets promote more involvement. Continuous
information flow is essential for market efficiency, and the internet can provide that.
The many types of capital markets available to investors.

The Largest Audience
The primary market, which is part of the capital markets, is where new securities are offered for
sale. Companies, governments, and other public sector organizations may raise money via the
issuance of new stock or bond issues. Syndicates of securities dealers are often employed for this
purpose. The selling of fresh securities to investors is known as underwriting. An IPO, or initial
public offering, refers to the sale of a company's shares for the first time (IPO). The fee paid to
dealers is included in the investment cost, despite the fact that it is disclosed in the prospectus.
Long-term instruments produced in primary markets may be used by companies to borrow
money from the capital market.
A main market is one where fresh long-term equity capital is traded. The main market is where a
security is originally offered for sale. Thus, it is known as the "new issue market" (NIM).
Initial public offerings (IPOs) or "primary issues" are methods of issuing securities directly to
investors, in which a company obtains cash and then issues fresh certificates of deposit to the
individuals who bought them. To establish a new business or to grow or modernize an existing
one, the key issues of the firm are utilised. The primary market plays an important role in the
economy by facilitating the production of capital.
The fresh issue market does not include other long-term external funding possibilities such loans
from financial institutions. If you want to turn your private capital into public capital, you must
borrow money from the fresh issue market. To reclaim sold financial assets, you must be the
original owner.
Part II: The Aftermarket

The secondary market, also known as the aftermarket, is the financial market where previously
issued assets and financial instruments, such as stocks, bonds, options and futures, are bought
and sold. [1]. Another name for a product or asset with a customer base in a different market is
"secondary 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 common use of the term "secondary market" is in reference to mortgage-
backed securities sold to investors like Fannie Mae and Freddie Mac.
An initial public offering (IPO) or an issuance of U.S. Treasury securities are examples of
situations when investors may purchase directly from the issuers rather than via a broker. After
the first issue, investors may acquire from each other on the secondary market.
The secondary market for a broad variety of assets, from loans to equities, may be either
fragmented or centralized, illiquid or extremely liquid, depending on the product. For publicly
listed firm shares, liquid secondary markets are best shown by the major stock exchanges.
Investors who hold stocks traded on the Dhaka and Chittagong Stock Exchanges have access to a
centralized secondary market. Over the counter trading is the most prevalent method of
purchasing and selling bonds and other structured assets. Borrowers may swap loans on a
website called a Loan Exchange.
Bangladesh's financial market
In the capital market, entrepreneurs who need money to start or build a firm may transfer cash
from savers (individuals and institutions) at affordable prices. Small investors like you and me

may purchase a stake in large corporations via the capital market. This is a generally
acknowledged technique for distributing the advantages of economic development to the general
public and private sector enterprises, to put it simply. [...] Bangladesh's capital market is the
third-largest in South Asia, although being smaller than other Asian markets. Over-the-counter
trading is still common in Bangladesh, although the Securities and Exchange Commission (SEC)
administers a fully computerized stock market (SEC). In addition, the Securities and Exchange
Commission (SEC) monitors the execution of rules and regulations and their effect on the
operation and growth of the capital market. There have always been dematerialized securities
transactions settled by CDBL (Central Depository Bangladesh Limited). The Dhaka Stock
Exchange was established on April 28, 1954, and began trading in the first three months of 1956.
After a five-year break caused by a lack of government backing, the country's capital market was
eventually reactivated in 1976 with nine issues still outstanding. The Chittagong Stock Market
(CSE), Bangladesh's second stock exchange, was established in 1995 with state-of-the-art
logistical assistance and cutting-edge administration. Stock markets in Bangladesh are available
to the public, and there are two of them.
Stocks traded on the Bangladesh Stock Exchange (DSE)
A stock exchange in Chittagong (CSE)
Before making an investment, an investor should educate themselves with the markets in which
they are interested. For the sake of clarity, we will only discuss the Dhaka stock market in this
article. Bangladesh's economic infrastructure is heavily dependent on the country's stock market,
which serves as a vital conduit for the public to provide financial support for institutional
investors. Stock market volatility can have a significant impact on the financial sector as well as
the wider economy.
Stock Exchange of Bangladesh (DSE)
Located in Motijheel, Dhaka, Bangladesh's primary stock exchange is the Dhaka Stock Exchange
(also referred to as the DSE). It was established as a corporation in 1954.

Chittagong Exchange of Stocks
Background
The Chittagong Stock Exchange (CSE) was established on 10 October 1995 in Chittagong City,
Bangladesh, using the cry-out trading method to develop a national stock exchange. The
Securities and Exchange Commission granted authorization for the establishment of
Bangladesh's second stock exchange on February 12, 1995 after approaching the Bangladeshi
government in January 1995.
An Economy's Capital Markets Play a Vital Role
Long-term investments are linked with long-term capital sources like this one to decrease the
load on the financial system, in addition to providing long-term funding for productive activities.
Capital markets, via long-dated bonds and asset-backed securities, are good sources of finance
for infrastructure projects with substantial socioeconomic benefits. These include roads, water
and sewage systems, housing, electricity, and telecommunications.
In order to achieve fast industrialization, the country's savings and investment ratios must be
raised over 10% of GDP, which can only be achieved by cultivating a culture of saving and
investing.
A crucial indication of poverty reduction, the equitable distribution of wealth is a fundamental
component of the Bangladesh economy's progress.

With limited resources, moving the driving force of economic growth from public to private
sector is necessary.
Through long-term project-based funding, it helps the government narrow the resource gap and
supplement its efforts to finance important socio-economic development.
Increases economic development by increasing the efficiency of capital allocation via the use of
a competitive pricing mechanism.
International investors may now access Bangladesh, which is essential given the country's low
domestic savings ratio.
Wiring Harness
In the short term, the value of a stock cannot rise or fall more than 10% because of the use of this
automated system. According to the firm, the Power Grid's closing price was 710tk, and the
circuit breaker is worth 10% of that amount, which means that the value of the Power Grid will
not move by more than 10% today regardless of h
Term of the deal
In the T+2 settlements,
To complete your transaction on Tuesday, you must purchase shares in a firm that comes into
category A, B, or N. You may do this over the weekend. If you want to speak about bank and
exchange holidays or weekends, don't read this. You can sell the shares you purchased in two
business days.
Cycle of settlements T+3

As long as you acquire shares from Category Z in the T+3 settlement cycle, you may sell them
after three business days, which is the T+3 settlement cycle (which is today and three working
days).
Conclusion:
companies can raise funds for expansion by investing in the capital market, which is set to boom
in Bangladesh. The SEC, DSE, CSE and all other market participants should work together to
achieve this goal. Inconsistent government signals will affect the market's faith in the system.
Any stock market will have ups and downs, and investors cannot blame others when prices fall.
But investors are maturing, so the yelling and chanting in front of the stock e is no longer
acceptable.
References:
Capital markets, B. J. Foley, ed., New York: Macmillan International, 1991.
Information and capital markets (No. w0678), by Joseph E. Stiglitz, 1981, National Bureau of
Economic Research, Cambridge, Massachusetts.
Journal of Applied Corporate Finance, 11(4), 21-35, B. Lev (1999). R&D and capital markets.
Are internal capital markets efficient?, The Quarterly Journal of Economics, vol. 113(2), pp.
531-552, 1998.
Globalization and financial markets are examined in the book Globalization in historical
perspective (pp. 121-188).
Journal of Applied Corporate Finance, 11(4), 21-35: Lev B. (1999). R&D and capital markets.