Presentation

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Analysis of basic parameters of stock Highlighting DSE

Muhammad Jakir HossainID No:513132037

PreliminariesA stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by companies, unit trusts, derivatives, pooled investment products and bonds.To be able to trade a security on a certain stock exchange, it must be listed there.

Background of Dhaka Stock ExchangeEast Pakistan Stock Exchange Ltd was finally named as Dhaka Stock Exchange (DSE) on 14 May 1964.Although incorporated in 1954, formal trading started in 1956.Prior to independence in 1971, the number of listed companies in DSE was 196 with a total paid up capital of Tk. 4 billion.The total number of listed securities is now 378.

Policies of Dhaka Stock Exchange (DSE)

DSE can introduce automate monitoring systems that may control price manipulation, malpractices and inside trading.It can make sure all the listed companies publish their annual reports with actual and proper information that can ensure the interest of the investors.To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting.To make arrangement to set up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors.More banks, insurance companies and other financial institutions should be encouraged to deal in share business directly.The management of DSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms.

Functions of Dhaka Stock Exchange (DSE)

Listing of CompaniesProviding the screen based automated trading of listed SecuritiesSettlement of tradingGranting approval to the transactionMarket Administration & ControlMarket SurveillanceTo train the investors about fundamentals to deal in share transactions.To punish the member brokers for breaching of contract.

Nature of Dhaka Stock Exchange

Public Market:Only trading of market lot share is done here through automatic matching. Spot Market:Spot transactions are done here through automatic matching which must be settled within 24 hours. Block Market:A place where bulk quantities of shares are traded through pick and fill basis. Odd Lot Market:Odd lot scripts are traded here based on pick and fill basis.

Listed Companies in DSE

Last One Year Performance of DSE

Basic market parameters

Stock parameter is the factors that eventually control the stock price at the stock exchange. A better understanding of these parameters will help you to trade in stocks. Here we are presenting definitions of some of the most important parameters:

Face Value Face value of a stock represents the nominal value that the issuer of the stock decided for that stock.Book Value - Book Value of stock is determined by dividing the net worth of the company divided by the number of shares outstanding. The net worth of the company is total asset of the company minus the liabilities.Market Price Market price indicates the last traded price at a particular stock exchange where the stock is listed at a given day.Market Capitalization market capitalization of company is determined by multiplying the market price of the stock with the total number of issued and outstanding stock in the market.

Basic market parameters(contd)

Volume Volume of stock is average of total traded stocks at the exchange over a period of time.Earnings per share - EPS is determined by dividing the net profit of the company, the aggregate net profit of the last four quarters, by fully diluted equity capital.Price to Earnings Ratio (P/E) P/E ratio is determined by dividing the closing price of a stock with the Earning per Share or EPS of the stock.Beta Beta shows the sensitivity of stock to the market. It indicates how much the scrip moves at a unit change in the market. The Beta for a stock can be negative or positive. When the Beta for a stock is negative it means that the share moves in the opposite direction that of the market.

Recent market highlights of top 20 shares

Recent market highlights of top 20 shares(contd)

Recent market highlights of top 20 shares(contd)

Problems and Limitations of Dhaka Stock Exchange

Price ManipulationIt has been observed that the share values of some profitable companies have been increased fictitiously some times that hampers the smooth operation of DSE.Delays of settlementFinancing procedures and delivery of securities sometimes take an unusual long time for which the money is blocked for nothing.Irregular payment dividendsSome companies do not hold Annual General Meeting and eventually declare dividends that do not reflect the real or actual financial positions of the company and ultimately shareholders become confused. Selection of membershipSome members being the directors of listed companies of DSE look for their own interest using the internal information of share market.

Problem and Limitations of Dhaka Stock Exchange (contd)

Improper Financial Statement Many companies of DSE do not focus real position of the company as some audit firms involve in corruption while preparing financial statements. As a result the shareholders as well as investors do not have any idea about position of the company.Technical problems and political infightingThe concept of centralization of securities market has not been implemented that arises technical problems and political infighting. Lack of skilled manpowerIn DSE as well as financial and non financial institutions involved in the securities market. The lack of proper policyAbsence on framework that provides incentives and protection to investors.

Suggestions to improve the activities of DSE

Re-establishment of Security Exchange Commission is highly necessary at this moment. SEC is supposed to have honest, skilled, knowledgeable, clean imaged people.DSE is composed of 25 members board. There are 12 members of stock broker and 12 of dealers and the rest is chief executive officer. So board members are the market player and controller as well. So it is easy for them to manipulate market. So Demutualization is needed now.There should be a supportive atmosphere between Dhaka Stock Exchange Ltd (DSE) and Security Exchange Commission (SEC). Their goal should be the same to work for the betterment of the market.Bangladesh bank should impose bar or circular on the investment criteria for the private banks and other financial institutions. Conducting in-depth investigations based on preliminary enquiries/analysis made into trading of the scrip. In case of irregularities observed , necessary actions are initiated or investigation case forwarded to SEC, if necessary through the CEO.

Suggestions to Improve the Activities of DSE(contd)To force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors.To introduce automated monitoring system that may control price manipulation, malpractices and inside trading. There should be a new regulation for the placement business on the eve of pre-IPO state.To introduce full computerized system for settlement of transactions.To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting.The department may issue verbal/ written warning to member/s when market irregularities in the scrip are suspected. The department, through the CEO, imposes penalty or suspend the member/s who are involved in market irregularities, based on the input/ evidence available from investigation report.To take remedial action against the issues of fake certificates.To punish the member brokers for breaching of contract.

Suggestions to Improve the Activities of DSE(contd)Strengthening market regulation and supervisionDeveloping the capital market infrastructureModernizing capital market support facilitiesIncreasing the limited supply of securities in the marketDeveloping institutional sources of demand for securities in the market and Improving policy coordination. Liaising with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in selected News Papers.Comments received from the companies are disseminated to the market by way of online news bulletin. Investigations based on rumor verifications are carried out, if required, to detect cases of suspected insider trading.

Concluding remarkThe market is still struggling to be stable.Market is trying to recover from its bearish mood but we have observed still much confusion, lack of cooperation among the government, DSE members, and regulators. All are waiting for a stable market so that investors get confidence to put their valued money in this market. I think it is the high time government should sit with all the elements of capital market and take proper steps to stabilize the market for the greatest interest of the small investors as we know they are heart of this market.

THE END

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