Messages

1

Capital Market / What is the difference between Economic Development vs. Economic Growth?

« on: June 03, 2018, 10:38:53 AM »

Economic Development vs. Economic Growth

Economic Growth is a narrower concept than economic development. It is an increase in a country's real level of national output which can be caused by an increase in the quality of resources (by education etc.),increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy. Economic Growth can be measured by an increase in a country's GDP (gross domestic product).Economic development is a normative concept i.e. it applies in the context of people's sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affects productivity and could lead to Economic Growth. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment. It implies an increase in the per capita income of every citizen. Economic Growth does not take into account the size of the informal economy. The informal economy is also known as the black economy which takes the unrecorded economic activities. Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming. Sustainable growth can be transformed in to economic development. Economic growth is a necessary but not sufficient condition of economic development.

Sources: http://www.differencebetween.info/difference-between-economic-growth-and-economic-development

2

Capital Market / What is the overview of stock exchange in Bangladesh?

« on: June 03, 2018, 10:32:30 AM »

Overview of stock exchange in Bangladesh

Introduction: Capital Market mainly refers to the Stock and Share market of the country. When bank-ing 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 stock market, 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.
Bangladesh    capital market is one of the smallest in Asia but the third largest in the south Asia region. It 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 materialized securities in CSE and DSE.

History of Stock Exchange:
Dhaka Stock Exchange was setup on 28th April, 1954 that started formal trading on early1956.  Post–independence government did not promote a capital market during the first five years, and it was activated again in 1976 with 9 issues on board. In 1995, a second course, the Chittagong Stock Exchange, was setup with sophisticated logistic support and modern management.
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 thanes.
•   Introduce Book Building system in Bangladesh capital market.
•   Introducing derivative market
•   Continuous promotion of stock investment throughout the country.
•   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 investor’s interest;
•   Provide a fully automated trading system with most modern amenities to ensure: quick easy, accurate transactions and easily accessible to all;
•   Attract non-resident Bangladeshis to invest in Bangladesh stock market;
•   Attract foreign institutional investors to invest in Bangladesh

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.
Functions:
The functioning of an efficient capital market may ensure smooth floatation of funds from the savers to the investors. When banking system cannot meet up the total need for funds to the market economy, capital market stands up to supplement. To put it in a single sentence, we can therefore say that the increased need for funds in the business sector has created an immense need for an effective and efficient capital market. It facilitates an efficient transfer of resources from savers to investors and becomes conduits for channeling investment funds from investors to borrowers. The capital market is required to meet at least two basic requirements: (a) it should support industrialization through savings mobilization, investment fund allocation and maturity transformation and (b) it must be safe and efficient in discharging the aforesaid function. It has two segments, namely, securities segments and non-securities segments.



Function of DSE                                                                                                            
The major functions are:
– Listing of Companies. (As per Listing Regulations).
– Providing the screen based automated trading of listed Securities.
– Settlement of trading.(As per Settlement of Transaction Regulations)
– Gifting of share / granting approval to the transaction/transfer of share outside the         trading     system of the exchange (As per Listing Regulations 42)
– Monitoring the activities of listed companies. (As per Listing Regulations).
– Investors grievance Cell (Disposal of complaint bye laws 1997).
– Investors Protection Fund (As per investor protection fund Regulations 1999)
– Announcement of Price sensitive or other information about listed companies through         online.
 Mission of DSE:
 The Dhaka 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 of the economy.
OBJECTIVES OF DSE:
The prime objective of the DSE is to create a nation-wide stock market also beyond the national boundary, which will simultaneously act as a platform for industrial entrepreneurs and general investors. Explicitly the objectives of DSE are
Following:
1        To develop a strong platform for the entrepreneurs for raising capital.
2        To provide an investment opportunities for small and large-scale investors.
3        To develop a transparent market ensuring investors interest.
4        To provide a fully automated trading, Clearing and settlement system to ensure   quick, easy, accurate and easily accessible to all transactions.
5        To attract non-resident Bangladeshis to invest in Bangladesh Stock market.
6        To attract foreign institutional investors to invest in Bangladesh stock market.
7        To collect, preserve and disseminate data and information on stock market.
8        To develop a corporate culture through mandatory corporate membership.

Vision of CSE:
Aspire a global standard transaction place of securities and financial product.

Mission of CSE: Practice a set of core values to build competency in compliance, diversification and technology so that an accessible platform, market confidence and wealth maximization scope can be ensured.
Core values
•   Value for people
•   Transparency
•   Excellence
•   Harmony
•   Commitment
•   Integrity
Objectives of CSE
•   Increase business turnover
•   Modernize trading system
•   Ensure effective relationship management
•   Achieve high level of confidence & professionalism
•   Engage in product and market diversification
•   Contribute to capital market policy development
•   Ensure exchange related quality services


Sources: https://www.bb.org.bd/fnansys/capmarket.php
https://www.dsebd.org/
http://www.cse.com.bd/

3

Capital Market / Why capital market is important for economic development of Bangladesh?

« on: June 03, 2018, 10:09:38 AM »

Capital Market Important for Economic Development of Bangladesh

Importance of Capital Market in the economy: The capital market is the market for long-term loans and equity capital. Developing countries in fact, view capital market as the engine for future growth through mobilizing of surplus fund to the deficit group. An efficient capital market may perform as an alternative to many other financing sources as being the least cost capital source. Especially in a country like ours, where savings is minimal, and capital market can no won-der be a lucrative source of finance. The capital market also helps increase savings and investment, which are essential for economic development. An equity market, by allowing diversification across a variety of assets, helps reduce the risk the investors must bear, thus reducing the cost of capital, which in turn spurs investment and economic growth. However, volatility and mar-kept efficiency are two important features which will ultimately determine the effectiveness of the stock market in economic development. If a stock market is inefficient due to insufficient informational supply, investors face difficulty in choosing the optima-al investment as information on corporate performance is slow or less available. The resulting uncertainty may induce investors either to withdraw from the market until this uncertainty is resolved or discourage them to invest funds for long term. Moreover, if investors are not rewarded for taking on higher risk by investing in the stock market, or if excess volatility weakens investor’s confidence, they will not invest their savings in the stock market, and hence deter economic growth. The emerging stock markets offer an opportunity to examine the evolution of stock return distributions and stochastic processes in response to economic and political changes in these emerging economies.

Functions: The functioning of an efficient capital market may ensure smooth flotation of funds from the savers to the investors. When banking system cannot meet up the total need for funds to the market economy, capital market stands up to supplement. To put it in a single sentence, we can therefore say that the increased need for funds in the business sector has created an immense need for an effective and efficient capital market. It facilitates an efficient transfer of resources from savers to investors and becomes conduits for channeling investment funds from investors to borrowers. The capital market is required to meet at least two basic requirements: (a) it should support industrialization through savings mobilization, investment fund allocation and maturity transformation and (b) it must be safe and efficient in discharging the aforesaid function. It has two segments, namely, securities segments and non-securities segments.

Sources:https://www.bb.org.bd/fnansys/capmarket.php