A Few Milestones in Dhaka Stock Exchange in 2010: The year 2010 was definitely a golden year in the history

of stock market of Bangladesh, when the benchmark indices moved up almost 80 per cent in curse of the entire calendar year. However, for the primary market, the scenario turned out to be a little mixed in Bangladesh. Capital market also continued to rally handsomely in 2010 even though U.S and European market had to recover from recession effect. The market capitalization to GDP ratio has been increased over the year from 30% to 50%. DSE General Index (DGEN) has gained its peak at 8,918.51 point in December 5, 2010 and the lowest value was at 4,568.40 point. Over the year, DGEN increased 82.78% and reached at 8,290.41 point at the end of the year. The total market capitalization of all shares and debentures (excluding t-bills and t-bonds) of the listed securities at the end of December, 2010 also stood higher at USD 49.4 billion, indicating a gain of 84 percent which was higher than USD 26.8 billion at the end of December, 2009. The total turnover has increased from USD 0.13 billion to USD .25 billion which indicates a 91% growth. Along with other factors, at least a portion of the upward movement of the market can be explained by the inadequate number of securities and huge fund flow in the capital market. The market was not able to uphold its bullish position from the beginning of December, 2010. Major changes in stock market in 2010: The calendar year 2010 was a historic year in Bangladesh in which the stock market went through some breakthrough changes, to transform the functioning of capital markets in the country. These included: 1. Removal of all the paper shares from the stock exchanges and replacement of same by demat transactions. 2. Introduction of Book building method for the first time. 3. Making compulsory submission of quarterly Financial Statements by the listed companies, almost in line with other countries, to help investors gain more knowledge of the listed companies. 4. Fixing the tenure of Closed-end mutual funds. 5. Allowing mutual funds to participate in the Book Building process. 6. Government started offloading of SOEs (State Owned Enterprises) shares through a plan of disinvestment to ensure better funds generation by government. 7. Imposition of Ten per cent Capital gain tax on institutional investor. 8. Highest number of SEC directives issued. These transformations have put the Bangladesh stock market on a fast forward track, particularly inviting institutional confidence from FIIs in putting funds in Bangladesh stock markets due to higher corporate transparency and improved compliances and governance in place in markets. Sector performance During the year under review, all the sectors experienced an upward trend. As per the sector indices, Life insurance sector was the highest gainer providing 170% return. The other notable sectors - General Insurance (114.45%), Foods and Allied (154.74%), Engineering & Electrical Sector (122.12%), Bank (125.29%) and Leasing & Finance (156.29%) - doubled during the twelve months. Mutual fund was the least performer during the year which was 0.2%.

Bangladesh stock market faces biggest crash in 55 years:

If we would recall, Dhaka Stock Exchange Gen. Index (DGEN) soared to its highest levels from October to December last year, with the peak on Dec. 5, 2010 at 8,918 points. DSEs index on Jan. 3, 2010 was at 4568.40 and went up at a staggering 4,350 points or 95.23% increase! But 2 weeks ago, Jan. 10, 2011, trading on the Dhaka Stock Exchange was halted after it fell by 660 points, or 9.25%, in less than an hour, the biggest one-day fall in its 55-year history. Police and angry retail investors clashed after the stock market suffered huge losses.

Reasons for Stock Market Crash:

1. Because of power and infrastructure shortages most entrepreneurs could not invest in the real sector (meaning industries). 2. Bangladesh was having current account surpluses (huge remittance flows). So more money was coming in than going out.
3. Interest rates went down. So, it was not a good idea to get around 8.5% interests per year

(before tax) when inflation was around 5-7%.So suddenly, people had a lot of idle money which they were unable to invest anywhere. Anywhere except the stock market that is. Thus the joyride of equities (stocks) began and that situation is still continuing. Because of this excess flow of funds by both general investors as well as institutions (Banks, NBFI's and Insurance companies), multiple attempts by the regulator failed to cool down the market. I can't blame anyone because no alternative investments were available. Plus, when you can earn 30% return in 7 days why would someone invest elsewhere? 4. Worst IPOs in 2010.
5. Laid down a limit for investment by the banks and other financial institutions in the

stocks. 6. Merchant banks and Brokerage houses provide increased margin loan. 7. The market through direct listing or book building method was too pricey from the very beginning. 8. Market P/E (trailing) is around 30 at the moment. This is probably amongst the highest in the world right now. High P/E's can only be justified when you expect superior earnings growth. But that is not the case here. The best companies in BD over the last 10 years have experienced earnings growth of about 20%. For 20% earnings average, the market P/E should be around 20 and not 30 (which it is at the moment). 9. The P/E is calculated using the earnings reported by the companies. However, not all of these earnings figures earnings. Especially for banks and non bank financial institutes a large portion of income is coming from one-off equity gains that might not be repeated in the future years. 10. IPOs at premiums higher than the justified ones. 11. Heavy involvement in stock market by the Commercial Banks.
12. Policies to minimize the exposure of banks in the stock market were taken in 2010.

13. The banks and other big investor institutions withdrew the capital from the market, the panic ensued. 14. Financial literacy or poor knowledge about the Stock market.
15. Due to the rumors in the stock market.