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Group Presentation

on
Financial market indicators of
Bangladesh
Principal of Finance
(EIB-508)
Prepared for
Mohammad Rakib Uddin Bhuiyan
Associate Professor
International Business
University of Dhaka

Prepared by
Manush Dhar, Id:801827022
Ridwan Bayezid, Id:801925022
Nur-E-Makshud, Id: 801928023
Nurnobi Raja, Id:801928028
Sajib Chandra Roy, Id: 801928036
Introduction:
Overview of Financial system of
Bangladesh:
The financial system of Bangladesh is comprised of three broad fragmented sectors:
 Formal Sector,
 Semi-Formal Sector,
 Informal Sector.
The sectors have been categorized in accordance with their degree of regulation.

The Formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions
(FIs), Insurance Companies, Capital Market Intermediaries like Brokerage Houses, Merchant
Banks etc.; Micro Finance Institutions (MFIs).
The Semi formal sector includes those institutions which are regulated otherwise but do not
fall under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange
Commission or any other enacted financial regulator. This sector is mainly represented
by Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli
Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non Governmental
Organizations (NGOs and discrete government programs.
The Informal sector includes private intermediaries which are completely unregulated.
Financial Market:
 Markets in the financial sectors are fundamentally places where investors or
lenders and borrowers come together to exchange financial assets.
 Here, investors or lenders posses funds that they are willing to invest in return for
a profit.
 And, borrowers take funds for any given reason.
Financial System:
Types of Financial Markets in
Bangladesh:

Capital Market Money Market Foreign Exchange Market Derivatives Market


Savings & investment Short term & highly An Over-the-country Derivatives are essentially
based securities are liquid investment market for the trading of products that derive their
transferred from decisions are made currencies. This market value from changes in the
suppliers of capital between borrowers determines the foreign future price of another
to buyers and users and lenders. exchange rate. underlying entity.
of capital.
Capital Market:
Definition:
Capital market is a market where buyers and sellers engage in trade of financial securities like
bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and
institutions. Another way, Capital markets help channelize surplus funds from savers to
institutions which then invest them into productive use. Generally, this market trades mostly in
long-term securities.

In the capital market, both equity and debt instruments, such as equity shares, preference
shares, debentures, zero-coupon bonds, secured premium notes and the like are bought and sold,
as well as it covers all forms of lending and borrowing.

Types of Capital Market


The capital market is bifurcated in two segments,
 Primary market
 Secondary market
Primary Market: Otherwise called as New Issues Market, it is the market for the trading of
new securities, for the first time. It embraces both initial public offering and further public
offering. In the primary market, the mobilization of funds takes place through prospectus, right
issue and private placement of securities.
Secondary Market: Secondary Market can be described as the market for old securities, in
the sense that securities which are previously issued in the primary market are traded here. The
trading takes place between investors, that follows the original issue in the primary market. It
covers both stock exchange and over-the counter market.
Core Capital Market of Bangladesh:
 Dhaka Stock Exchange
 Chittagong Stock Exchange

Indicators of Capital Market of Bangladesh:


Comments:
According to the data-
 The capital market of Bangladesh was quite active
 The financial sector’s performance was beyond expectation
 Performance of Banks was not satisfactory
 No responsible trading seen on the insurance sector
 Mutual Funds needs the governance of the authorities
 Low Paid-up Company needs the governance and surveillance of the authorities
considering present market activities
Bangladesh Money Market:
 Money market is the center of dealing in short term monetary assets like bill of
exchange, short term govt. securities and other short-term loans.
 It basically refers to a section of the financial market where financial
instruments with high liquidity and short-term maturities are traded.

Instruments of money market:


 Treasury Bills (T-Bills)
 Certificate of Deposits (CDs)
 Commercial Papers (CPs)
 D. Banker's Acceptance
 Repurchase Agreements (Repo) etc
Statistical indicators:
Drawbacks of Bangladesh’s Money Market:
 Absence of Integration
 Multiple rate of interest
 Insufficient Funds or Resources (waste of short term business opportunities!)
 Shortage of Commercial Bill
 Shortage of Investment Instruments
 Lack of Organized Banking System (Std Chartered)
 Less number of Dealers

Comments:
 The central bank controls the entire operation of the organized sector of the money market.
 Some problem due to unorganized the money market of Bangladesh have been seen there
which are arising for the liquidity crisis, non-performing loans, growing gap between lending
and deposit growth, widening current account deficit, a distortion in the interest rate market
and a lack of skilled manpower.
Indicators on Bangladesh Foreign
Exchange Market:

 Major Indicators:
 Exchange Rates
 Inflation Rates
 Interest Rates
 Level of activity & employment

 Remittances
 Foreign Exchange Reserves
 Foreign Exchange Regulations (Foreign Exchange Regulation Act 1947)
Exchange Rates:
Remittances:
Have a stabilizing effect on the foreign exchange market.
Average (2014 – 2019) : 1202.85 Million USD/month.
Foreign Exchange Reserves of Bangladesh:
Steadily Increasing.
Current : 32235.70 Million USD (February, 2019)
Other indicators:
Comment:
The foreign exchange market of Bangladesh has been going through volatility. In the last 2
years, the inter-bank exchange rate of USD has risen almost 6 points, from Tk78.88
(January,2017) to Tk84.35 (April,2019).
The goal should be to stabilize the market.
Financial Derivative Market of
Bangladesh:

Multinational
Market for A futures contract
corporations
Derivatives is almost to manage
utilizing futures and
non-existent exchange-rate risk
forward contracts
Derivative Products:

Instruments • Forward contracts ,Forward rate


agreements
mostly used for • Future contracts
hedging price • Options
risks • Swap, Swaptions and synthetic assets

• Forwards
Four main types • Futures
of derivatives • Options
• Swaps
contracts
Roles Of Derivative Market:

Market Efficiency:
Risk Management : exploiting any profit
opportunities that arise from the
keeping risk at a desired level
discrepancy in prices of the
identical assets
Derivative
Market

Price Discovery : investors Operational Advantages


expectation of future prices
Comments on the Derivative Market of
Bangladesh:
 Financial Derivative Products are considered to be
risk hedging instruments
 Bangladesh has a few number of derivative
products such as securitization, certificates of
deposits, commercial paper
 Lots of growth opportunities for derivative
products
Conclusion:
Financial Market of Bangladesh is still in its primitive state. Government has to
implement proper regulation to ensure its growth and long term sustainability.
Governing and regulatory bodies has to be given more power to safeguard its future.

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