Research, IDLC Investments Ltd.
2011
CAPITAL MARKET REVIEW
Trading session
stopped the progress
after losing 587 points
within 5 minutes
Publication of
share market
scam report
New monetary policy
statement made
investors conservative
Amendments in
proposed budget
regarding allowing
undisclosed money to
the capital market
IMF & WB concern
over the
Stabilization Fund
Prime
Minister’s
meeting with
stakeholders
Record fall of 635
Points & largest
single day hike of
1012 points
Approval of
BDT 50
billion worth
Bangladesh
Fund
IMF concern on BD Fund
& Govt.’s firm position
against black money
whitening, imposing tax
on capital gains & TIN
against BO a/c
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SEC reformation &
extension of the deadline
for banks to trim down their
single borrower exposure
limit
Depressing HY1
earnings & investors
panic regarding
SEC’s vow to legal
actions against
manipulators
AIT reduction, tax
rebate, extension of
adjustments time,
declaration of
Stabilization Fund
SEC
declared a
multi level
incentive
package
Sponsors’
buy fueled
investors
hope
Research, IDLC Investments Ltd.
January 30, 2012
Research, IDLC Investments Ltd.
Bangladesh capital market flipped in FY11 after a steep rise in FY10. Against 83% return in 2010, DSE General Index lost 36.6% in
Bangladesh
Capital Market in FY11- a changing landscape
2011. DGEN loss was severe but more disastrous upshot of BD capital market of FY11 was “Loss of Confidence” among investors.
Bangladesh capital market flipped in FY11 after a steep rise in
FY10. Against 83% return in 2010, DSE General Index lost
36.6% in 2011. DGEN loss was severe but more disastrous
upshot of BD capital market of FY11 was “Loss of Confidence”
among investors.
The bubble created during FY10 without any major correction,
finally burst on December 19, FY10 while DGEN witnessed the
steepest till date single day fall of 552 points or 6.7% to 7,654
since FY09. The down slope of the index continued till January
10, 2011, with frequent record sets and breaks. Market
observed record fall of 635 points & largest single day hike of
1012 points in two consecutive days. To stabilize the market,
SEC took several initiatives like increasing the margin loan ratio
and allowing netting facilities to nonmarginable shares. But
free fall of all indices continued and market outlook appeared
grim with fear when on February 28, 2011, DGEN closed at
5203, a new low, with paltry turnover of BDT 4894 million.
Though news of imminent formation of open-end mutual fund
for BDT 50.0 billion to be sponsored by state-owned
institutions aimed at stabilizing the capital market, helped to
prevent further fall, the momentum did not last long. Govt’s
pre-budget firm position on not allowing money whitening
through the capital market, probability of imposing tax on
capital gains and submission of TIN certificate against BO
account fueled the steep fall of DGEN.
Completion of long awaited SEC reformation and news on
extension of the deadline for banks to trim down their single
borrower exposure limit to December, 2011 from August,
2011 had set some affirmative futuristic inhalation in late May.
Amendments in the proposed budget, especially regarding
allowing undisclosed money to the capital market and other
potential positive changes stimulated to continue a positive
trend in June also.
DSE at a glance
2010
2011
Change
243
4,009,913
235
1,560,912
-61%
16,434
6,642
-60%
818
41.25
849
30.77
4%
-25%
35.68
23.84
-33%
8,290
6,878
5,205
445
218
5,258
4,384
3,910
501
232
-37%
-36%
-25%
56
14
31
37
6
Total Number of Corporate Bonds
2
3
Total Newly Listed Securities
21
8
Market Capitalisation to GDP (Ratio)
50.67
33.23
Source : DSE Monthly Review & Research, IDLC Investments Ltd.
1
-34%
Total Trading Days
Total Turnover value (BDT mn)
Daily Average Turnover value (BDT
mn)
Average Volume (bn)
Market Capitalisation (USD bn)
Market Capitalization: Equity
portion (USD bn)
DSE General Index (DGEN)
DSI Index
DSE 20
Total Number of Listed Securities
Total Number of Companies
Total Number of Mutual Funds
Significant Corporate Activities in FY11
13 new scrips made their debut.
Keya Cosmetics and Keya Detergent merged in May.
BEXTEX and BEXIMCO amalgamated in July.
Indian High court passed judgment in Lafarge’s favor in August.
Bangladesh fund had been launched on October 11.
Uniform Face value was implemented on December 04.
Source : Research, IDLC Investments Ltd.
Free Float Index change
2-Jan-11
29-Dec-11
Change
Large Cap
98.34
59.44
-39.55%
Mid Cap
98.93
58.52
-40.85%
Small Cap
99.28
58.69
-40.88%
Mini Cap
99.78
64.58
-35.28%
Micro Cap
99.24
73.56
-25.87%
Source : Research, IDLC Investments Ltd.
The depressed mode of market took place in late July again
and continued throughout September, as investors panicked
from SEC’s vow to legal actions against suspected investors.
Investor pessimism, a weakening financial system, liquidity
shortage all pushed toward the fall. Following investor
activism on the street, regulatory bodies took certain
measures to stabilize the market, of which relaxation of
adjustment timeline for single borrower exposure of merchant
2|Page
Research, IDLC Investments Ltd.
bankers (from Dec 2011 to Dec 2012) was mentionable.
Several stakeholders of capital market also took active steps to
improve market. Especially, move taken by Bangladesh
Association of Publicly Listed Companies (BAPLC) to mitigate
the margin loan crisis, draw investors’ attraction.
Following meeting with NBR, merchant banks, brokerage
houses and other stakeholders, several stimulatory
announcements were made. Among these include income tax
rebate on stock market investment, lower taxes on mutual
funds and halving of taxes on brokerage commission. Banks
agreed to infuse funds into the drying stock market, and
Bangladesh Association of Bankers (BAB) announced formation
of Market Stabilization Fund. However, the market seemed a
bit unsure as to the success of proposed steps and as no
immediate impact was seen, investor confidence eroded
further. Negative observation from World Bank and IMF only
made the erosion faster.
Regional markets
Country (index)
Bangladesh (DGEN)
India (BSE 30)
Taiwan ( Taiwan Weighted)
HongKong (Hang Seng)
Singapore (Straits Times)
Thailand (SET)
Malaysia (KLSE Composite)
Pakistan (Karachi 100)
Srilanka (CSE All Share Index)
Source : DSE Monthly Review
3|Page
YTD %
change in
Index
Dec,
2010
PE
Dec,
2011
PE
-36.6%
-34.7%
-24.0%
-19.2%
-17.2%
-4.5%
-4.0%
-10.4%
-
30.94
23.89
15.00
20.00
16.00
15.00
18.00
9.00
24.69
13.62
17.61
13.00
10.00
11.00
10.00
15.00
8.00
15.82
Sector Index YTY change
Dec-10
Dec-11
Change
NBFIs
5885.48
Ceramics
1119.87
Textiles
3246.12
General Insurance
4246.70
Services & Real Estate
2998.20
Mutual Funds
1361.28
Miscellaneous
2376.07
Paper & Printing
3661.98
IT
2229.18
Engineering
4405.13
Banks
2765.52
Telecommunication
3422.97
Life Insurance
3143.99
Jute
5252.50
Fuel & Power
1869.32
Pharmaceuticals
1671.45
Cement
1897.61
Tannery
1976.05
Food & Allied
4167.84
Source : Research, IDLC Investments Ltd.
2415.55
577.96
1728.17
2370.45
1736.51
796.62
1432.09
2244.61
1384.98
2771.07
1804.64
2276.87
2105.63
3628.16
1298.98
1184.00
1356.49
1611.21
3489.72
-59%
-48%
-47%
-44%
-42%
-41%
-40%
-39%
-38%
-37%
-35%
-33%
-33%
-31%
-31%
-29%
-29%
-18%
-16%
Research, IDLC Investments Ltd.
On November 14, market saw DGEN breaking the
psychological support level of 5000, reaching 4877. Panic
spread further among already frustrated investors and the
effort to leave out before its too late only made the market
plunge at an accelerated pace. The depressed state of the
market and investors protest led the govt. to act on the issue.
Following up prime minister’s emergency meeting and finance
ministry’s meeting, finally SEC declared a multi level incentive
package on November 23, which consisted of short term, midterm and long term steps to stabilize the market. Among the
proposals, some of the major ones were requiring sponsors to
hold at least 30% stake, allowing Banks some flexibility in
capital market investment, opening up sell side research and
investment advisory service. Reaction was mixed among
investors, as investors were still uncertain as to the proper
implementation of the proposed steps.
Sector wise PE
Bank
Financial Institutions
Mutual Funds
Engineering
Food & Allied
Fuel & Power
Jute
Textile
Pharmaceuticals
Paper & Printing
Service & Real estate
Cement
IT
Tannery
Ceramic
Insurance
Tele
Travel & Leisure
Miscellaneous
Market P/E
Source : DSE Monthly Review
PE (Dec 10)
PE (Dec 11)
25.24
47.27
17.53
50.1
27.3
21.57
55.66
52.44
34.12
126.93
43.93
33.44
64.91
20.66
106.86
64.64
20.35
65.45
19.54
29.16
10.50
12.15
6.24
26.4
16.41
13.95
32.64
22.66
22.52
42.23
25.82
21.6
38.93
15.6
30.2
20.37
20.62
23.07
8.02
13.68
All shares with uniform face value of BDT 10 had been started
trading on December 04. In the very last week of 2011, market
showed a positive trend, primarily for the Sponsor’s buy. On
December 29, the last trading session of the year 2011, DGEN
ended at 5257.6.
While the steep escalation of DGEN could not be justified by
underlying fundamentals, restrictive monetary policy to curb
rising inflation and to arrest depreciation of local currency was
also instrumental behind acute fall of DGEN from December,
2010. Eroding confidence due to lack of consistency in the
policy measures and bleak economic outlook accentuated the
fall.
Name of IPOs/RPOs : FY 2011
Name of the IPOs/RPOs
Public Issue (BDT
mn)
MJL Bangladesh Limited
4,600
M. I. Cement Factory Limited
3,348
Bangladesh Shipping Corporation (RPO)
3,137
LR Global Bangladesh Mutual Fund One
1,500
Barakatullah Electro Dynamics Limited
1,200
EBL NRB Mutual Fund
750
Zahintex Industries Limited
500
Southeast Bank 1st Mutual Fund
500
MBL 1st Mutual Fund
500
AIBL 1st Islamic Mutual Fund
Subordinated 25% Convertible Bonds of BRAC Bank
Limited (RPO)
Rangpur Dairy & Food Products Limited
500
Reliance Insurance Mutual Fund
275
Salvo Chemical industry Limited
260
Deshbandhu Polymer Limited
Total issue size
300
294
160
17,824
Source : Research, IDLC Investments Ltd.
Disclaimer: This Document has been prepared and issued by IDLC Investments Limited on the basis of the public information available in the
market, internally developed data and other sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts
& information stated in the Document are accurate as on the date mentioned herein. Neither IDLC Investments Limited nor any of its director,
shareholder, member of the management or employee represents or warrants expressly or impliedly that the information or data of the
sources used in the Document are genuine, accurate, complete, authentic and correct. Moreover none of the director, shareholder, member
of the management or employee in any way be responsible about the genuineness, accuracy, completeness, authenticity and correctness of
the contents of the sources that are publicly available to prepare the Document. It does not solicit any action based on the materials contained
herein and should not be construed as an offer or solicitation to buy sell or subscribe to any security. If any person takes any action relying on
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