Forma # 1.ai - ICAB

State of the Bangladesh Economy
in Fiscal Year 2010-1011
Mr. M. Farhad Hussain FCA
Acknowledgement
The CPD IRBD 2010‐11 team
would like to express its profound
gratitude to Professor Rehman
Sobhan, Chairman, CPD for his
advice and guidance in preparing
this report. The team gratefully
acknowledges the valuable
contribution of Ms Anisatul
Fatema Yousuf, Head and
Director, Dialogue &
Communication Division, CPD
and her colleagues at the Division
in preparing this report.
Contribution of Administration &
Accounts Division is also highly
appreciated. Support of Mr A H M
Ashrafuzzaman, Senior System
Analyst and Mr Hamidul Hoque
Mondal, Senior Administrative
Associate is particularly
appreciated. The team would like
to appreciate the valuable support
it has received in accessing
relevant data and information
from concerned officials
belonging to a number of
institutions including Bangladesh
Bank, Bangladesh Bureau of
Statistics (BBS), Bangladesh Power
Development Board (BPDB),
Board of Investment (BoI),
Department of Agricultural
Extension (DAE), Dhaka Stock
Exchange (DSE), Export
Promotion Bureau (EPB), Ministry
of Food and Disaster
Management (MoFDM), Bureau
of Manpower, Employment and
Training (BMET), National Board
of Revenue (NBR), Petrobangla,
and Planning Commission.
Recent Trends in the
Capital Market
The capital market in Bangladesh
is increasingly coming under
scrutiny as it is detracting from its
core purpose i.e. raising equity
for industrial activities. It is
maintained that recent growth in
the capital market is difficult to
relate to the growth of real
economy, rather it is indicative of
inadequate investment
opportunities in productive
sectors, short‐term speculative
trading behavior underpinned by
market irregularities and
anomalies, weak oversight
functions of regulatory bodies and
poor policy framework for the
financial sector. From this
perspective, four key issues may
be highlighted in the context of
the current state of affairs in the
sector. These are: a) lack of
investment opportunities in
productive sector; b) poor
governance in the capital market;
c) market manipulation; and d)
anomalies in the financial sector.
Since FY2005‐06, stock market
related indicators have registered
significant rise66; these trends
have continued in FY2010‐11.
Between July 2010 and December
2010, DSE General Price Index
(DGEN) has registered a growth of
34.7 per cent, market
capitalisation has increased by
29.5 per cent and Price Earnings
(P/E) ratio has increased to 26.3
(Table 11). Overall market
capitalisation at the end of
December, 2010 was as high as
51.5 per cent of GDP, which was
38.5 per cent of GDP even in
June, 2010. Market related factors
such as issuance of the highest
number of Initial Public Offerings
(IPOs) in FY2009‐1067, entry of
large number of small investors in
the market with large volume of
liquidity and revealed market
anomalies in an inefficient market
can only explain a part of this
growth.
22
January - March 2011
The Bangladesh Accountant