An Overview of Bangladesh Stock Market.

Abstract

The stock market plays various roles in an economy. It acts as an intermediary between surplus units and deficit units of the economy and facilitates savings into investments. Also by providing liquidity of these in vestments, the stock market ensures optimum allocation of resources. All these activities make it the engine for the growth of the economy. Stock market in Bangladesh is not yet to play its potential role as a vehicle for financing long term investment. However, the hangover of an unpalatable historical past which saw a dramatic plunge in the second half of 1996 and starting of 20 II only to be followed by a drastic downswing has been successfully trying to overcome. A number of actions from the regulatory bodies were the mam reason of losing public confidence from the stock market. Frequently changing the policy and poor response of institutional investors, merchant banks and commercial banks in the crisis period make the market unstable. It is surprising that "excess liquidity" has suddenly disappeared. It was available there in the market before demand for shares had exceeded supply thereof. It resulted into over-heating of the market several weeks back. Overheating of the market did not happen in one day or one week or one month; it happened during the last several months. "Shortage of liquidity" has caused the present market crash, with supply of securities far outstripping demand for the same. But such a shortage of liquidity is the effect of "over regulation" by Securities and Exchange Commission (SEC), the stock market regulator,and Bangladesh Bank (BB), the monetary watchdog, due to their not regulating in a right way it the right time.