Do u want to knw abt our Capital mkt? Do u want to knw hw to invest in share mkt

[ashiqbest012]

Well, I am trying to start a new topic named Money market and Capital market and how/when to invest in the share market and present situation of the share market. As a student of BBA department and an investor of the share market, I will represent some of my ideas, feelings with you.

At first I will give you some idea about Money market and Capital market and about its instrument then I will directly go to the share market discussion.

Before stating this topic, I want to say something. Some semester before I didn't have any idea about our Capital Market and Money market in Bangladesh, although I am a student of the business department. Our lecturer tried to teach in different types of the term on  Capital Market and Money, but I used to memorize it. As a result, after a semester later I forgot everything, although I obtained "A+" or good result. Example If you ask yourself "what is the definition of Finance, Capital Market, common stock, bond, Mutual fund? I am sure that a very few students will give the appropriate answer, and somebody would not. On the other hand, If I ask you, how to use the mobile, how to play cricket, how to play computer game, I hope about 96% student will give the right answer. Why is it? Because Practice...Practice and Practice.

When you will choose Financial Institution and Market, Investment, Corporate Finance, Financial Analysis and Control, Bank Fund management etc courses, if you have a little idea about the capital market and money market, you can get the good result, and you can understand the term properly.

Market

In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them.

The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (like the NYSE) or an electronic system (like DSE or CSE). Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange.


Types of financial markets

There are two types of financial Markets. These are

1.   Money Market
2.   Capital Market

Money Market:

Money market a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and leading in the short term, from several days to just under a year.

In one sentence: You can convert into cash within a very short period of time and it is less riskier than Capital market.

Capital Market of Bangladesh

A market in which individuals and institutions trade financial securities. Organizations/ Institutions in the pubic and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets.

Capital markets are the financial markets that facilitate the funds for long-term use. There is no strict definition of long term, but the original maturity of the debt exceed one year, and usually the original maturity of the debt will be more than five years. Financial instruments with both intermediate term (one to ten years) and long term (more than 10 years) maturities are included in this category. The market for long-term funds where securities such as common stock, preferred stock and bonds are traded. Both the primary market for new issues and the secondary market for existing securities are part of the capital market also. Most long term borrowing in any economy is carried out by government and firms. When firms make new issue those securities in order to raise new funds for investment, they have to issue those securities on terms which make them attractive to the lenders.  

In one sentence: Dhaka Stock exchange(DSE) is a long term market where you can trade share. You have to remember that as DSE is the long term market so you have to invest your money for long term.

To be continued...

[Faiyaz]

I completely agree with Ashiq bhai. But just wanna include something, regarding market in course of economics. In economics market means a specific region or place where buyers and sellers interchange commodities with competing each other. That means it emphasizes more on the whole "economic environment" (as a buyer base like- jute market). It also emphasizes the persons who influences and lastly the functions like- setting the prices, delivery aspects etc...
But we tend to get confused with the term when we use it in marketing. In marketing it generally means the actual and potential buyers. The difference lies with the term, as one describes it directly and another indirectly. Just assume- if you and your friend are crossing across (for example) class 604, and the students are making much noise then you could either say "the students of class 604 is making noise" or you could say "a big noise is coming from class 604". Now the first way of expression is market in terms of marketing and the latter one, is in terms of economics.   

[ashiqbest012]

Thank you Mr. Faiyaz Naveed. You have nicely  defined the term of marketing with example in two ways.
Please always share your views like that. I like it.

I have just started this topic very simply without any complexity. 

[ashiqbest012]

At present existing Money market instruments in Bangladesh:

1.   Government treasury bills of varying maturity
2.   Certificates of Deposits (CD)
3.   Bankers Acceptance or L/C
4.   Repurchase agreement (REPOs) and Reverse REPO sect.

 
1.   Government treasury bills:

T-bill market is by far the largest component of the money market in Bangladesh. Treasury bill or T-bill is a short-term debt issued by a national government with a maximum maturity of one year. Treasury bills are sold at discount, such that the difference between purchase price and the value at maturity is the amount of interest. Although the maturity of T-bill shouldn't be more than one year, in Bangladesh, 2-year and 5-year securities are also regarded as T-bills. Treasury bills are fully guaranteed by the government and hence are free from default risk. The biggest reason that T-Bills are so popular is because they are one of the few money market instruments that are affordable to the individual investors.
 


Overview of Treasury bill in Bangladesh:

Treasury bills are short-term Government debt securities with maturity of a period less than one year. However, in Bangladesh, two and five year securities are also regarded as T-bills since they are zero coupon securities. They are the most well known of all Government securities. Treasury bills are designated by the number of days to their maturity. There are six types of T-bills that prevail in Bangladesh. These are 1) 28 days T-bill 2) 91 days T-bill 3) 182 days T-bill, 4) 364 days T-bill 5) 2 years T-bill 6) 5 years T-bill. Treasury bills are sold on a discount basis, which in simple terms means that we have to pay for the bills less the interest receivable during the term of the bill and receive the face value of the bill at the end of the period. Treasury bills are not listed at the Stock Exchange.



2.   Certificate of deposit:

Certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank”. They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years) and usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.


3.   Banker’s acceptance:

A banker's acceptance, or LC, is a negotiable instrument or time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the bearer of the draft. Upon acceptance, which occurs when an authorized bank accepts and signs it, the draft becomes a primary and unconditional liability of the bank. If the bank is well known and enjoys a good reputation, the accepted draft may be readily sold in an active market. A banker's acceptance is also a money market instrument – a short-term discount instrument that usually arises in the course of international trade.


4.   Repurchase agreement:

A Repurchase agreement (also known as a repo or Sale and Repurchase Agreement) allows a borrower to use a financial security as collateral for a cash loan at a fixed rate of interest. In a repo, the borrower agrees to sell immediately a security to a lender and also agrees to buy the same security from the lender at a fixed price at some later date. A repo is equivalent to a cash transaction combined with a forward contract. The cash transaction results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower.

Advantages of money market

Cost advantage

Banks must put aside their portion of deposit in the form of reserves that are held without interest at the Federal Reserve. For that they cannot invest the total portion of deposit amount. This means that it must pay lower interest rate to the depositors that if the full deposit could be reinvested. If the investors invest their fund directly in money market they may gate more interest from deposit in a bank. The bond issuer can borrow fund from public directly at lower interest rate than bank loan.


Fixed income security

Bond provides to the investors a fixed income security by giving periodic coupon payment that is higher than banks offer interest rate. After the maturity the bond issuer repay the bond face value to the investors.


Liquidity

Bond is considered especially government Treasury bond is more liquid assets. So investors can sale easily it in money market and collect money. If the corporate bond has an option of “convertibility”, its means the bond holder can convert his bond as company’s share after certain time period.


To be continued...

[goodboy]

 :)Ashiq bhai..............

the concept of money market is much more interesting for newly investors...............I wanna ask you "which concept should we try invest money?"..............

also preferably...........capital market is for professionals....... I assume...............which is more easier for new investors...............

Thanks for starting a beneficiary topic...................

[ashiqbest012]

Thank you Md. Abul Hossain Shajib for your interest.

Do you know one thing,  firstly, I analyzed the DSE market about 9 months before investing secondary market.

Yes, before investing secondary market, you have to consider two things one is the Fundamental analysis, and another is the Technical analysis. And You have to broad your network, always open your eyes, and you have to know the  different types of information from different medium or company AGM, otherwise you will be losser. 

You are right, this market is for professionals. I think, every person should not come in this market without knowing the share market. As you  see, investors always come to the street when the price of the share fell down. But this time I always enjoy it because this is the suitable time for investing money in the share market. I always search this opportunity. I disclosed with you one my secret.

Anyway, if you want to invest money in the share market, please invest to the Primary market first instead of Secondary market. Secondary market is very riskier for new investors or whom who always make influence from others. Always take info from reliable source otherwise you will be a loser.


Thank you

[ashiqbest012]

Capital Market

A market in which individuals and institutions trade financial securities. Organization/ Institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. This type of market is composed of both the primary and secondary markets.

Primary Market

A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

IPO – Initial Public Offering

An initial public stock offering (IPO) referred to simply as an "offering" or "flotation," is when a company (called the issuer) issues common stock or share to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. IPO is new shares Offered to the public in the Primary Market. The first time the company is traded on the stock exchange. A prospectus is issued to read about its risk before investing. IPO is a company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains. An IPO can be a risky investment.


To be continued...

[ashiqbest012]

Secondary Market

A market where investors purchase securities or assets from other investors, rather than from issuing company’s themselves. The stock exchanges - such as the Dhaka Stock Exchange and the Chittagong Stock Exchange are secondary markets. Secondary markets exist for other securities as well, such as when funds, investment banks, or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash proceeds go to an investor rather than to the underlying company/entity directly.

A newly issued IPO will be considered a primary market trade when the shares are first purchased by investors directly from the underwriting investment bank; after that any shares traded will be on the secondary market, between investors themselves. In the primary market prices are often set beforehand, whereas in the secondary market only basic forces like supply and demand determine the price of the security.
In the case of assets like mortgages, several secondary markets may exist, as bundles of mortgages are often re-packaged into securities like GNMA Pools and re-sold to investors.

The Over-the-Counter (OTC) Market

The over-the-counter market is, by far, the largest market. Almost every security—including bonds, derivatives, and currencies—are traded in the OTC market. It generally operates by phone or through electronic systems, where individual dealers or brokers list bid and offer prices. There are generally no listing requirements. When a broker or dealer wants to buy an OTC stock, he contacts the market maker listing that security. For stocks, there are 2 specific OTC markets, the OTC Bulletin Board and the Pink Sheets.

 A number of corporations may not choose to be listed on the organized exchanges. Shares in these corporations are over-the counter (OTC) stocks that are traded in decentralized markets. OTC trading volumes in countries have increased in recent years as more OTC stocks are traded in electronic networks that link traders around the world.

Organized Exchange

In organized exchange there rules and regulation is well recognized. Standardized securities are traded here. It has specific location and standardized product.  There are rules for trading, rules for listing and close observation or market monitoring watchdog. In organized exchange which securities are traded is less risky. Like DSE, CSE.

[ashiqbest012]

Capital Market Securities

There are four types of capital market securities are available in Bangladesh. The following types of securities are available on the stock market for investment:
•   Stock
•   Bond
•   Debenture
•   Mutual fund

Stock

In plain and simple, stock is share in the ownership of a company. Stock holders own a percentage of interest and stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether it shares, equity or stock, it all means the same thing. If the trend shows negative growth shareholder can sell instantly without having big loss. The first sale of stock by a company is called the initial public offering (IPO).

There are two main types of stock

•   Common stock: A type of security that signifies ownership in a company and represents a claim on part of the corporation’s assets and earning. It usually entitles the owner to vote at shareholders' meetings and to receive dividends
•   Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Bond

Long-term debt instruments representing the issuer’s contractual obligation. Bonds are fixed-income securities because the interest payments (for coupon bonds) and the principal repayment for typical bonds are specified at the time the bond is issued and fixed for the life of the bond. A bond is a formal contract to repay borrowed money with interest at fixed intervals.
•   Thus a bond is like a loan
•   The issuer is the borrower (debtor),
•   The holder is the lender (creditor), and the coupon is the interest.
•   Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.
•   Certificates of deposit (CDs) or commercial paper are considered to be money market instruments and not bonds.
•   Bonds must be repaid at fixed intervals over a period of time.

Corporate Bonds

Corporate bond is the long term debt issued by private corporations typically paying semi-annual coupons and returning the face value of bond at maturity. Corporations may wish to fund capital expansions by borrowing instead of by issuing stock. One way to borrow is by issuing corporate bonds, which are long term debt instrument issued by corporations. A typically corporate bond pays a fixed amount of interest in the BD govt. twice each year until maturity. Some corporate bonds are convertible, meaning that the holder has the right to convert them into certain number of equity shares prior to maturity. Corporations that offer such a convertibility feature usually do so to make the bonds more attractive to potential buyers.

Municipal Bonds

Long-term securities issued by state and local governments are called municipal bonds. An attractive feature of these bonds for many holders is that the interest payments the holders receive typically are tax-free. Consequently, the stated interest rates on municipal bonds are lower than the rates on corporate bonds. Most municipal bonds contain a call provision, which allows the issuer to repurchase the bonds at a specified price before the bonds mature. A municipality may exercise its option to repurchase the bonds if interest rates decline substantially because it can reissue bonds at the lower interest rate and reduce its cost of financing. 

The Bond Markets

The bond market is a financial market where participants buy and sell debt securities, usually in the form of bonds. Like emerging-market countries around the world, Bangladesh could benefit from having a local-currency, fixed-income securities market. At present, its main fixed-income financial products are bank deposits, bank loans, government savings certificates, term loans, treasury bills, and government bonds and corporate debt (syndicated loans, private placement, and debentures). But in general the corporate debt market is still very small compared with the equity market.

[shibli]

 â€œNo matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”

---- Warren Buffett on investor's patience...

[ashiqbest012]

Debenture

Debentures are generally freely transferable by the debenture holder. Debenture holders have no voting rights and the interest paid to them is a charge against profit in the company's financial statements. Debenture is a document that either creates a debt or acknowledges it. The term is used in corporate finance for a medium to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note. 

There are two types of debentures:

(i) Convertible debentures.
(ii) Non -Convertible debentures. 

   Convertible debentures, which are convertible bonds or bonds that can be converted into equity shares of the issuing company after a predetermined period of time. "Convertibility" is a feature that corporations may add to the bonds they issue to make them more attractive to buyers. In other words, it is a special feature that a corporate bond may carry. As a result of the advantage a buyer gets from the ability to convert; convertible bonds typically have lower interest rates than non-convertible corporate bonds.

   Non-convertible debentures: which are simply regular debentures, cannot be converted into equity shares of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts.

Mutual fund

An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing n securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by Asset manager, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors.

Mutual fund sell shares to the surplus units and use the funds to receive a portfolio of securities. Some mutual funds concentrate on capital market securities. Mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals).

[ashiqbest012]

Purpose of capital market

Firms that issue capital market securities and the investors who buy them have very different motivations than they have when they operate in the money markets. Firms and individuals use the money markets primary to warehouse funds for short periods of time until a more important need or a more productive use for long term investments. The capital markets provide an alternative to investment in assets such as real estate or gold.

The primary reason that individuals and firms choose to borrow long-term is to reduce the risk that interest rates will raise before they pay off their debts.

How capital markets use the funds to the productive sectors efficiently

Capital market plays the vital role to the development of our economic sectors directly. The savers (governments, businesses, and people who save some portion of their income) invest their money in capital markets like stocks and bonds. The borrowers (governments, businesses, and people who spend more than their income) borrow the savers' investments that have been entrusted to the capital markets.

When savers make investments, they convert cash or savings (risk-free assets) into risky assets with the hopes of receiving enhanced benefits in the future.  

1. Regulatory Bodies

The Securities and Exchange Commission exercises powers under the Securities and Exchange Commission Act 1993. It regulates institutions engaged in capital market activities. Bangladesh Bank exercises powers under the Financial Institutions Act 1993 and regulates institutions engaged in financing activities including leasing companies and venture capital companies.

2. Capital Market Participants

(i) Stock Exchanges

There are two stock exchanges (the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) which deal in the secondary capital market. DSE was established as a public Limited Company in April 1954 while CSE in April 1995. As of 30 June 2000 the total number of enlisted securities with DSE and CSE were 239 and 169 respectively. Out of 246 listed securities with the DSE, 219 were listed companies, 10 mutual funds and 10 debentures.

(ii) The Investment Corporation of Bangladesh  

The Investment Corporation of Bangladesh plays the important function to the financial market. ICB underwrites issues of securities, provides substantial bridge financing programs, and maintains investment accounts, floats and manages closed-end & open-end mutual funds & closed-end unit funds to ensure supply of securities as well as generate demand for securities. ICB also operates in the DSE and CSE as dealers.  
 
(iii) Specialized Banks

Bangladesh Shilpa Bank (BSB), Bangladesh Shilpa Rin Sangstha (BSRS), BASIC Bank Ltd., some Foreign Banks and NCBs are engaged in long term industrial financing.

Possibilities of the stock markets

(i)  Bangladesh's stock market has witnessed impressive growth since 2007. It appears that progress of new listing rather has slowed down. It has to get out of current stagnation and move towards further expansion.

(ii)A large number of new investors from across the country are entering the market. (iii)Institutional investors are active in the market. Asset management companies are growing and their activities are visible.

(iv)A number of proposals for new mutual funds are awaiting approval. These developments need to be seen positively.

(v)Policies regarding different methods of listing, IPO pricing, approval of new mutual funds and other market related matters should be made keeping long term market interest in view.

(vi) It is desirable that short term policy interventions just to address a temporary market crisis are avoided.

Financial debts instrument trading in Bangladesh

SEC, the capital market watchdog directed Dhaka Stock Exchange Ltd. (DSE) to bring amendment to the direct listing regulations two stock markets in Bangladesh, one is named Dhaka Stock Exchange (DSE) in Dhaka and another one is called Chittagong Stock Exchange (CSE) in Chittagong. A central regulatory agency which is the Securities and Exchange Commission (SEC) overseeing the activities of the entire capital market including issue of capital, monitoring the issue of stocks, and operation of the stock markets. The number of listed companies in DSE are 246 of which are shares, 10 debentures, and 10 mutual funds. The listed companies in CSE are 132 with shares, 14 mutual funds and 1 debenture.

[ashiqbest012]

What is CDBL?

The abbreviation of CDBL is Central Depository of Bangladesh Limited. The owner of the CDBL is Stock Exchange, Specific some Bank, ICB, Some large company. The main objective of CDBL is transact and preserve the ownership of Share, Debenture, Mutual Fund in a electrical way.

CDBL provides services to the Bangladesh Capital Market, covering Settlement of trades on the Dhaka and Chittagong Stock Exchanges as well as Settlement of OTC transaction of Treasury Bills and Government Bonds issued by the Bangladesh Bank.


The Over-the-Counter (OTC) Market

The over-the-counter market is, by far, the largest market. Almost every security—including bonds, derivatives, and currencies—are traded in the OTC market. It generally operates by phone or through electronic systems, where individual dealers or brokers list bid and offer prices. There are generally no listing requirements. When a broker or dealer wants to buy an OTC stock, he contacts the market maker listing that security. For stocks, there are 2 specific OTC markets, the OTC Bulletin Board and the Pink Sheets.

 A number of corporations may not choose to be listed on the organized exchanges. Shares in these corporations are over-the counter (OTC) stocks that are traded in decentralized markets. OTC trading volumes in countries have increased in recent years as more OTC stocks are traded in electronic networks that link traders around the world.


What is the red sign, green sign and Blue sign mean of the share price?

To be Continued...

[BRE SALAM SONY]

thanks
nice and helpfull for our new business man on capital market

[ashiqbest012]

What is the Stock Exchange?

The stock exchange provides a sound and stable securities market where shares can be bought and sold.


What is the Role of the Stock Exchange?

The stock exchange provides listed companies with a channel seek capital fund from the public and at the same time It provides the investors a place to buy and sell shares of the listed companies.

The exchange also monitors the market to ensure that it is working efficiently, fairly and transparently.


How many Stock Exchanges in Bangladesh?

There are Two stock exchanges in Bangladesh:
1. Dhaka Stock Exchange Ltd. - Established on 1954
2. Chittagong Stock Exchange Ltd. - Established on 1995
Of these, Dhaka Stock Exchange is the biggest stock exchange in the country.


How do you select the company Before You Invest?

Don't put in your money until you have understood all relevant information regarding the investment. Prepare yourself for the vigorous homework of analyzing company's annual reports, EPS (Earning Per Share), accounts and other statements while keeping abreast of what's happening in the industry, country and elsewhere that may affect your investment. Consult your investment adviser/broker to get latest market information about shares you intend to buy or sell. Be skeptical of any thing picked up from rumors, particularly if you cannot rationally explain their choice.


Why Do Investors Think For Long-term Investment?

Bear in mind that even in the best of securities/shares, there can be short-term aberrations. It is important to have the power to hold your investments for longer periods. Studies have shown that investments properly timed and based on strong fundamentals have been very profitable for investors in the longer term.


What is 'Book closure' / 'Record Date'?
While a company a dividend, right/ bonus shares or intends to hold any AGM/ EGM; it declares a book legislature closer provider/ Record Date to register the name of shareholders.

Only shareholders whose names appear on the register after the book closure/ Record Date are eligible to attend in the AGM/ EGM and also to receive dividends & bonus shares and entitlement to right shares, if any.