Guiding investors thru\\\' the turbulent waters of share market

Bangladesh Share Market: Looking Ahead After Two  Big Crashes is quite a big book of 484 pages with seventeen chapters accommodating  the share market scams, the historical background, their causes, present status, impact on micro and macro-economies, and  impact on  social and individual  lives. The author of the book, Md. Toufique Hossain, is a young professional at BRAC. The book narrates the innovative position developed at BRAC in accordance with World Bank (WB) format. It's beyond doubt that the young professionals are highly talented, energetic and dedicated staff of BRAC. The author's research interests include Capital Market, Derivate Market, Mutual Funds, Bond Market, Philanthropic Capital Market and Stock Market Demutualisation, Public Finance, Behaviour Finance and Micro Finance.
The Bangladesh share market has lately been intertwined with a harrowing experience of the small investors, who will definitely grab the ideas, facts, figures, history, causes of crashes and the prospects related to the share market that have been skillfully presented in this book.
The Bangladesh stock market has experienced a long and arduous journey to reach the present status since its   nascent stage in 1954. Along the way it has witnessed many pluses and minuses. The Bangladesh Securities and Exchange Commission (BSEC), a regulatory body for the stock market, came into being in 1993. Over the years, it has taken a lot of measures to regulate the market, and the readers can learn about some significant measures from this book. The capital market acts as an intermediary between savers and the companies seeking additional funds for business expansion. A vibrant capital market supports the growth of an economy making good use of the capital market. It can help optimise resource allocation and ensure sound development of the financial sector, and the economy as a whole. Relaxed and flexible monetary policy, improved liquidity, the interest rate and rules about merchant banks' loans for investors in the capital market are very crucial macro-economic factors that come into play in ensuring a stable capital market.
The capital market of Bangladesh experienced the first share market crash in 1996 and the second one in 2010. Unlike in 1996, the stock market was far more expanded in 2010 and more and more factors came into play in the market crash in 2010-11. Before witnessing stability return to some extent in 2013, the crash continued until 2012, although a confidence crisis still remained.
When the stock market goes through its cycle, investors ride a roller coaster of emotions --- from excitement to depression. It is important to stabilise the market, if investors' confidence is to be sustained. To achieve that goal, it is important to activate the over-the-counter market.
Volatility in share market has become a matter of concern in the recent times for investors, regulators and brokerage firms. This concern centres on the perception that high volatility can lead to a general erosion of investors' confidence and flow of capital away from the share market.
Back in 2009, the stock market started experiencing the boom time and in 2010 it rose in value by 80 per cent. Investors were very happy during that time, because of the quick profits they had made. But at the fag end of 2010, the stock market headed for the biggest crash in its history. The market collapse and the subsequent volatility shook the investors' confidence seriously. The shock came at a time when the memory of the 1996 stock market crash was still vivid in the minds of the investors.
The author has taken the readers to the background causes of the 1996 share market scam. He says that during the 1990s, foreign investment was a new idea against the backdrop of the prospect of Bangladesh's capital market. Bangladesh followed the next-door countries like India and Pakistan that offered stimulus packages to attract foreign companies to invest in their stock markets. Donor countries and agencies showed great interest in the capital market of Bangladesh as the market looked very prospective. Against this backdrop, the then UK deputy high commissioner and representatives of donor agencies, like the UNDP, visited the DSE. Finally, the then finance minister M Saifur Rahman in his budget speech in 1992  suggested a policy allowing foreign companies to invest  in the share market. Bangladesh adopted very soft rules and regulations to attract foreign investments.  Initially, it was decided to open the secondary market to foreign investors, but later the primary market was also opened up.
At the same time, the government of Bangladesh took a number of schemes in this connection attracting an encouraging amount of foreign capital inflow. In fact, the amount of foreign capital inflow was three times greater than that of capital outflow.  
Later in June, 1996, the Awami League formed government after 21 long years. Some opportunists and dishonest businessmen then convinced the government into withdrawing the 'lock-in system' that created the opportunity for those businessmen to play with the share market at will.  The market saw an unprecedented bullish trend due to manipulation of share prices. For instance, the price of a share of Tk 100 denomination reached Tk 5000.
The vivid description by the author takes us to the turbulent days of the share market scams.  About 300,000 small investors entered the market.  Trading was being held on the kerb market stretching from Motijheel Shapla Chattar  to the Ittefaq crossing.  Involvement of ignorant traders and unscrupulous elements led to a boom in trading on the kerb market on the main street outside the Dhaka Stock Exchange, where nearly 25,000 persons traded in stocks regularly. All this resulted in a market free for all and a mass hysteria. The licenced brokerage houses were almost inactive or uninvolved. At that time many investors used to come to the market in the early morning for trading with 'paper shares' and would go home in the afternoon with hefty profits. Bad elements produced fake share certificates, and sold them to unwitting traders. The small, innocent investors mostly became victim of cheating, and finally the large-scale scam took place leaving a massive, long-term negative effect on small investments.  
The capital market plays a significant role in the economy of a country, but the stock market in Bangladesh continues to be a hapless victim of negligence. Market crashes have nakedly surfaced here one after another. Still policy makers involved with the national economy do not show any strong sign of learning any lesson    from past mistakes.  
The author of the book suggests to the economists of the country to attach great importance to this vital and prospective area of our economy, where both big and small investors have long been active despite market volatilities.
The reviewer is Proramme Manager, BRAC Education Programme, and vice president of Bangladesh English Language Teachers Association (BELTA).
[email protected]

................................

Bangladesh Share Market: Looking ahead after Two
Big Crashes
By Md. Toufique Hossain
A H Development  Publishing House
143, New Market , Dhaka, 1205