2011 Bangladesh share market scam
Encyclopedia
The 2010-11 Bangladesh share market scam is an ongoing share market turmoil in the two Bangladeshi stock exchanges, DSE
and CSE
. Millions of small investors have lost all their investments due to the market crash. The crash is deemed to be a scam and exacerbating due to government failure.
into the capital market, when the index rose by 22% over a single day on November 16, 2009. Share prices continued to fluctuate, reaching the annual high in mid-2009 before plummeting by the end of 2009, with retail investors threatening a hunger strike.
The market continued to be turbulent throughout 2010, with the DSE hitting it's all-time high revenue and the largest fall in a single day since the 1996 market crash, within the space of a month.
The conservative monetary measures adversely effected the capital market, with the market falling once on December 13 by 285 points, over 3% of the DGEN Index which stood at around 8,500 points. The capital markets suffered a second fall on December 19, with the index falling a further 551 points, or about 7%. This 7% fall in the Dhaka Stock Exchange
's index on a single day was the largest fall in the 55 year history of the Exchange, surpassing the fall of the 1996 market crash. This fall was deemed 'normal' by analysts, who believed the market was overvalued.
Investors took to the streets with protests. Random objects like wood and papers were set on fire in front of the DSE office in Motijheel
Immediate measures were taken by the regulatory body Securities and Exchange Commission, which, together with the Bangladesh Bank
, laxed its earlier conservative measures to pacify the fall. As a result, the market ameliorated the next day by 1.9%.
Within December 2010 and January 2011, the DGEN index fell from 8,500 by 1,800 points, a total 21% fall, with masterminds of the crash making about BDT
5,000 crore
($ 667 million) out of the scam.
The market fell by 5% on June 12, before taking a 4% plunge on October 11, sending the market into further turmoil. The fall finally triggered small investors to go on a fast-unto-death on October 16 after forming the Bangladesh Capital Market Investors' Council . Opposition politicians declared their solidarity with the protesters. The market stood at around 5,500 index points in October 2011 from 8,900 only a year ago.
Protests continued throughout the months, the most recent ones taking place in front of the DSE office in November 2011, with protesters sitting in throughout nights.
After the market fell further subsequently, small investors started going on hunger strikes separately, before forming the Bangladesh Capital Market Investors' Council on October 16 and going on a fast-unto-death. Opposition politicians declared their solidarity with the protesters.
Protesters stayed overnight by the DSE office starting October 16 and were dispersed on day two by the baton-charging police. Protesters, including the head of the Council, were arrested, although the police denied arresting any protester. Protesters also demanded complete trade suspension at the DSE until the Prime Minister intervened to fix the market.
Finance Minister Muhith
faced staunch criticism for the handling of the market crash; he admitted his failure in attending the debacle. He also attracted criticism for refusing to disclose the names of those accused of chicanery by the probe committee in April 2011. Protests were also fueled by the Finance Minister's comments on the secondary markets in October 2011, when he said, "I don't know how it will get right." Opposition and protesting investors had called for his resignation.
Governor Ibrahim Khaled heading the four-man high-powered committee.
The committee provided their findings after three months, on April 7. It identified an array of chicanery performed by some 60 influential individuals that resulted in the recent market crash. The committee interviewed all members of both the DSE and CSE, and consulted journalists and analysts before presenting their report. The committee found various irregularities, including the existence of omnibus
accounts, that allowed some market players to make exorbitant profits at the expense of the retail investors. Among the 60 identified primarily included chairman of Beximco
and the mastermind of the 1996 market crash Salman F Rahman, former DSE president Rakibur Rahman, SEC chairman Ziaul Khandaker, SEC member Mansur Alam and BNP politician Mosaddek Ali Falu
. The report mentioned that pro-government business tycoons, including Salman and Rakibur, exerted influence within the SEC by influencing the appointment of its members. The report ended with recommendations to reform the SEC drastically and asked the government to publish the names of the influential players and to remain cognizant in countering their influences.
The report resulted in the dismissal of SEC chairman Ziaul along with other SEC members accused. However, the Finance Minister AMA Muhith
stated that the State would neither disclose the names of the accused officially nor take punitive measures without further investigation, although no dates for fresh probes have been declared.
50 billion ($ 667 million). Banks have reportedly kept buying shares despite suffering from liquidity crises themselves, and not selling any shares. However, share indices kept plummeting throughout the time period. However, prices rose by 7% ahead of the Prime Minister's emergency meeting about the market.
Dhaka Stock Exchange
Dhaka Stock Exchange is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city. It was incorporated in 1954. Dhaka stock exchange is the first stock exchange of the country...
and CSE
Chittagong Stock Exchange
Chittagong Stock Exchange is a stock exchange located in the port city of Chittagong in southeastern Bangladesh. It was established in 1995 as the second stock exchange of the country. The exchange is located in the Agrabad commercial area of the city...
. Millions of small investors have lost all their investments due to the market crash. The crash is deemed to be a scam and exacerbating due to government failure.
Background
The stock market was in turbulence throughout much of 2009, with the long bullish trend starting to turn grim. The bullish trend was initiated by the end of the two-year political crisis and re-emergence of democracy via the December 2008 polls, and was largely unaffected by the BDR Mutiny. The market was heavily aided by the entrance of GrameenphoneGrameenphone
Grameenphone , widely known as GP, is the leading telecommunications service provider in Bangladesh. With more than 32 million subscribers , Grameenphone is the largest cellular operator in the country...
into the capital market, when the index rose by 22% over a single day on November 16, 2009. Share prices continued to fluctuate, reaching the annual high in mid-2009 before plummeting by the end of 2009, with retail investors threatening a hunger strike.
The market continued to be turbulent throughout 2010, with the DSE hitting it's all-time high revenue and the largest fall in a single day since the 1996 market crash, within the space of a month.
The slump
By the end of 2010, it was well known that the capital markets of Bangladesh well overvalued and overheated. The central bank had taken measures to cool the market down and control inflation by putting a leash on the liquidity.The conservative monetary measures adversely effected the capital market, with the market falling once on December 13 by 285 points, over 3% of the DGEN Index which stood at around 8,500 points. The capital markets suffered a second fall on December 19, with the index falling a further 551 points, or about 7%. This 7% fall in the Dhaka Stock Exchange
Dhaka Stock Exchange
Dhaka Stock Exchange is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city. It was incorporated in 1954. Dhaka stock exchange is the first stock exchange of the country...
's index on a single day was the largest fall in the 55 year history of the Exchange, surpassing the fall of the 1996 market crash. This fall was deemed 'normal' by analysts, who believed the market was overvalued.
Investors took to the streets with protests. Random objects like wood and papers were set on fire in front of the DSE office in Motijheel
Motijheel
Motijheel is an administrative division of Dhaka city, the capital of Bangladesh. It is situated at the heart of the city . Motijheel is the major business and commercial hub of Dhaka city and has more offices and business institutions than any other part of the city...
Immediate measures were taken by the regulatory body Securities and Exchange Commission, which, together with the Bangladesh Bank
Bangladesh Bank
Bangladesh Bank is the Central bank of Bangladesh and is a member of the Asian Clearing Union.-History:After the liberation war, and the eventual independence of Bangladesh, the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country,...
, laxed its earlier conservative measures to pacify the fall. As a result, the market ameliorated the next day by 1.9%.
Within December 2010 and January 2011, the DGEN index fell from 8,500 by 1,800 points, a total 21% fall, with masterminds of the crash making about BDT
BDT
BDT may refer to:* BDT, the ISO 4217 code for Bangladeshi taka * The Best Damn Thing, a 2007 album by Avril Lavigne...
5,000 crore
Crore
A crore is a unit in the Indian number system equal to ten million , or 100 lakhs. It is widely used in India, Bangladesh, Nepal, and Pakistan....
($ 667 million) out of the scam.
The market fell by 5% on June 12, before taking a 4% plunge on October 11, sending the market into further turmoil. The fall finally triggered small investors to go on a fast-unto-death on October 16 after forming the Bangladesh Capital Market Investors' Council . Opposition politicians declared their solidarity with the protesters. The market stood at around 5,500 index points in October 2011 from 8,900 only a year ago.
Protests continued throughout the months, the most recent ones taking place in front of the DSE office in November 2011, with protesters sitting in throughout nights.
Protests
Protests on the streets started becoming a common scene contiguous to the DSE office. The protests continued for days in January and February, often resulting in clashes between the police and the protesters.After the market fell further subsequently, small investors started going on hunger strikes separately, before forming the Bangladesh Capital Market Investors' Council on October 16 and going on a fast-unto-death. Opposition politicians declared their solidarity with the protesters.
Protesters stayed overnight by the DSE office starting October 16 and were dispersed on day two by the baton-charging police. Protesters, including the head of the Council, were arrested, although the police denied arresting any protester. Protesters also demanded complete trade suspension at the DSE until the Prime Minister intervened to fix the market.
Finance Minister Muhith
Abul Maal Abdul Muhith
Abul Maal Abdul Muhith is an economist, diplomat, and a Bengali Language Movement veteran from Bangladesh. He was born in Sylhet in 1934.-Education:Mr. Muhith secured first place in his Intermediate examination in 1951 from Sylhet MC College...
faced staunch criticism for the handling of the market crash; he admitted his failure in attending the debacle. He also attracted criticism for refusing to disclose the names of those accused of chicanery by the probe committee in April 2011. Protests were also fueled by the Finance Minister's comments on the secondary markets in October 2011, when he said, "I don't know how it will get right." Opposition and protesting investors had called for his resignation.
Probe
A probe committee was formed to investigate the stock market crash on 24 January 2011, with former Bangladesh BankBangladesh Bank
Bangladesh Bank is the Central bank of Bangladesh and is a member of the Asian Clearing Union.-History:After the liberation war, and the eventual independence of Bangladesh, the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country,...
Governor Ibrahim Khaled heading the four-man high-powered committee.
The committee provided their findings after three months, on April 7. It identified an array of chicanery performed by some 60 influential individuals that resulted in the recent market crash. The committee interviewed all members of both the DSE and CSE, and consulted journalists and analysts before presenting their report. The committee found various irregularities, including the existence of omnibus
Omnibus
Omnibus may refer to:Law* Omnibus bill, a single legislative document containing many laws or amendments* Omnibus spending bill, a single legislative document that sets the budget of many government departments* Omnibus clause* Omnibus hearing...
accounts, that allowed some market players to make exorbitant profits at the expense of the retail investors. Among the 60 identified primarily included chairman of Beximco
Beximco
The Beximco Group is the largest private sector conglomerate in Bangladesh. The group has interests in pharmaceuticals, textiles, ceramics, jute, aviation, media, finance, real estate, construction and energy. It is also the parent company of GMG Airlines and Independent Television ....
and the mastermind of the 1996 market crash Salman F Rahman, former DSE president Rakibur Rahman, SEC chairman Ziaul Khandaker, SEC member Mansur Alam and BNP politician Mosaddek Ali Falu
Mosaddek Ali Falu
Alhaj Mosaddek Ali Falu is a Bangladeshi politician and a former parliamentarian from BNP. He served as the political adviser to the Prime Minister of Bangladesh Begum Khaleda Zia between 2001 and 2006...
. The report mentioned that pro-government business tycoons, including Salman and Rakibur, exerted influence within the SEC by influencing the appointment of its members. The report ended with recommendations to reform the SEC drastically and asked the government to publish the names of the influential players and to remain cognizant in countering their influences.
The report resulted in the dismissal of SEC chairman Ziaul along with other SEC members accused. However, the Finance Minister AMA Muhith
Abul Maal Abdul Muhith
Abul Maal Abdul Muhith is an economist, diplomat, and a Bengali Language Movement veteran from Bangladesh. He was born in Sylhet in 1934.-Education:Mr. Muhith secured first place in his Intermediate examination in 1951 from Sylhet MC College...
stated that the State would neither disclose the names of the accused officially nor take punitive measures without further investigation, although no dates for fresh probes have been declared.
Bailout
The market stabilisation fund (MSF) was conceived by the Bangladesh Association of Banks (BAB) in late October 2011 as a method to increase liquidity in the market and increase share prices, worth BDTBDT
BDT may refer to:* BDT, the ISO 4217 code for Bangladeshi taka * The Best Damn Thing, a 2007 album by Avril Lavigne...
50 billion ($ 667 million). Banks have reportedly kept buying shares despite suffering from liquidity crises themselves, and not selling any shares. However, share indices kept plummeting throughout the time period. However, prices rose by 7% ahead of the Prime Minister's emergency meeting about the market.