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					                                                                           Md. Mahmudul Alam 1
                                                                           rony000@gmail.com


                             Concept Outline for the workshop on
   Investment Decision and Market Analysis for Non-technical and Non-
          professional Investors of Dhaka Stock Exchange (DSE)
Background:
Last time when I went to Bangladesh, I found too many new investors investing in the DSE
market by selling their land, borrowing on interest or from personal savings, who have
virtually no idea about the share market. Many brokerage houses have opened branches in
different districts to tap these new investors. In one of the district level brokerage houses, I
found some people who even don't know the name of the companies they are investing in and
cannot read English from monitor. So, when anyone orders one share, several persons also
buy that same share with just blind following. These investors even have no idea about the
number of volume consisting a lot. Suppose, if one person buys a share, another one also says
buy 100 for me. The agent says 100 is not a lot. Then people say, ok buy 200 shares. The
agent again says no lot at 200, the lot is 500. Then that guy says ok buy 500. What a great
investor it is? People follow rumor and only rumor. I have found the same attitude among
many educated people as well who don't believe in analysis but in news/rumor. There are
around 2 million BO ID’s in Bangladesh. How many of them are efficient and do analysis?

Then, based on my innate feelings to do something to protect the small investors so that they
can safeguard their last savings, I have developed an easily accessible and effective tool
including guidelines of transaction decision for the mass investors. Also, I have added few
missing religious issues that are badly needed in the market. I have distinguished between the
Halal/Haram shares and also included the proper ruling of Zakaah on shares in that file.

Part 1
This part deals with the basic understanding about the market and its theory.

Introduction:
According to the research (including my several publications on Dhaka Stock Market
Efficiency), DSE is an inefficient market (even inefficient in the "weak form" level). Those
who have the technical ability and historical trend, can get extraordinary return from the
market. A very small group, who have huge money and technique, manipulate or control the
market and take the opportunity. On the other hand, so many small investors are continuously
loosing, or being deprived. Suppose, a company is doing well and gaining annual return of
40%, the efficient group realizes that, and increases the price up to 60% and take 20%
extraordinary profit from the inefficient group. At the end of the day, the inefficient group
gets 40% from the company (the real growth), but after adjustment they get net 20% whereas
another group get 60%. Many cases, price of loosing companies are increased significantly so
that the small investors bear all the manipulated losses. So, sharing the basic knowledge as
well as sharing the basic analytical tools in an understandable form will help mass people
develop similar type of understanding, that will ultimately help to gain the efficiency in the
market.

Basic Discussion:

What does it mean by doing stock business? Why do we invest in stock market rather than
investing in one of our own business?
There is another group who has wrong idea about the stock market. People think that they are
trading in share just like other goods, but one thing they forget is - buying a stock means
                                                                            Md. Mahmudul Alam 2
                                                                            rony000@gmail.com


buying an ownership of the a company. There is high potential that large scale industry has
scope to generate more return as well as more financial and management strength than small
scale industries. If anyone buys a share of a company, he is also an owner of that company
and will get a proportionate return from the overall income of that company. It is not like as
gambling, but purely mathematical and logical. Don't think this return is generated by
depriving others, it is the real income of the company.

Is it true that too much people are engaged in stock business in Bangladesh?
Dhaka Stock Exchange was incorporated in 1954; the formal trading started in 1956. This is
2010, after 50 years of activity, including foreign investors and NRBs, currently there are
only 2 million accounts (except multiple account owners, distinct account is approximately
1.2 million) against 170 million population. Only 0.7% population are engaged in the market.

Why do you invest in Bangladesh rather than major stock markets of the world?
It is true that there was a crash in 1996, due to the weak legal and institutional framework.
The market is now very cautiously regulated, and there is very low possibility to happen such
crash again. The recent global financial crisis affected all over the world except the closed
economies like Bangladesh. New York stock exchange index declined more than 30% during
recent financial crisis. Many industries in USA are going to shut down due the crisis.
Interestingly, the world financial crisis had no impact on the DSE at all. According to the
world business report, DSE is one of the highest returns generating market. There is a huge
scope to expand the industrial sector in Bangladesh through generating capital from stock
market. The industries are also doing well. When the industry grows the profit will go to the
shareholders. So, your investment is important for the industrial growth and vice versa.

What will happen if more investment goes into Bangladeshi Stock Markets?
If more investors go in the market, the industries of Bangladesh can generate low cost fund
from market (loan is expensive than generating fund by equity). Industry will become
stronger due to a large reinvestment rather than loan repayment. The industry will have
possibility to boom. As a result, foreign investment will increase as well. The expanding
industry will generate employment too. Moreover, Stock market is an indicator of economic
value of a country. When experts evaluate the value of a country, they take the stock market
value, because all the capital of the country is considered as included in the capital market/
stock market.

The educated society needs to involve more in the market, because it will give them a good
return. If they are involved in the market, market will be more efficient and as a consequence
no gambler group will be able to take extraordinary return from the market. So, everyone will
be benefited. This is a hypothetical scenario, but not impossible: if you invest 5 lac tk for 5
year with 100% return, what will be end result? 10lak-after 1year, 20lak-after 2years, 40lak-
after3 years, 80lak-after 4years, 1crore 60lak-after 5 years. Just practice the given file for one
week and follow the guidelines given there, and see it is not dream. Based on experiences,
only following the record dates of the companies, without any extensive analysis,
market/private information, vast experience, irregular or not full time in market, anyone can
get 60% return.
                                                                         Md. Mahmudul Alam 3
                                                                         rony000@gmail.com


Part 2:
This part deals with the guidelines and decision making approach for non-technical mass
investors.

How to maintain a diversified portfolio?

How to deal transaction with Highest Risk, to Lowest Risk?

How to monitor the market easily with minimum time and effort?

How to handle private information?

How to measure the Validity of public information?

What is the appropriate technique for DSE small investors- Historical Trend analysis or
Technical Analysis?

How to deal or realize the Gambler effect?

Does Personal Calendar for Share is works in DSE?

Level of efficiency/ inefficiency of the market

Basic Suggestions and cautions for safe investment

Advanced study and references on data and analysis

Islamic ruling on Share Business- Zakaah on Share, Defining the Halal Share/ Halal
Business

etc.


Part 3
This part deals with the practical usage of the excel file and the procedure to take decisions
by using the excel file. Excel File (DSE Efficient Traders) is available in:
http://ukm.academia.edu/MdMahmudulAlam/Teaching



Proposed Timeline: 3 hours
Part 1: 30 min
Part 2: 60 min
Part 3: 30 min
Q/A: 30 min
Agents from Broker Houses will provide information and supports regarding the procedures
of account opening and trading: 30 min

				
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posted:1/4/2011
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