In a dimly-lit office on the fifth floor of the Dhaka Stock Exchange (DSE) building, a musty warren of brokerage firms in the Bangladeshi capital, Nikhil Chandra Bosu sits at a computer terminal waiting for the 11 a.m. opening bell. A few investors, cradling cups of tea, watch on, hoping for the graphs to spike and for their slim stock portfolios to gain in value.
But Bosu, a trader at the Kurshid & Co. stock brokerage firm, says he has never seen the market in such a sick state. In December 2010, a massive crash rocked the DSE, eating up the life savings of hundreds of thousands of small investors. Before the bubble burst, Bosu says he was trading 15 million takas ($196,500) worth of stocks per day, taking a 0.5 percent commission on buy and sell orders. Today, with the market continuing to flat-line, his firm’s daily trading volume has slumped to just 5 million ($65,500). “The general investor lost confidence because of the crash,” he says. “There’s nothing left to do but wait and see.”
Mainul Islam is one of those who lost out. The 30-year-old says he invested a 1 million taka ($13,100) gift from his parents in banking stocks, hoping to make enough cash to fund a trip to Europe. “I was sitting idly and thought it was easy to invest money and make some quick bucks, but I didn’t expect the price to fall so quickly,” he says.His portfolio has since lost around 70 percent of its value.
Islam, like many small Bangladeshi traders who fell victim to the crash, pins the blame on “insiders” at the DSE and at the Bangladesh Central Bank, who he says manipulated the market for personal gain. “The big investors lured people to invest in the stock market and then sold every stock,” he says. “Some share prices went up from 50 to 2,500 takas. Now they’re back at 50.”
From 2007 until the crash, as Western markets were being rocked by the global financial crisis, Bangladeshi investors were making hay. The DSE’s index leapt from 2,450 in February 2009 to an unprecedented 8,600 by the end of 2010, and the number of investors in the market doubled from 1.5 to more than 3.3 million. Asif Anwar, an independent financial analyst based in Dhaka, sayseasy access to credit and the expansion of brokerage houses outside the capital fueled an epidemic of “pure, uncontrolled greed” and drew hundreds of thousands of ignorant investors into the market.
“There was a mania that gripped the country,” Anwar says. “Everybody was talking about the stock market. Everybody became an analyst overnight.” Few of these new investors, however, understood the risks of stock trading, a situation that was compounded by a lack of government oversight and, some say, rampant manipulation by large firms and merchant banks.
The inevitable bust came after interest rates spiked and the central bank enforced regulations governing capital exposure limits, triggering a massive flight of capital from the stock market. As banks and company directors quickly sold out to avoid losses, reaping massive profits, more than a million small investors were left holding relatively worthless stocks. “The main beneficiaries of this game were the commercial banks…They played with the small investors and took money from them,” says Mohammad Shakil Rizvi, the president of Dhaka Stock Exchange Ltd.
For many small investors, shock quickly turned to anger. Hundreds swarmed into the streets to protest against corporate greed and the manipulation of the market by “big shots” in the financial services industry. On January 10, after the market lost 9.25 percent of its value in less than an hour and trading was suspended, protestors clashed with police, smashing cars and burning tires.