A REPORT ON

Blue Chip Share in Bangladesh

Submitted to

Mrs. Tanbina Tabassum

Lecturer of Finance,

Premier university, Chittagong

Submitted by:

Section A

Department of Finance& Banking

Serial No. Name ID no Program

01. MunMun Dev Nath 0816112271 BBA

02. Susmita Sen 0816112275 BBA

03. Sudeshna Das 0816112280 BBA

04. Farjana Karim 0816112289 BBA

05. Prasenjit Roy Chowdhury 0816112308 BBA

Table Of Contents

Serial no. Particulars1 Letter of transmittal

2 Acknowledgement

3 Objectives of the study, scope of the study, limitation of the study, Data collection, Data analysis.

4 Overview of the SEC5 Discussion about CSE.

CSE initiatives in market development

CSE imitative in expansion

6 Potential of capital market in Bangladesh7 Expansion of the Capital Market and Its

Future:

8 Share Categorization: A, B, G, N & Z

9 Criteria for Share Categorization: A, B, G, N &

Z

10 What is blue chip stock?11 Features of blue chip stocks12 How to invest in blue chip stocks13 Feature of blue chip company14 History15 Blue chip shares in Bangladesh

16 CSE-30, Criteria for a Selective Index.

17 Stock market index

18 How to calculate stock market index

19 DSE-20

20

21 SECTOR WISE SELECTED 30 SHARES IN

CSE:

22 Analysis of stocks23 Analysis of 10 companies & results24 Beta factors analysis25 Benefits of blue chip shares26 Disadvantages of blue chip shares27 Futures of blue chip shares28 Misconceptions29 Suggestions30 Conclusion

31 Bibliography

Letter of transmittal

 A Report on blue chip share.

June 24.06.12

Mrs. Tanbina Tabassum

Department of Finance & Banking

Premier University

Subject: Submission of the Report.

Honorable Madam,

It is our great pleasure to submit the report titled `Report on Blue chip shares in Bangladesh to you.

We have prepared this report, as a part of the course Money and Capital Market. To make this

report up to the standard we tried our best to fulfill the requirements by implementing the

knowledge we have gather from the course. Thank you very much for  providing us this type of

opportunity and giving us the necessary guidance and direction needed for preparing the

report.We have tried our level best to make this report holistic and informative enough. Besides

this,there may be some shortcomings. I would be grateful if you consider those from excusable

point.

Sincerely yours

MunMun Dev Nath

Susmita Sen

Sudeshna Das

Farjana Karim

Prasenjit Roy Chowdhury

Batch16, 8th Semester Section #A

Department of Finance and Banking

Premier University

At first we want to express our great gratitude to our honorable Teacher to give us such a good topic for making a assignment. She gave us her helpful hand to do this assignment. Her class lecture & advice help us to prepare our assignment very much which was very fruitful to us. So we are grateful to her.

.At the very beginning, a special note of acknowledgement is due to our course teacher, Mrs Tanbina tabassum, for giving us the permission to prepare the report on this topic. She was very generous and friendly toward us while conducting the course and was the person who has guided us throughout preparing the report. Her teaching method was really effective and interesting.

We would like to thank God for keeping everything on right track. Finally, we would like to thank our parents and friends without whose support it was impossible for us to complete the project.

We are-

Intake: 8th semester

Section: A

Program: BBA

Department of Finance and Banking

Premier University

Blue chip companies are usually financially sound and are thought to be relatively low-risk

investments. They tend to be less volatile than other companies and to provide

solid growth to portfolios. Similarly, the stocks of blue-chip companies are highly valued due to

their consistent financial soundness. A regular dividend is expected from blue-chip stocks even

in bad financial times in the stock market. Due to stock market crash now investors are very

much worried about price volatility so that they are searching low risky shares so blue chip

shares will be suitable for investors. Day by day popularity of blue chip shares are increasing

because of their performance. For Investors who are fully depend on share market blue chip

shares create opportunities for increasing their earning profits by creating scope of low risk

investments. We have analyzed 10 blue chip companies in our report.

DEDICATION

We would like to dedicate all of our efforts to complete this report to our beloved parents and

respected teacher MrsTanbinaTabassum..

OBJECTIVES OF THE STUDY

 The main objective to prepare this report is to know about the blue chip shares in stock market by taking CSE as

base. In order to achieve the main objective I have to considersome specific and vital objectives which are given

below:

To highlight the position of blue chip share in Bangladesh.

To analyze the benefit of blue chip share

To evaluate the impact of blue chip share in Bangladesh economy

To evaluate the behavior of investors in blue chip share

To identify the problems and prospects associated with blue chip share in Bangladesh.

SCOPE OF THE STUDY

This report is prepared on the basis of CSE-30 and DSE-20. It shows the practical situations about blue chip

shares prevailed in the stock market. The investors will get practical knowledge and idea about the benefits of the

blue chip shares and will be able to determine the best way to employ their capital. The study extends to cover the

price changes ,dividend policy,issued capital,Beta analysis,EPS,price earnings ratio and price risk (volatility) of

few CSE and DSE listed companies. To illustrate the recent affect we used the data for the year of 2009, 2010 and

2011.

 

LIMITATION OF THE STUDY

 

Information is the primary prerequisite to prepare a good report. Information’s are not rich

enough or many update data are not available in the market. The report deals with some CSE and DSE listed

companies, but not in detail. To show the present situations of blue chip in Bangladesh we used most of our

practical knowledge but if the data about blue chip share were available we could practically learn theirinfluence

on the price volatility of stock market. The limitation of the study at a glance:

In Bangladesh, there have no share named blue chip share

Time constraints

all data are not available for all users

complex calculation method

METHODOLOGY OF THE STUDY

All the information provided in this report has been collected through 3 stages.

 

Data collection

 

Data analysis

DATA COLLECTION

 Data has been collected directly from the brokerage house and CSE CSE Bazar Parikrama, CSE website and

company annual reports.

DATA ANALYSIS

Data has been analyzed with the help of the mathematical and graphical expressions. In the report we have

analyzed of 10 listed companies of CSE and DSE including their average return.

ORGANIZATION OF DATA

To prepare this report I have organized the data in 5 chapters along with problems and recommendations related to

the subject matter of this report

Overview of stock exchange commission

Securities and Exchange Commission (SEC) was established on 8 June 1993 through enactment

of the Securities and Exchange Commission Act, 1993. The objectives of the SEC are to develop

the securities markets and to frame necessary rules and regulations of capital markets and issues

and dealings in securities with a view to provide for protection of investors. After establishment,

the Commission has played significant role in the overall development of the capital market and

legal infrastructure in the capital market, introduction of automated trading system for securities

transaction, deposit and transfer of securities electronically through establishment of Central

Depository Bangladesh Limited, opportunity of getting real time market price of securities and

index information, etc. Consequently,

investors have been ensured to invest in the capital market with confidence, and similarly

entrepreneurs of different industries have picked the capital market as the main source of long-

term financing.

At present, the capital market of Bangladesh is passing through a critical juncture. In the

backdrop of recent volatility and economic scenario look at national and global levels, concerted

efforts are needed to restore the confidence of investors and bringing stability in the market. All

market participants such as merchant bankers, brokers/dealers, asset management companies,

auditors, credit rating agencies, private entrepreneurs, state owned enterprises, stock exchanges

and regulatory organizations have to work together more professionally in order to achieve the

ultimate goal of the Capital Market. Likewise, investors have to be more aware about the capital

market and need to enhance their knowledge in related areas.

The Dhaka Stock Exchange (DSE):

Dhaka Stock Exchange Ltd (DSE) is the oldest and largest stock exchange in Bangladesh.

Though DSE was established in 28 April 1954 but its commercial operation started in 1956.The

board of directors consisting of 24 members directs the activities of DSE. Out of them, 12

directors are elected by direct votes of DSE members and other 12 directors are nominated by the

elected members from non-DSE members upon approval of the Commission. At present, there

are 238 members in DSE of which 22 members are registered by the Commission for conducting

securities business.

DSE has expanded its on-line trading network to many district towns like Gazipur, Narayanganj,

Comilla, Feni,Habiganj, Maulvibazar, Mymensingh, Chittagong, Khulna, Sylhet, Kushtia,

Barisal, Rajshahi and Bogra including the divisional towns. As on 30 June 2011 total number of

listings in DSE was 490 against which issued capital was Tk. 80683.90 crore and the market

capitalization was Tk. 285389.22 crore.

The Chittagong Stock Exchange (CSE) at a glance:

The Chittagong Stock Exchange Ltd (CSE), the second stock exchange, was established in 1995.

The board of directors consisting of 24 members directs the activities of CSE. Out of them, 12

directors are elected by direct votes of CSE members and other 12 directors are nominated by the

elected members from non-CSE members upon approval of the Commission. Now there are 135

members in CSE of which 120 members are registered by the Commission for conducting

securities business. As on June 30, 2011 total number of securities in CSE was 215 against which

issued capital was Tk. 20677.39 crore and market capitalization was Tk. 225978.00 crore.

Over -the-Counter Market or OTC Market:

Securities are traded without intermediaries through mutual understanding in the OTC market,

which are outside the stock exchanges. In CSE stock exchange’s OTC market, there are

opportunities of securities trading. Under Securities and Exchange Commission (Over-the-

Counter) Rules, 2001, OTC market was established in CSE. Securities de-listed from the

exchanges and securities not listed with the exchanges but issued obtaining consent from the

Commission can be traded in the OTC market. Dhaka Stock Exchanges Ltd started OTC market

in line with the direction of the Commission on 6th September, 2009. Settlement procedure of

the OTC market is like the public market.

CSE initiatives in market development

CSE was very keen on development activities in 2008. From the very beginning CSE tried to get

along with the investors. On the continuation second CSE capital market fair was organized in

Sylhet. The first one was organized in Chittagong in 2005. CSE also organized a monthly

training program about capital market for the third time in March. The fourth and fifth was

arranged in Juneand the sixth and seventh in September. In the same time CSE arranged a five-

day certificationcourse in collaboration with National Stock Exchange of India Ltd. to make

people working in brokerage firms and financial institutions aware of financial derivatives. In the

year 2008, CSEextended its network to Khulna, Moulovibazar, Sylhet, Chhatak, and Hathazary

in Chittagong.Up tonow CSE trading network is extended to 11 cities and 4 upazillas.Now CSE

trading 30 blue chip shares.

The Mission

To create an effective, efficient and transparent market atmosphere of international standard to

save and invest in Bangladesh in order to facilitate the competent entrepreneurs to raise fund and

accelerate industrial growth for overall benefit of the economy.

The Potential of the Bangladesh Capital Market

The capital market is the engine of growth for an economy, and performs a critical role in acting

as an intermediary between savers and companies seeking additional financing for business

expansion.

Vibrant capital is likely to support a robust economy. While lending by commercial banks

provides valuable initial support for corporate growth, a developed stock-market is an important

pre-requisite for moving into a more mature growth phase with more sophisticated

conglomerates. Today, with a $67 billion economy and per capita income of roughly $500,

Bangladesh should really focus on improving governance and developing advanced

market products, such as derivatives, swaps etc. Despite a challenging political environment and

widespread poverty, Bangladesh has achieved significant milestones on the social development

side. With growth reaching 7 percent in 2006, the economy has accelerated to an impressive

level. It is noting worthy that the leading global investment banks; Citi, Goldman Sachs, JP

Morgan and Merrill Lynch have all identified Bangladesh as a key investment opportunity. The

Dhaka Stock Exchange Index is at a 10-year high, how ever, the capital market in Bangladesh is

still underdeveloped and its development is imperative for full realization of the country's

development potential. It is encouraging to see that the capital market of Bangladeshis growing,

albeit at a slower pace than many would like, with market development still at a nascent stage.

The market has seen a lot of developments since the inception of the Securities and Exchange

Commission (SEC) in 1993. After the bubble burst of 1996, the capital market has attracted a lot

more attention, importance and awareness that have led to the infrastructure we have in the

market today.

Expansion of the Capital Market and Its Future:

The capital market of Bangladesh is an emerging market. Although the capital market started in

1956, the establishment of the Securities and Exchange Commission in 1993 quickened the pace

of growth of the securities market by strengthening the role of the market participants. While in

2000 the market capitalization was only around 2.24% of the country’s GDP, at the end of June,

2011 it stood around 41.22%. The average daily turnover of the country’s main stock exchange.

The trading network has expanded to the six divisions of the country transcending the periphery

of Dhaka and Chittagong. The network is also expanding to district towns and other important

places gradually. But expansion of the trading network is not enough; it requires expansion of

investment related knowledge especially for the investors and development of trend in investing

based on fundamentals, which will help investors to protect themselves in many ways from

unexpected loss.

SEC, DSE, CSE and merchant bankers arrange regular training programs for the investors in

related areas. Booklets and brochures have also been published in this regard. To conduct more

extensive level of training, an institute named Bangladesh Institute of Capital Market has got

approval recently.

For the sake of the depth of the capital market, efforts are underway to launch activities for the

development of bond market and derivatives market. It is expected that in the next 5 years

considerable development will take place in these areas.

Actions have been initiated to launch a full-fledged separate automated clearing house, which is

expected to reduce settlement time and thus improve overall market efficiency.

Share Categorization: A, B, G, N & Z

The prime bourse of the company introduced “Group A” and “Group B” from July 2, 2000 based

on its financial strength and performance to give clear information to investors for taking

informed decision. DSE has further categorized the securities by introducing “Group Z” which

came into effect from September 26, 2000. The Stock Exchange introduced another company

category “Group G” on June 30, 2002. The categorization helps a lot the investors in choosing

companies before making investment decision. N Category- the newest one was launched

through an order of SEC on July 3, 2006.

Listed securities are categorized into “A”, “B”, “Z”, “N” and “G” based on profitability ,

commercial operation, holding of AGM and accumulated loss exceeding paid up capital etc. This

categorization helps investors to know the qualities of securities before making investment

decision.

During the reporting FY, number of “A” category companies has increased compared to the last

FY. The number of “B” category companies has increased and “Z” category companies have

decreased compared to the last FY.

Criteria of the Share Category is as follows:

“A’ Category Companies: Companies which are regular in holding the Annual General

Meetings and have declared dividend at the rate of 10 percent or more in a calendar year.

(Mutual Funds, Debentures & Bond are being traded in this category).

“B’ Category Companies: Companies which are regular in holding the Annual General

Meetings but have failed to declare dividend at least at the rate of 10 percent in a calendar year.

“G’ category and their settlement systems would be like B-category companies. Category

Companies: Companies which have failed to hold the Annual General Meetings or failed to

declare any dividend or which are not in operation continuously for more than six months or

whose accumulated loss after adjustment of revenue reserve, if any, is negative and exceeded its

paid up capital.

“N’ Category Companies: Greenfield Companies.

“Z’ Category Companies: All newly listed companies except Greenfield companies will be

placed in this

Category P/E

Category name P/E Ratio Category Cap. Category Earning

A 13.54 1,749,721,283,585 129,207,923,513

B 38.42 10,600,188,612 275,927,924

Z 49.94 73,507,118,503 1,471,775,251

N 20.49 13,740,120,000 670,736,000

Blue Chip Stock

The stocks of well-established companies, leading in their sector, with consistent profit growth

over a long period and steady dividend payment are called "blue chip stocks". The term "blue

chip" gets its name from the game of poker where a blue chip has the highest value.

Blue chip companies are usually financially sound and are thought to be relatively low-risk

investments. They tend to be less volatile than other companies and to provide

solid growth to portfolios. Similarly, the stocks of blue-chip companies are highly valued due to

their consistent financial soundness. A regular dividend is expected from blue-chip stocks even

in bad financial times in the stock market.

Blue chip stocks have a lot of prestige as an investment asset class. They are perceived to be the

best stock for long-term investment. Blue-chip companies are the leaders in their sector, and are

known for their sheer size and reputation - in products, services and company governance.

Features of Blue Chip Stocks

There are no specific criteria for blue chip stocks. The most common characteristics of such stocks include:

1. Revenues: Companies with revenues higher than that generated by industry peers.

2. Earnings: Companies that have been generating healthy earnings on a consistent basis.

3. Dividends: Companies that pay regular dividends to common stockholders, even if their performance has been unsatisfactory in a particular period. Moreover, the dividend payout is raised at regular intervals.

4. Balance Sheet: The balance sheets are robust and their debt liabilities are not extensive.

5. Credit Rating: Their credit ratings in the bond and unsecured debt markets are high.

6. Size: The market capitalization of these companies is higher than that of other companies in the same industry.

7. Product Portfolio: They have extensive and diversified product lines. They also have a wide global presence.

8. Competition: They are cost efficient, with high distribution control and excellent franchise value, all of which contribute towards their competitive advantage.

How to Invest in Blue Chip Stocks

There are several ways of purchasing blue chip stocks. These include:

1. Directly from a broker. One can opt for a direct stock purchase plan or a dividend reinvestment plan to acquire blue chip stocks.

2. A mutual fund that specializes in blue chip stocks.

3. Investing in the Diamond, a popular ETF (exchange traded fund). By buying a share of the Diamond, you purchase a fraction of all the thirty stocks in the US-based Dow Jones Industrial Average (DJIA) index. Given their low expense ratio, limited management fee and high tax efficiency, the Diamonds are preferred to blue chip mutual funds.

Features of a Blue Chip Company

Here are some aspects of a blue-chip company: -

Leaders in their sectors, with significant competitive advantage.

Steady earnings over a long period of time.

Large market capitalisation.

High public confidence due the quality of its products and services.

Ability to face both good and bad financial times, including recession.

Examples in the Bangladesh include Grameen Phone and Square Pharma. An index such as

the DSE 20 tracks blue chip stocks.

History

The term "blue chip stock" was coined by the Dow Jones' Oliver Dingold in the early 1920's

(source: Wikipedia). The phrase refers to a blue poker chip, which is the highest and most

valuable piece. A blue chip stock is classified as the stock of a large company that is an industry

leader and provides consistent, steady investment returns. Blue chip stocks are traditionally

thought to be a safe investment since the prices do not tend to vary wildly.

To compensate for slower growth, blue chip stocks pay investors dividends at regular intervals.

Often, the amount paid out in dividends increases over time.

Blue chip share in Bangladesh

There is no share named blue chip share in Bangladesh. But DSE has 155 “A” category shares of

which 20 shares fulfill the requirements of blue chip shares. CSE has 135 “A” category shares of

which 30 shares fulfill the requirements of blue chip shares .The blue chip companies of the

country are playing vital role in this growth. We have put together a brief profile of the top 10

blue chip companies. They are well-known names of Bangladesh Inc and have played a vital role

in the success of Bangladesh economy.

Most blue chip stocks pay regular dividends, even when business is faring worse than usual.

They are valued by investors seeking relative safety and stability, though prices per share are

usually high. Typically, such stocks are perceived to

offer reliable returns, low yield, and low risk.

CSE-30 DSE-20

1 ACI

2 AMCL(PRAN)

3 APEXTANRY

4 BATASHOE

5 BATBC

6 BDLAMPS

7 BXPHARMA

8 DHAKABANK

9 GQBALLPEN

10 ISLAMIBANK

11 LINDEBD

12 MEGHNACEM

13 MONNOCERA

14 NBL

15 PRIMEBANK

16 SINGERBD

17 SOUTHEASTB

18 SQUARETEXT

19 SQURPHARMA

20 UTTARAFIN

CSE SELECTIVE INDEX (CSE - 30)

1 ABBANK

2 ACI

3 AFTABAUTO

4 APEXTANRY

5 ASIAINS

6 BAYLEASING

7 BEXIMCO

8 CONFIDCEM

9 EBL

10 FAREASTLIF

11 HEIDELBCEM

12 IDLC

13 IFIC

14 ISLAMIBANK

15 JAMUNAOIL

16 LANKABAFIN

17 MPETROLEUM

18 NBL

19 NAVANACNG

20 PLFSL

21 PRIMEBANK

22 PRIMEFIN

23 PUBALIBANK

24 SINGERBD

25 SQURPHARMA

26 SQUARETEXT

27 SAPORTL

28 UNIONCAP

29 UTTARABANK

30 UTTARAFIN

At the beginning of new millennium a selective Index will be introduced, which is found to be

very popular in almost all the developed exchanges worldwide. Here the selection criteria play a

very important role in forming an index.

Criteria for a Selective Index

It provides a discussion about the important criterion for an index, which is to be used as a

benchmark of performance. The criterion is that the movement of the index fully represents the

aggregate movement of the index's constituent assets and that the index's returns are realizable

by an investor who has held a portfolio identical to the asset mix of the index. Value-Weighted

Index satisfies the above criterion.

Selection of stocks for the benchmark index should be such that it represents the whole market.

In addition it will be guaranteed that the constituent stocks have high percentage coverage of the

market in terms of market value. This will make it difficult if not possible for a few investors to

manipulate the movement of the index.

CRITERIA FOR CSE-30 INDEX

Two layer methods are followed for selection of listed companies in the CSE-30 Index. In the

first layer method, basic criteria are considered for primary selection.

BASIC CRITERIA

Must be listed with the Chittagong Stock Exchange Limited.

In case of IPO/New Issue, this should be on listing either with DSE or CSE for a

minimum period of 2 years or remained in Commercial Production in Bangladesh for the

minimum same period prior to its listing.

Companies that did not hold their Annual General Meetings regularly will not be

considered.

Minimum market capitalization must be Tk. 200 million and at least two times of paid-up

capital.

Must have at least 20% free floating share capital. Free floating share capital shall mean

the share capital which will exclude Govt's holding (other than ICB), Sponsors/Directors

& their Associates' holding plus other locked-in portions.

Must have positive revenue reserve/ retained earnings.

Must be traded for at least 50% trading days of the six monthly review period.

Paid dividend in any of the last 2 years.

Company having negative Earning Per Share (EPS) for last two consecutive years will

not be considered.

Company falling under settlement category 'Z' will not be considered.

Financial Institution falling under the problem list of Bangladesh Bank will not be

considered provided such information is available from an acceptable source.

Company failing to pay the listing fees and/or penalty imposed under the Listing

Regulations of CSE for a period of 2 years will not be considered.

At least one company from each sector having minimum seven companies will be taken

in the index if the scrip satisfies the above criteria and achieves the minimum point (50

points) as evaluated on the basis of the following Selection Criteria. The sector having

less than seven companies will be considered to be a part of Miscellaneous Sector.

On being qualified on the basis of the Basic Criteria, the companies are required to meet the

following further Selection Criteria to have the final berth in CSE-30 Index.

SELECTION CRITERIA

Higher Net Assets Value (NAV) per share

Higher rate of Earning Per Share (EPS)

Higher rate of Dividend

Lower Price Earning (PE) Ratio

Higher Dividend Yield (DY)

Higher rate of free floating in equity

Larger number of shareholders

Higher liquidity in terms of trading day

Higher liquidity in terms of number of contract

Longer duration of continuous remaining in the CSE-30 Index

Regular payment of listing fees

Conditions to be followed while forming the selective Index:

Only the active scrips will be considered for calculating the index.

Mutual Funds and Debt securities will not be considered in this index.

Only normal public market trades will be considered.

Selective Index will be refreshed after 3 minutes time interval during online trade.

At the time of update the Selective Index will consider the Weighted Average Price for

each constituent stock. (Example annexed)

No changes in number of shares will be allowed during the bussiness sessions.

Index committee will review the index - its criteria, performance, calculation method

after every six month.

Index Base Date is 30th December 1999

Base Day index is set to be 1000.

CSE-30

The construction principle of this index based on Laspeyres method like other two CSE indices ,

CSE All Share Price Index and CSE-30 Index. It may be mentioned here that the base value of

these two indices was also set to 1000 with a base date 30th December 1999. The current values

(as on 11th February 2004) of CSE All Share Price Index and CSE-30 Index are 1601.54 and

1483.60 respectively.

Selected 30 Companies

SL Scrip Code LTP High Low YCPClose

Price Change Trade Volume

1 ABBANK 43.7 44.2 43.1 43.9 43.6 -0.2 231 77,430

2 ACI 175.0 175.0 170.1 180.0 175.0 -5 2 150

3 AFTABAUTO 140.5 141.0 138.2 140.9 140.0 -0.4 242 50,776

4 APEXTANRY 100.3 101.0 100.1 105.0 100.3 -4.7 6 1,200

5 ASIAINS 39.8 40.7 39.8 40.5 40.3 -0.7 16 913,562

6 BAYLEASING 47.9 48.0 47.0 48.5 47.7 -0.6 34 17,966

7 BEXIMCO 90.5 91.5 89.9 91.3 90.7 -0.8 437 136,838

8 CONFIDCEM 118.3 118.9 116.8 118.6 118.7 -0.3 62 10,065

9 EBL 40.4 40.7 39.8 40.6 40.3 -0.2 79 50,920

10 FAREASTLIF 195.0 195.0 190.2 193.6 195.0 1.4 7 2,300

11 HEIDELBCEM 236.0 236.0 236.0 236.1 236.0 -0.1 1 100

12 IDLC 117.6 118.0 116.2 119.5 117.9 -1.9 9 1,687

13 IFIC 45.6 45.9 45.5 46.0 45.7 -0.4 12 1,690

14 ISLAMIBANK 42.9 43.2 42.8 43.2 43.0 -0.3 88 38,051

15 JAMUNAOIL 255.2 255.2 250.1 255.6 254.5 -0.4 31 4,900

16 LANKABAFIN 88.2 89.5 86.9 88.8 88.2 -0.6 144 101,500

17 MPETROLEUM 214.8 214.8 209.0 213.5 213.0 1.3 53 59,900

18 NBL 29.6 30.0 29.5 29.9 29.6 -0.3 260 159,838

19 NAVANACNG 97.0 98.0 96.1 98.0 96.9 -1 90 24,444

20 PLFSL 45.5 46.2 44.8 46.1 45.5 -0.6 266 88,400

21 PRIMEBANK 35.0 35.2 34.9 34.9 35.0 0.1 33 21,836

22 PRIMEFIN 62.1 62.9 61.5 63.0 62.4 -0.9 84 14,000

23 PUBALIBANK 32.4 32.6 32.1 32.6 32.4 -0.2 139 72,148

24 SINGERBD 180.0 180.5 180.0 180.0 180.3 0 4 700

25 SQURPHARMA 256.3 262.0 255.4 262.1 256.6 -5.8 258 107,890

26 SQUARETEXT 105.9 105.9 102.9 103.0 105.3 2.9 20 12,706

27 SAPORTL 41.0 41.1 40.4 41.4 40.9 -0.4 26 5,907

28 UNIONCAP 39.7 39.7 38.6 39.7 39.7 0 7 3,527

29 UTTARABANK 45.5 46.0 45.4 46.0 45.7 -0.5 65 28,556

30 UTTARAFIN 110.6 111.0 108.0 110.1 109.5 0.5 27 4,200

Stock market indexA stock market index is a method of measuring a section of the stock market. Many indices are

cited by news or financial services firms and are used as benchmarks, to measure the

performance of portfolios such as mutual funds.

Alternatively, an index may also be considered as an instrument (after all it can be traded) which

derives its value from other instruments or indices. The index may be weighted to reflect the

market capitalization of its components, or may be a simple index which merely represents the

net change in the prices of the underlying instruments.

There are many different ways of constructing an index. One of the most common methods is

illustrated by the following simple example.The values of a market portfolio at the close of

trading on Day 1 and Day 2 are recorded below:

Trading days Value of portfolio Index

DAY 1 (base day) Tk 20,000 1000

DAY 2 Tk 21,000 1050

We take Day 1 as the base day. The index on that day will be taken as a standard. The value

assigned to the base day index is 1000 in this example. On Day 2 the value of the portfolio has

changed from Tk 20,000 to Tk 21,000, a 5% increase. Therefore, the value of the index on Day 2

will change to indicate a corresponding 5% increase in market value. The computation follows

the procedure below:

  2's portfolio value

Day 2's index = ------------------------------------------------- * Base Day's (Day 1) index

Base Day's (Day 1) portfolio value

                              Tk 21,000

                        = ---------------- * 1000

                              Tk 20,000

                        = 1050

                              

 Day 2's index is 1050 as compared to the 1000 of day 1. The above illustration only serves as an

introduction to how a particular index is constructed. The daily computation of an index is more

involved especially when there are changes in market capitalization of constituent stocks, e.g.,

rights offers, stock dividend etc. The primary objective of constructing market indices is to

measure the performance of the market. The indices provide vital information about the current

and historical behavior of the market. Stock market indices differ from one to another basically

in their sampling and/or weighting methods.

Highest

value :

16564.04

Lowest

value :

9995.5619

Date

From :

18 Jun,

2011

Date To :

18 Jun,

2012

Trading

Days :

241

SECTOR WISE SELECTED 30 SHARES IN CSE:

Banking & Financial sector: Islami Bank Bangladesh Limited ( ISBNK), Prime Bank Limited (

PMBNK ), Dhaka Bank Limited ( DHBNK ), South East Bank Limited ( SEBNK ), National

Bank Limited ( NBL ), National Credit & Commerce Bank ( NCCBL ), Al-Arafat Islami Bank

Limited ( AIBL ). Pharmacy & Chemical sector: Square Pharmaceuticals Limited ( SQPH ),

Beximco Pharmaceuticals Limited ( BXPH ), Advanced Chemicals Industries Limited ( ACL ),

Keya Cosmetics Limited ( KECOS ).Textiles & Clothing Sector: Square Textiles limited

( SQTEX ), Padma Textiles Limited ( PDTEX ), Beximco Synthetics Limited ( BXSYN ), Prime

Textile Spinning Mills Ltd ( PRTEX ), Apex Weaving & Finishing Mills Ltd. ( APXWV ),

Beximco Textiles Limited ( BXTEX ). Food & Agriculture sector: Agricultural Marketing

Company limited ( AMCL ). Engineering & Electrical Sector: Singer Bangladesh Limited

( SINGR ), Eastern Cables Limited ( ESTCB ), Quasem Drycells Limited ( QUSDR ), Olympic

Industries Limited ( OLIND ). Cement Sector: Heidelberg Cement Bangladesh Ltd. ( HBCM ),

Confidence Cement Ltd ( CNFCM ), Meghna Cement Mills Ltd ( MGHCM ).

Leather & Footwear Sector: Apex Tannery Limited ( APXTN ). Services & Construction

Sector: Eastern Housing Limited ( EHL ). Information Technology: BOC Bangladesh Limited

( BOC ).Ceramic Sector: Fu-Wang Ceramic Industry limited ( FWCR ). Miscellaneous Sector:

Aramit limited ( ARMIT ).

DSE-20 Index:

The index was introduced on January 01, 2001. The index comprises leading 20 shares with a

base of 1000. The criteria taken into account in formulating the index were market capitalization,

free float shares in public hands, minimum payment of 10 percent dividend for the last three

consecutive years and 95 percent trading days liquidity in terms of trading during the last six

months. Subjective criteria such as good corporate governance, regular holding of Annual

General Meetings and sectoral representation were the other key factors for becoming eligible

for inclusion in the index.

     DSE 20 Share By Company Name On  May 30, 2012 at 14:36:46

# Trading Code

Last

trading

price

High LowClose

PriceYCP Change Trade Volume Value(mn)

1 ACI 180.8 181.0 177.1 0.0 176 4.80 25 1900 0.34

2 AMCL(PRAN) 120.5 123.7 120.5 0.0 120.4 0.10 11 1300 0.16

3 APEXTANRY 103.0 104.6 103.0 0.0 102.8 0.20 39 7700 0.80

4 BATASHOE 499.9 499.9 499.9 0.0 498 1.90 8 800 0.40

5 BATBC 600.0 602.0 600.0 0.0 601.5 -1.50 42 28450 17.07

6 BDLAMPS 141.0 142.0 139.7 0.0 139.5 1.50 48 5000 0.70

7 BXPHARMA 63.4 64.1 63.0 0.0 62.7 0.70 478 149350 9.50

8 DHAKABANK 30.4 31.0 30.4 0.0 30.5 -0.10 146 136600 4.17

9 GQBALLPEN 196.1 198.0 191.5 0.0 191.7 4.40 546 79150 15.48

10 ISLAMIBANK 43.5 43.9 43.4 0.0 43.4 0.10 402 340200 14.81

11 LINDEBD 532.0 544.0 530.0 0.0 529.2 2.80 21 2200 1.18

12 MEGHNACEM 153.1 153.1 149.9 0.0 147.1 6.00 670 160600 24.39

13 MONNOCERA 41.9 42.0 41.0 0.0 40.9 1.00 31 5900 0.25

14 NBL 30.5 31.0 30.1 0.0 30.3 0.20 927 834000 25.39

15 PRIMEBANK 34.8 34.8 34.3 0.0 34.5 0.30 108 128750 4.45

16 SINGERBD 180.9 183.4 178.5 0.0 178.4 2.50 80 8100 1.47

17 SOUTHEASTB 21.8 21.8 21.3 0.0 21.6 0.20 115 300500 6.49

18 SQUARETEXT 102.8 104.9 102.8 0.0 102.8 0.00 108 24350 2.52

19 SQURPHARMA 252.0 254.9 250.9 0.0 250.3 1.70 931 80520 20.36

20 UTTARAFIN 109.3 110.0 105.7 0.0 104 5.30 412 73850 8.02

Analysis of stocks

Stock analysis is the process of screening a company’s fundamentals and investigating market

trends in order to identify stocks that can deliver high profits at low risk. Stock markets are

volatile and go through bull and bear phases, with share prices moving up or down. Stock market

analysis helps investors identify these phases. There are two distinct methodologies for stock

analysis, namely fundamental analysis and technical analysis.

Analysis of 10 companies:

SECTOR DETAILS

Sector: Bank

Sector PE: 10.27

Sector Cap 511552005945.00

Sector Earnings: 49834736609.20

Sector Beta: 0.89

BASIC INFO

Lot: 50

No Of Securities: 442333668

Listing Year: 1983  

Reserve: 10460.8

Last AGM Held: 02/05/2012

Paidup Capital: 4423 M

Market Capital: 22619.315 M

Trade % of MCAP: 0.02%

Public Securities 160301721

Public Cap 8197M

Capital Details

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

13.9% 36.24% 0.57% 49.29% 0%

EPS

Last EPS: Quarter: Annu EPS: P/E:

1.14 Q1 4.56 9.34

52 WEEK HIGHAdj price: 75.13

52 WEEK LOW Adj price: 31.17

Financial Performance

Performance Year 

Basic EPS  Basic EPS (restated)  

Net Asset Value

Per Share 

 Restated Net Asset Value

Per Share 

Net Profit After Tax (mn)

% Dividen

d 

% Dividend Yield  Based on Based on

Continuing

operations

Including Extra-Ordinar

y Income

Continuing

operations

Including Extra-Ordinar

y Income

Continuing

operations

Including Extra-Ordinar

y Income

2006 93.08  NA 0 NA 481.7

4 0   532.19 NA 30 0

2007 256.1  NA 85.37 NA 807  202.33   1903.49 NA 200 0

2008 103.18  NA 89.72 NA 301.4

9 262.16   2300.62 NA 15 1.82

2009 133.26  0 106.61 0 399  318.87   3417.19 0 20 1.7

2010 12.45  0 10.82 0 44.14  38.38   3989.52 0 10 0.63

2011 NA  NA NA NA NA  NA   NA NA NA NA

2012 NA  NA NA NA NA  NA   NA NA NA NA

SECTOR DETAILS

Sector: Pharmaceuticals

& Chemicals

Sector PE: 17.86

Sector Cap 154955418232.00

Sector

Earnings:

8676994879.92

Sector Beta: 0.66

BASIC INFO

Lot: 50

No Of

Securities:

23773833

Listing

Year:

1976  

Reserve: 3883.72

Last AGM

Held:

12/06/2012

Capital Details

Paidup

Capital:

238 M

Market

Capital:

2933.238 M

Trade % of

MCAP:

0.01%

Public

Securities

7431700

Public Cap 917M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

34.2% 31.26% 0% 34.54% 0%

EPS

Last EPS: Quarter: Annu EPS: P/E:

0.10 Q1 0.40 429.50

52 WEEK HIGHAdj price: 252.8352 WEEK LOW Adj price: 124.25

Dividend

Dividend(%) Dividend payout ratio

2007 85 4.68

2008 100.00,20%B 1.92

2009 105 2.35

2010 120 3.22

2011 80,20%B 3.87

SECTOR DETAILS

Sector: Miscellaneous

Sector PE: 8.01

Sector Cap 50729782832.50

Sector

Earnings:

6331036466.76

Sector Beta: 0.86

BASIC INFO

Lot: 100

No Of

Securities:

363565109

Listing

Year:

1989  

Reserve: 15361.8

Last AGM

Held:

30/06/2011

Capital Details

Paidup

Capital:

3636 M

Market

Capital:

1339.559 M

Trade % of

MCAP:

1.25%

Public

Securities

277945526

Public Cap 1024M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

13.25% 76.45% 0% 0% 10.3%

EPS

Last EPS: Quarter: Annu EPS: P/E:

3.53 Q1 14.12 6.26

52 WEEK HIGH

Adj price: 198.00

52 WEEK LOW

Adj price: 61.60

Financial Performance

Performance Year 

Basic EPS  Basic EPS (restated)  

Net Asset Value

Per Share 

 Restated Net Asset Value

Per Share 

Net Profit After Tax (mn)

% Dividen

d 

% Dividend Yield  Based on Based on

Continuing

operations

Including Extra-Ordinar

y Income

Continuing

operations

Including Extra-Ordinar

y Income

Continuing

operations

Including Extra-Ordinar

y Income

2006 0  NA 3.65 NA 34.81  0   132.19 NA 15 0

2007 1.53  NA 1.01 NA 32.9  23.13   55.4 NA 15 0

2008 19.08  NA 11.11 NA 72.35  43.4   1047.36 NA 10 0.54

2009 34.59  0 21.62 0 101.9

6 63.73   3259.8 0 60 0

2010 NA  NA NA NA NA  NA   NA NA NA NA

2011 NA  NA NA NA NA  NA   NA NA NA NA

2012 NA  NA NA NA NA  NA   NA NA NA NA

SECTOR DETAILS

Sector: Bank

Sector PE: 10.27

Sector Cap 511552005945.00

Sector

Earnings:

49834736609.20

Sector Beta: 0.89

BASIC INFO

Lot: 100

No Of

Securities:

466759413

Listing

Year:

2000  

Reserve: 2989.27

Last AGM

Held:

29/03/2012

Capital Details

Paidup

Capital:

4668 M

Market

Capital:

9508.787 M

Trade % of

MCAP:

0.06%

Public

Securities

140074500

Public Cap 2854M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

50.53% 30.01% 0% 19.46% 0%

EPS

Last EPS: Quarter: Annu EPS: P/E:

0.90 Q1 3.60 8.19

52 WEEK HIGHAdj price: 37.96

52 WEEK LOW Adj price: 24.58

Dividend declaration

year Dividend

2007 25%

2008 15%

2009 25%

2010 35%

2011 30%

SECTOR DETAILS

Sector: Bank Sector PE: 10.27 Sector Cap 511552005945.0

0 Sector Earnings:

49834736609.20

Sector Beta:

0.89

BASIC INFO

Lot: 100 No Of Securities:

1250964000

Listing Year:

1985  

Reserve: 13508.5 Last AGM Held:

15/05/2012

Capital Details

Paidup Capital:

12510 M

Market Capital:

21341.232 M

Trade % of MCAP:

0.05%

Public Securities

316118603

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn: 42.01% 25.27% 0% 9.98% 22.74%

EPS

Last EPS: Quarter: Annu EPS: P/E: 1.57 Q1 6.28 6.85

52 WEEK HIGHAdj price: 46.50

52 WEEK LOW Adj price: 34.90

Dividend

year dividend

2007 25%

2008 30%

2009 30%

2010 35%

2011 25%

SECTOR DETAILS

Sector: Engineering

Sector PE: 19.18

Sector Cap 86804872441.30

Sector

Earnings:

4526302475.00

Sector Beta: 0.99

BASIC INFO

Lot: 100

No Of

Securities:

49658400

Listing

Year:

2009  

Reserve: 482.35

Last AGM

Held:

22/09/2011

Capital Details

Paidup

Capital:

497 M

Market

Capital:

M

Trade % of

MCAP:

0.00%

Public

Securities

18666593

Public Cap 0M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

42.5% 37.59% 0% 19.91% 0%

EPS

Last EPS: Quarter: Annu EPS: P/E:

3.76 Q3 5.01 18.87

52 WEEK HIGH

Adj price: 159.82

52 WEEK LOW

Adj price: 48.60

SECTOR DETAILS

Sector: Engineering

Sector PE: 19.18

Sector Cap 86804872441.30

Sector

Earnings:

4526302475.00

Sector Beta: 0.99

BASIC INFO

Lot: 50

No Of

Securities:

39267580

Listing

Year:

1983  

Reserve: 2747.84

Last AGM

Held:

30/04/2012

Capital Details

Paidup

Capital:

393

Market

Capital:

3290.582 M

Trade % of

MCAP:

0.04%

Public

Securities

6282813

Public Cap 526M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

75% 16% 0% 9% 0%

EPS

Last EPS: Quarter: Annu EPS: P/E:

2.33 Q1 9.32 19.24

52 WEEK HIGH

Adj price: 309.00

52 WEEK LOW

Adj price: 165.90

SECTOR DETAILS

Sector: Pharmaceuticals & Chemicals

Sector PE: 17.83

Sector Cap 154731079433.00

Sector Earnings:

8676994879.92

Sector Beta: 0.66

BASIC INFO

Lot: 10

No Of Securities:

264834760

Listing Year:

1995  

Reserve: 11279.9

Last AGM Held:

21/09/2011

Capital Details

Paidup Capital:

2648 M

Market Capital:

31564.436 M

Trade % of MCAP:

0.09%

Public Securities

103656325

Public Cap 12354M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

54.16% 39.14% 0% 0% 6.7%

EPS

Last EPS: Quarter: Annu EPS: P/E:

11.21 Q3 14.95 17.19

52 WEEK HIGH

Adj price: 286.00

52 WEEK LOW

Adj price: 175.50

Dividend

year dividend(%)

2007 50%

2008 40%

2009 40%

2010 35%

2011 30%

SECTOR DETAILS

Sector: Financial Institutions

Sector PE: 27.17

Sector Cap 191637970524.00

Sector Earnings:

7052330754.44

Sector Beta: 0.90

BASIC INFO

Lot: 200

No Of Securities:

123750000

Listing Year:

1992  

Reserve: 2696.44

Last AGM Held:

28/03/2012

Capital Details

Paidup Capital:

1238 M

Market Capital:

3020 M

Trade % of MCAP:

0.22%

Public Securities

26655750

Public Cap 651M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

35.99% 21.54% 0% 42.47% 0%

EPS

Last EPS: Quarter: Annu EPS: P/E:

1.71 Q1 6.84 17.30

52 WEEK HIGH

Adj price: 190.40

52 WEEK LOW

Adj price: 65.12

SECTOR DETAILS

Sector: Bank

Sector PE: 10.28

Sector Cap 512363794719.00

Sector Earnings:

49834736609.20

Sector Beta: 0.89

BASIC INFO

Lot: 250

No Of Securities:

935771469

Listing Year:

2000  

Reserve: 7175.58

Last AGM Held:

29/03/2012

Capital Details

Paidup Capital:

9358 M

Market Capital:

19985.875 M

Trade % of MCAP:

0.01%

Public Securities

341275855

Public Cap 7289M

SHARE DRISTRIBUTION

Director: Public: Govt: Inst: Foriegn:

40.75% 36.47% 0% 20.95% 1.83%

EPS

Last EPS: Quarter: Annu EPS: P/E:

0.52

52 WEEK HIGHAdj price: 43.00

52 WEEK LOW Adj price: 27.17

Q1 2.08 16.59

Analysis of Beta Coefficient

What Does Beta Mean?

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the

market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that

calculates the expected return of an asset based on its beta and expected market returns.

Beta is calculated using regression analysis, and you can think of beta as the tendency of a

security's returns to respond to swings in the market. A beta of 1 indicates that the security's

price will move with the market.

A beta of less than 1 means that the security will be less volatile than the market. A beta of

greater than 1 indicates that the security's price will be more volatile than the market. For

example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

ACI:

Beta Coefficient of ACI = 0.792108337923

Covariance = 3.41940671414

Variance = 4.3168422177

Beta Coefficient of BEXIMCO = 0.929687655672

Covariance = 4.0461473953

Variance = 4.3521578141

Beta Coefficient of DHAKABANK = 0.927159897464

Covariance = 3.99236619145

Variance = 4.30601690428

Beta Coefficient of SINGERBD = 0.680546393985

Covariance = 2.9588146789

Variance = 4.34770458716

Beta Coefficient of ISLAMIBANK = 0.745086809377

Covariance = 3.22945178389

Variance = 4.33432956167

Beta Coefficient of ABBANK = 1.01335264579

Covariance = 4.38138309572

Variance = 4.3236509165

Beta Coefficient of SQURPHARMA = 0.535334352303

Covariance = 2.31094185336

Variance = 4.31681965377

Beta Coefficient of IDLC = 0.863711100588

Covariance = 3.67306439471

Variance = 4.25265391658

MARKET YIELD

Company  Last Price

Dividend Yield  

Payout Ratio  

Declaration(C)Declaration Date

ABBANK 39.2 1.276 % 13.228 % 5 % 01-03-2012

IFIC 41.8 1.196 % 6.550 % 5 % 17-05-2012

ISLAMIBANK 41.8 1.675 % 11.626 % 7 % 24-04-2012

PUBALIBANK 31.6 1.582 % 14.793 % 5 % 06-03-2012

UCBL 24.9 4.819 % 16.000 % 12 % 03-04-2012

UTTARABANK 40.9 4.890 % 34.722 % 20 % 05-04-2012

IDLC 109.8 3.188 % 15.823 % 35 % 10-03-2011

ULC 36.7 2.044 % 32.468 % 7.5 % 18-03-2012

PRIMEBANK 32.6 3.067 % 14.493 % 10 % 05-03-2012

SOUTHEASTB 20.1 7.463 % 64.378 % 15 % 29-02-2012

DHAKABANK 28 1.786 % 8.000 % 5 % 28-02-2012

BATASHOE 481 2.183 % 24.741 % 105 % 26-04-2012

MONNOSTAF 165 0.606 % 37.313 % 10 % 13-05-2012

6THICB 45.9 19.608 % 9.926 % 90 % 11-08-2011

8THICB 49.5 18.182 % 72.993 % 90 % 11-08-2011

AIMS1STMF 33.7 8.309 % 595.745 % 28 % 08-09-2011

ICBAMCL1ST 39.7 13.854 % 7.771 % 55 % 31-07-2011

ICBISLAMIC 19 18.947 % 863.309 % 36 % 31-07-2011

GRAMEEN1 45.4 5.507 % 26.624 % 25 % 29-09-2011

AFTABAUTO 131.9 1.516 % 10.199 % 20 % 05-12-2011

BDLAMPS 135.8 2.577 % 40.854 % 35 % 24-04-2011

ECABLES 58.9 1.698 % 40.486 % 10 % 12-06-2012

SINGERBD 174.2 1.722 % 19.634 % 30 % 20-03-2012

RENWICKJA 75.7 2.642 % 3.695 % 20 % 14-11-2011

NTLTUBES 57.5 4.348 % -349.650 % 25 % 11-11-2010

APEXFOODS 63.3 2.212 % 74.074 % 14 % 07-09-2011

BATBC 600.1 6.166 % 87.038 % 370 % 14-03-2012

LINDEBD 528.2 1.893 % 22.779 % 100 % 20-03-2012

DELTASPINN 28.4 3.521 % 72.307 % 10 % 21-11-2011

HRTEX 27.2 1.838 % 19.157 % 5 % 24-02-2011

SQUARETEXT 98.4 1.626 % 22.989 % 16 % 30-04-2012

MALEKSPIN 17.2 5.814 % 58.140 % 10 % 2010-11-14

ACI 169.1 4.731 % 66.061 % 80 % 16-05-2012

SQURPHARMA 248.7 1.206 % 18.067 % 30 % 16-08-2011

AMCL(PRAN) 119 2.605 % 54.520 % 31 % 03-11-2011

CONFIDCEM 108.8 1.838 % 27.064 % 20 % 14-05-2012

MEGHNACEM 123.9 2.018 % 84.459 % 25 % 05-06-2011

NAVANACNG 89.7 2.007 % 26.049 % 18 % 07-08-2011

Results:

From above discussion, these companies are in excellent financial condition and are leading

players in its sector.so these are blue chip stock in Bangladesh. These high-quality stocks are

considered a lower risk investment, which are much preferable for risk-averse investors in

Bangladesh. These companies pay regular dividends to common stockholders, although their

performance has been unsatisfactory in a particular period. Their dividend payout is rising at

regular intervals. These Companies have been generating healthy earnings on a consistent basis.

In this way Before investing in any blue chip company, investors have to carefully read and

analyze all information available about the company , its history, nowadays reality and outlook

for the future. No one knows what's going to happen in the next few months and the every-year-

growing stock doesn't have to follow its twenty years history.

Benefits

Since blue chip companies are industry leaders, the company is likely to have a long standing

record of successful business. Most industry leaders have low debts and healthy balance sheets,

which leads to consistent and increased dividends for shareholders. Unlike more volatile stocks,

blue chip stocks are likely to ride out dips in the economy without dropping substantially. For

example, a recession would likely have a stronger negative impact on other stocks than it would

the blue chip companies (although it is worth noting that in a recession, nearly all stock prices

will dip at least somewhat).

Here are some advantages of investing in blue chip stocks:

The main reason why blue chip shares are much sought after is due to the perception of

safety. Blue chip stocks are perceived to be less risky than other stocks.

The preference for quality among investors is another reason that blue chip stocks are

valued. High value blue chip stocks are said to be worth possessing for long-term

investment purposes.

The prospect of steady dividends, irrespective of market conditions, is a factor of

attraction in blue chip stock for investors. They are a preferred choice for those seeking

recession-proof investment and are considered to be great dividend stocks.

A stock portfolio should consist of a mixed bag of investments - there should be diversity

in assets. Instead of putting all eggs in one basket, it is better to diversify and dedicate a

percentage to large-caps or blue chip stocks, and the rest to other asset classes. This

would create a balance between stability and risk in a stock portfolio.

Disadvantages of Blue Chip SharesBlue chip shares are investments in well-established companies and leaders in their respective

industries. Blue chip companies in general are financially stable with a history of solid earnings.

Investors buy blue chip shares for investment safety, predictable returns, consistent dividend

payments and their defensive nature in market downturns. However, investors may have to trade

the benefits of owning blue chip shares for certain disadvantages such as low returns, slow

growth, little volatility and expensive pricing, which can also become disincentives to some

investors when considering blue chip shares.

The share market is prone to ups and downs. Blue chip stocks are not immune to those

fluctuations, although they are in a better position to weather any financial storms and pay

consistent dividends.

As lot of investors flock to blue chip stocks as to a refuge of stability, the dividend returns from

such stocks tend to be lower, although consistent.

Low Returns

Like any investment, returns on blue chip shares are commensurate with their risk.

Providing a high degree of investment safety from their predictable, steady business

operations, blue chip shares are low-risk investments, and thus returns are normally low

as well. Because of this disadvantage, blue chip shares are not suitable for investors who

have a high level of risk tolerance and are more aggressive in their investment

approaches.

Slow Growth

Blue chip shares are comprised of large-cap companies with maturing businesses and markets,

compared with small- and mid-cap companies that are still in their development stages and have

a high potential for growth. Nevertheless, blue chip share may yet deliver earnings increases over

time, but the growth is likely to be small and steady. While blue chip shares may be ideal for

investors seeking value accumulation over the long-term, their slow growth presents a particular

disadvantage to growth investors who expect above-average growth and large share price moves

in a short period of time.

Little Volatility

Large price swings in trading are uncommon with blue chip shares, as their respective companies

are financially stable with smooth operations. Little volatility can be a plus for some investors

who desire consistent investment returns, but this is actually considered a disadvantage to others

seeking varied trading gains. While many value investors choose blue chip shares based on

fundamental analysis, the lack of volatility makes them unsuitable in technical trading for quick,

short-term profits.

Pricing

Blue chip shares tend to commend higher valuation in market trading supported by investor

demand. Blue chip investors may include those who invest in blue chip shares for consistent

long-term returns, switch to blue chip shares for investment safety during economic downturns

and favor blue chip shares for predictable dividend payments. As a result, prices of blue chip

shares are more expensive, which creates a disadvantage for the investor who may not be

particularly interested in blue chip shares, but mainly needs them to spread his investments

among various share classes for diversification purposes.

Misconceptions

Inexperienced investors can make the mistake of thinking blue chip stocks are a safe, sure bet

with guaranteed dividends. However, this is not always the case. The state of the economy,

industry news, and company mergers & acquisitions can all cause the price of a stock to fall,

irregardless of how well established the company behind it is. Also, investors must make sure to

diversify their portfolios. Even holding multiple blue chip stocks is not enough of a

diversification; safer investments like Treasury bonds and established, steady yield mutual funds

should be included to mitigate risk. However, mutual funds do exist that invest primarily in blue

chip stocks; these are a good starting point of investment for the inexperienced or conservative

investor.

Suggestions to improve the activities of blue chip shares

To introduce automated monitoring system that may control price manipulation,

malpractices and inside trading of blue chip shares.

To introduce full computerized system for settlement of transactions of blue chip

shares.

To force the blue chip companies to publish their annual reports with actual and

proper information that can ensure the interests of investors.

Although blue chip shares are not suitable for investors who have a high level of risk

tolerance and are more aggressive in their investment approaches so in that case risk

averse people are suitable for blue chip share. So blue chip companies should try to

attract risk adverse investors.

Blue chip companies should have rapid growth for the long term existence.

For quick, short term profits blue chip companies should increase their price volatility

which will be suitable in technical trading.

Blue chip companies need to spread their investments among various share classes for

diversification purposes by decreasing their share price.

Future of blue chip shares

“There’s never been a better time to buy blue chip

shares”

Due to stock market crash now investors are very much worried about price

volatility so that they are searching low risky shares so blue chip shares will be

suitable for investors.

Day by day popularity of blue chip shares are increasing because of their

performance.

For Investors who are fully depend on share market blue chip shares create

opportunities for increasing their earning profits by creating scope of low risk

investments.

After analyzing their performance it is clear that blue chip shares will play a

vital role in our share market besides Bangladesh economy.

Conclusion:

From above discussion it is clear that Blue chip stocks are selective stocks those are most

valuable and primarily larger companies' stock. The blue chip shares are the engine of growth for

an economy, and perform a critical role in acting as an intermediary between savers and

companies seeking additional financing for business expansion but for those who are risk averse.

Blue chip companies usually have a long operating history, steady earnings and a good

reputation. As they are selected to be enlisted in DSE-20 or CSE-30 index those companies are

reviewed every six month based on a company has market capitalization at least Taka 200

million, company's free float stock in the market at least 20% shares of the company remains in

the hands of general public, a company provide payout to investors at least 10% of dividend for

the last three consecutive years, a company maintains a minimum trade of 95% trading days in

the last six month. In addition, other subjective criteria like good corporate governance, regular

holding of annual general meetings have been also considered.

Bibliography:

www.msn.com

www.google.com

www.wikipedia.com

www.scribd.com

www.globaloneness.com

www.cse.com.bd

www.dsebd.org

www.secbd.org

www.stockbd.com  

, http://www.investopedia.com/search/default.aspx?

q=total+impac t+of+volatility+on+stock+market , http://www.investopedia.com/search/default.aspx?

q=e valuate+the+behavior+of+investors+in+stock+market

www.biasl.net

CSE Bazaar porikroma (magazine)