Eleven years ago, Abul Kalam Azad decided he should become a Crorepati — a multi-millionaire.
And the path he needed to take seemed rather easy for a mobile shop owner at Motaleb Plaza in Dhaka. The stock market was booming and all his friends were raking in millions.
All his friends talked about all the time was the bubble in the market. So, he thought, why not hop on the bandwagon and carve his piece of the pie.
He sold off his shop, pooled the investment — some Tk1.5 million — and dove head first into the stock market.
A novice in stocks, he now knew all the terms: dividend, earnings per share, price to earnings ratio and so on. And he saw his gains soar, although not because of all these fundamentals, but for an entirely different reason — a crude but crafty manipulation of the market by the “big players.”
But, Azad did not care as long as his profits increased by leaps and bounds to make him a millionaire many times over. However, all his fortune was locked in stocks and scrips and not in his bank account.
That was 2010, the last of the strings of market manipulations that had plagued the Dhaka stock market, before the manipulators decided to pull out; they had created enough of frenzy to jack up stock prices and made their money. It was now time to quit.
Azad failed to notice the telltale signs of the imminent disaster until it was too late. Overnight, Azad went from riches to rags.
This is his story, like thousands of others like him.
The once millionaire, Azad went from living in the Dhaka’s posh Dhanmondi area to becoming a slum dweller. Now, he sells coffee on the street and is struggling to make ends meet.
Today, this 48-year-old father of three regrets his decision to invest in the stock market instead of just sticking to running a cell phone shop.
His family is in a terrible financial condition as he is in debt worth Tk3 million, twice his initial investment in the market. He is worried about feeding his family and providing for his children’s education.
Speaking to The Business Standard, Azad recalled that until the stock market bottomed in 2013, his eldest daughter Tasnima Azad Salma had been attending the primary section classes of YWCA — a top girls’ school in Dhaka.
The family was living in a three-room apartment in Dhanmondi, a mid-western expensive area in the capital, for a monthly rent of Tk12,000-13,000.
In 2013, within three years of the market crash, Azad lost all his equity, which mounted up to Tk7 million in two stock market investment accounts at the market’s peak.
His family had to leave the rented apartment soon after as he had become penniless. Tasnima had to take a study break as the family had to go back to her father’s native village.
Later, Azad, a college graduate in business studies, managed a job as an office support staff in Dhaka for a monthly salary of Tk8,000 and the family moved back to the capital.
But this time around, it was in a low-cost neighbourhood at the south-eastern part of the capital, where the rent of a two-room slum house would cost him his entire month’s salary. So, he had to share the house with another tenant to halve the rent.
Still, the remaining Tk4,000 was not enough to maintain a family in the city. Azad had to keep borrowing from his friends and family members every week.
Despite the financial struggle, Tasnima managed to complete her primary school education from in 2018, but her father has not dared sending her to a high school as he could not afford it.
Now she goes to a local madrasa — a tuition-free Islamic education centre.
Mohammad Fahim, Azad’s elder son, also goes to a madrasa only to memorize the Quran, as it helps raise children free of cost. Azad’s third child, Mohammad Yusuf, was born in the slum and is suffering from malnutrition.
Azad fears Yusuf also will have to follow his elder siblings’ path for education.
“I am not even in a position to feed my children properly, so quality education is a distant dream. He [Yusuf] too will have to go to a madrasa. There I don’t have to pay for anything.’’
Road to the stock market
Graduating in the mid ‘90s, Azad was looking for a brighter financial future by starting his own business. After several attempts in 2001, he finally opened a cell phone and phone accessories shop at Motaleb Plaza — one of the hubs for such businesses.
He invested over half a million taka he had collected from family savings and loans from friends. The shop was running well enough to offer Azad a decent standard of living.
Even though some credit sales seemed inconvenient to Azad, he was making profits at the end of the month. But, he was tired of asking customers for timely payments.
Meanwhile, in 2007, the stock market ignited in an uptrend following a changeover of the political regime of Bangladesh. In an uptrend, stock prices advance more than they decline, which helps even the naivest of investors make some profit.
People who had lost their fortune in the same game a decade ago, started to return. Some of Azad’s neighbours and friends also started making money from the stock market.
Some fantastic stories of gain lured Azad to invest in stocks, which, according to his advisors, “merely needs making wise decisions, no argument with people, no need to chase the parties [buyers on credit]”, unlike the everyday chaos of operating a physical store.
Naturally, Azad decided to close shop, and within May 2008, he collected almost all his outstanding dues, accumulating a net capital of over Tk1.5 million.
He opened investment accounts in two different merchant banks, which allowed him to borrow 150% over his own capital — known as a margin loan — to buy more stocks.
For Azad, this was the beginning of the end.
Sweet gains and the rise
Azad did not need to learn a lot to pick profitable stocks as he had met some “experienced investors” as tipsters in the brokerage firms.
In the bull market — a phase in stock market, when prices of majority stocks are biased upward — his money started to multiply faster than he had ever imagined.
“I started small, but gains made me put my entire capital, and more [money] into the market.”
Azad’s financial assets were spiralling up, thanks to the margin loan which he used to increase the size of his asset by 2.5 times the market price.
Opportunity to add to the margin loan against gradually increased asset helped him grow faster. Within two and a half years, his net assets crossed Tk7 million and he was about to achieve his dream of becoming a Crorepati.
One of his investment accounts counted to peak his own equity at Tk3 million and the second one too once reached to Tk4 million in November-December 2010.
Like most other investors, Azad had no clue that this was the end of the rise. Prices started to drop in regular intervals. Similar to the previous months, a recovery was soon to follow.
It did not.
‘It is a temporary headwind’
Analysts said that in Bangladesh, the stock market was extremely overvalued at the peak in the second half of 2010, as most of the local banks were recklessly over exposed in stocks. The central bank failed to tame their greed.
In the later part of the unwelcomed bull market, policymakers and money market regulators were forced to take steps against banks for over investing in stocks that had crossed the regulatory ceiling a long time ago.
Bangladesh Bank finally came up with tighter regulations in December that year to bring down banks’ investment in stocks and the market bubble burst.
Benchmark indices in the Dhaka and Chittagong stock exchanges nosedived. Although some state intervention occasionally appeared to push the market higher, they were later regarded as the last efforts before death struck.
However, like most other investors, Azad kept believing that everything would be fine again. “It is a temporary headwind that must go.”
But the bear market — a market in which share prices are falling — kept proving its real nature of losing more than adding to the prices.
“The market fell by 10% and my capital eroded at a rate of 25% because of a 150% leverage,’’ Azad explained. Some of his stocks lost more than half of its value within three years of the market crash.
In 2013, Azad lost his fortune as nothing was left in either of his two investment accounts. The remaining value of stocks was not enough to pay back even the margin loans, let alone the interest.
“No matter what I tried to protect my money, nothing worked,” he noted with grief.
Could have realized profit
At the peak of the 2010 bull market, if Azad had closed the investment account, he could have realized the outstanding return, he explained.
However, in reality, this was not the case.
Selling off stocks at the peak is a rare psychological strength observed by behavioural finance experts. Almost all individuals, even the smart institutional ones, cannot show that strength, they said.
Series of bigger gains after small corrections in the market is said to be the reason behind this behavioural trait.
The loan shark
Azad said, margin loan, as leverage, helped his Tk1.5 million of initial capital to gain more than 450% within two and half years. Without that, it could have been a gain of 180%.
“But I could have retained my asset in proportion to the remaining value of shares I held. But now, I owe Tk3 million to the bank,” he said, adding: “I have borrowed more than Tk0.5 million from friends to feed my family.”
However, the market had been in a downward spiral until 2014. Before that, DGEN, the then benchmark index of Dhaka Stock Exchange, bottomed at 3300, which had earlier peaked at 8900 in 2010.
At the market bottom, Azad’s investment accounts suffered margin calls and he could not add a single penny there. Brokers sold out all holdings from one account to ensure the safety of their funds.
The second account escaped forced selling as the lender was a state owned entity and they were ordered to handle stock market losers humanely.
After margin calls, if investors fail to deposit additional money to their account, the broker or lender can exercise their right to forced selling to get their money back.
Now the equivalent market index, DSEX, is hovering around 5300, without any apparent direction.
The remaining investment account statement reveals that Azad owes Tk3 million to the lender by now, meaning his net capital is negative Tk3 million.
Azad is praying for a price boost soon. Margin call from brokers is a nightmare to him.
He also thanks state-owned market intermediaries for not forcefully selling his holdings. Azad now suggests his friends not to buy stocks with borrowed fund. He emphasizes profit booking after a rational gain as well.
From millionaire to street coffee vendor
Azad’s coffee cart appears every day in front of the Asia Pacific University campus on Green Road. Pedestrians and students buy hot and cold coffee from him.
Nobody knows that this street vendor was once a millionaire.
In 2018, Azad left his clerical job and borrowed Tk70,000 from family members and friends. With that money, he built the van that includes tea and coffee makers. The moving tea stall helps him earn over Tk20,000 each month, pulling the family out from dire straits.
“I dream to send my youngest son to a good school and, of course, bring enough food to the table for my whole family,” Azad said, adding: “I hope this van can do this. But it cannot fix my investment account, where I owe Tk3 million now.
“How can I repay my friends and relatives!? I am living from hand-to-mouth.” Azad feels devastated by his ordeal.
But the coffee orders keep coming in.