Floor price reimposed for 169 securities

The securities regulator has expanded the range of its floor price mechanism to contain the free fall of securities after the key index of the prime bourse dropped below the 6200-point mark amid investors’ declining participation and macroeconomic woes in the country.

In an order issued on Wednesday, the Bangladesh Securities and Exchange Commission (BSEC) reinforced floor prices for 169 companies and mutual funds, taking into account their average closing prices for the past four sessions executed from Sunday to Wednesday.

From now on, the price floor mechanism will be applied for all the listed securities being traded on the bourses.

The regulator asked the stock exchanges to implement the order from today (Thursday).

Earlier, on December 21 last year, the BSEC lifted the floor price from these 169 listed securities in a bid to improve the market momentum.

After that order, the lower price change limit for these scrips had been traded 1 per cent based on the reference price of the last trading day’s closing price.

The stock market regulator before on July 28, 2022, imposed floor prices on all securities to prevent shares from falling beyond a certain level amid the domestic and global macroeconomic strains.

Share prices of most companies have been stuck at their floor prices for a long time, making investors averse to liquidating their holdings, consequently creating a liquidity crunch in the market.

Previously, in March 2020, the securities regulator had taken a similar move to limit the free fall of shares following the severe outbreak of the Covid-19 global pandemic in Bangladesh, when the DSEX fell below 3,000 points.

When a floor price is fixed, no company’s shares can be traded below the fixed price. If a company’s shares are traded at the floor price that would be regarded their lowest price.

The BSEC Chairman Professor Shibli Rubaiyat-ul-Islam repeatedly said earlier they had no alternative but to introduce the floor price mechanism to protect the interest of small investors.

Admitting that while all other markets were doing well, Bangladesh’s secondary market was having some problems, the BSEC chairman on Tuesday said the regulator has no control over the secondary market.

With regard to investors’ concern over the probable withdrawal of the floor price from the country’s capital markets, the BSEC chairman on that day said the floor price would not be withdrawn in the immediate future.

After lifting the floor price for 169 listed companies and mutual funds, the indices of the bourse moved downward to end the session in the negative zone.

Market insiders, however, said a number of regulatory policies, like imposing floor prices, went against the interests of investors, especially marginal ones, and so the participation of such investors was falling.

Investors continued selling shares as they could not see any sign of recovery from prolonged bearish trend, they said.

According to market participants, the ongoing economic issues such as inflation and the decreased consumer consumption capacity might also push the market into the bleak situation.

A top stock broker says it has been continuing the floor price system for a long time, which is preventing investors from buying and selling shares of companies with sound fundamentals.

But they were now selling shares in the block market after getting the opportunity, he added.

Besides, the currency volatility caused by the Russia-Ukraine war was also a prime cause that stimulated investors to offload shares from the capital markets, a market insider said.