Home ›› 29 Mar 2023 ›› Stock
Developing the country’s capital market still remains a far cry despite undertaking many initiatives as stocks witnessed a downbeat situation in the recent trading sessions.
Investors preferred partial liquidation of their holdings and remained on the safe side due to the prolonged volatility and liquidity shortage in the market.
The market remained unstable throughout the month of March despite Bangladesh Securities and Exchange Commission’s (BSEC) attempts to rectify its behaviour.
Earlier, on February 28, BSEC Chairman Professor Shibli Rubayat-Ul-Islam said there would be plenty of positive news regarding the country’s capital market in March this year.
But as of March 28, there is no sighting of any “good news”.
On Tuesday, the key index of the Dhaka Stock Exchange (DSE) slumped below the ‘psychological’ threshold of ‘6,2000-mark’ as investors continued to dump their holdings to escape further losses.
DSEX, the prime index of the premier bourse, lost 10.83 points, or 0.17 per cent, to settle at 6193, the lowest since February 26 last.
Besides, the Dhaka bourse observed a decrease in participation as total turnover fell to a one-month low, declining by 14.3 per cent to Tk 272 crore against Tk 317 crore in the previous trading session.
On anonymity, a high official of a top stock broker told The Business Post, “In the context of a continuous price decline and bringing back the floor price for all shares every day, some shares are falling to their lower limits.”
On July 28, 2022, the BSEC 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 an extended period of time, pushing the investors towards liquidating their holdings, and thus creating a liquidity crisis in the markets.
Earlier in March 2020, the securities regulator had taken a similar move to limit the free fall of shares following the global pandemic, when the DSEX fell below 3,000 points.
The BSEC chairman has repeatedly said that they had no alternative but to introduce the floor price mechanism to protect the interest of small investors and that the mechanism would not be withdrawn in the immediate future.
The ongoing Russia-Ukraine war, which started in February last year, spilled over its adverse effects across the globe, causing currency volatility, high inflation, and price hikes of all goods and raw materials in the global market.
Officials of various brokerage firms said due to the closure of two banks in the United States, there has been a panic in the global economy, which has affected the country’s stock market too.
Wishing to be anonymous, the chief executive officer of a leading brokerage house said, “The country’s stock market has been suffering a severe liquidity crisis as investors could not participate in trading due to the price limit set on shares by the regulator to halt the free fall of the price indices.”
“Stocks have been on a losing streak amid a confidence crisis stemming from worries about the weakening macroeconomic situation coupled with rising inflation,” he added.
A top stock broker said that liquidity in the market continued to be squeezed due to the floor price restriction as investors were reluctant to put fresh bets on stocks.
Due to these adversities, most companies listed on the DSE witnessed a steep decline in profits, while many suffered losses in fiscal year 2021–22 and first half of 2022–23 fiscal.
The securities regulator has imposed price floors on equities twice since 2020, which are still effective in curbing continued market declines, but do little to stabilise the market.
The frequent changes of the regulatory policies and a weak regulatory framework have eroded investor optimism to a larger extent.
The equity indices of the premier bourse extended their correction mode due to idle trading activities during the trading hour, with investors focusing on selective issues, EBL Securities said in its daily market review on Tuesday.
Out of the 392 issues traded, 28 advanced, 56 declined and 308 remained unchanged at the Dhaka bourse on Tuesday.
The Chittagong Stock Exchange also settled on red. The selected indices (CSCX) and the All Share Price Index (CASPI) declined by 28.1 and 46.6 points, respectively.
