DSEX, the key index of the Dhaka Stock Exchange (DSE), witnessed a big fall on Wednesday, snapping a two-day gain as large-cap shares faced selling pressure after the withdrawal of the floor price after around 1.5 years.
The key index lost 49.6 points and settled at a two month low of 6,227 points, as against 6,276 points in the previous trading session. Meanwhile, market turnover decreased marginally, inching down by 0.3 per cent to Tk 1,173 crore, against Tk 1,176 crore in the previous session.
In its daily market review, EBL Securities said, “The Dhaka stocks logged extreme hurdles owing to dominant sell pressures across the market as risk-averse investors were enticed into profit booking, being wary of a probable shift in market momentum after the indices slightly recovered from the initial plunge in the last two sessions following the removal of floor prices from the majority of scrips.”
“Investors wanted to get rid of their holdings in the volatile scrips and preferred to hold onto cash in anticipation of lucrative investment opportunities following the recent corrections in the market.”
Out of the 393 issues traded, 60 advanced, 301 declined, and 32 remained unchanged at the Dhaka bourse.
The blue-chip index DS30 and the Shariah-based index DSES closed at 2,139.13 and 1,372.91 points, respectively. Most of the large-cap sectors posted negative performance on Wednesday.
Fuel and Power experienced the highest loss of 4.82 per cent respectively. The block trades contributed 2.5 per cent of the overall market turnover. Sonali Paper & Board Mills was the most traded share with a turnover of Tk 66 crore.
On Monday, the Bangladesh Securities and Exchange Commission (BSEC) withdrew the floor price for another 23 companies’ shares.
On Thursday, after the session's closing bell, the stock market regulator issued an order rescinding the floor price for all listed companies and mutual funds, except for 35 companies' shares, complying with a long-standing demand from stakeholders.
On Sunday, DSEX fell 96.50 points, or 1.52 per cent on the first trading session after withdrawing the floor price. After five minutes of trading, the DSEX index plunged about 214 points but later recovered most of the initial losses.
The key index finally went down by 96.50 points to settle at 6,240.
After withdrawing the floor price for all listed companies, on Monday the key index gained 14.05 points and closed at 6,254.31.
The stock market regulator withdrew the floor price for another 23 companies’ shares on Monday. This BSEC order will come into effect on Tuesday and will remain in effect until further notice.
Now only 12 companies share the floor price. These are: Anwar Galvanizing, British American Tobacco, Beximco Ltd, BSRM Ltd, Grameenphone, Islami Bank, Khulna Power, Meghna Petroleum, Orion Pharma, Renata, Robi Axiata, and Shahjibazar Power.
As per the new order, the circuit breaker's upper limit and lower limit will be applicable to all securities other than the 12 companies’ shares as per the previous order, which was issued on November 14, 2019.
Market insiders said it was very much expected to fall as a large number of stocks failed to see price discovery for a long time due to the floor price.
They also said that many investors did not get the opportunity to trade due to the prolonged price level. As a result, there is pressure to sell shares at the beginning of the day, but it is gradually decreasing.
Welcoming the floor withdrawal move, a leading stock broker said the market might see some correction in the first few days. It’s nothing to be feared, and the market will recover very soon, they said.
On July 28, 2022, the BSEC imposed floor prices on all securities to prevent shares from falling beyond a certain level amid domestic and global macroeconomic strains.
The share prices of most companies have been stuck at their floor prices for an extended period, pushing investors towards liquidating their holdings and thus creating a liquidity crisis in the market.
In March 2020, the securities regulator took a similar move to limit the free-fall of shares following the global pandemic, when the DSEX fell below 3,000 points.
The port city bourse, the Chittagong Stock Exchange (CSE) however, settled on red terrain. The selected indices (CSCX) and All Share Price Index (CASPI) plunged by 209.0 and 347.3 points respectively.
