The Bangladesh Securities and Exchange Commission (BSEC) has withdrawn the floor price for all listed companies and mutual funds, except for 35 companies' shares, complying with a long-standing demand from stakeholders.
After the session's closing bell on Thursday, the stock market regulator issued an order in this regard.
As per the new order, the upper limit and lower limit of the circuit breaker will be applicable for all securities other than 35 companies’ shares as per the previous order, which was issued on November 14, 2019.
This order will have immediate effect and will remain in force until further order, as per BSEC’s directive.
DSE Brokers Association of Bangladesh (DBA) President Saiful Islam said on Thursday, “We highly appreciate and welcome the BSEC decision to withdraw the floor price on most of the listed securities except thirty-five.
“We would expect all market intermediaries and other stakeholders, including the investors, to perform their respective responsibilities to stabilise the market and to retain investors' confidence.”
Due to the floor price imposition, stock market trading decreased significantly over the last one and a half years. Around 80 per cent of the brokerage houses were unable to meet their operating expenses, he added.
Chittagong Stock Exchange (CSE) Chairman Asif Ibrahim said, “I welcome the lifting of the floor price, except 35 listed securities. I hope that the market will respond positively to this BSEC move.
“I also hope that the investors will regain their confidence and we will see a positive reflection in the indexes of both the bourses. We collectively need to strengthen our capital market, as there are no viable alternatives for the long term financing needs of our economy.”
Echoing the same, Managing Director and CEO of VIPB Asset Management Company Shahidul Islam on Thursday said, “It is a great decision. Market liquidity and activities will improve and many investors who were on the sidelines since mid-2022 will now consider coming back to the market.
“However, the regulators should make it clear that price floors will not be imposed again in the future under any circumstances. Such assurances will give confidence to the investors that they can exit whenever they want, and that confidence will help them consider getting into the market.”
The BSEC withdrew the floor price on listed securities 18 months after imposing them, in order to bring back a vibrant capital market. The regular circuit-breaker mechanism – which was in effect before the imposition of floor price – will come into effect again from Sunday.
That means their prices may increase or decrease by up to 10 per cent a day.
For newly listed scrips, the circuit breaker for the first trading session will be 50 per cent of the issue price, and on the second trading day the price can go 50 per cent higher or lower from the closing price of the first session.
In the third session, the scrips will follow the regular circuit breaker.
On July 28, 2022, 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.
Back 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.
After its imposition, the floor price was a complete mess for the stock business, and a year of disappointment for the stock market followed as the average turnover and foreign investment reached rock bottom.
Such difficulties have never been encountered by investors since the collapse in 2010.
