BSEC lifts floor price of 169 firms

The Bangladesh Securities and Exchange Commission has lifted the floor price for 169 companies in order to make the stock market vibrant. 

The regulator has set the circuit breaker in a way such that the companies' stock prices would now be allowed to drop more than 1 per cent based on the previous day's closing price.

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However, the limit for a rise will remain unchanged at 10 per cent, the BSEC said in an order issued yesterday.

At the end of last July, the BSEC set the floor price of every stock to halt the free fall of the market indices amidst global economic uncertainties.

The floor price was the average of the closing prices on July 28 of this year and the preceding four days.

Due to the presence of the floor price, the turnover of the stock market dropped to less than Tk 350 crore and most of the stocks failed to attract investors.

AB Mirza Azizul Islam, a former chairman of the BSEC, backed the decision, reasoning that any intervention in the price mechanism dents investors' confidence in the long term.

Normally, big investors and analysts do not like application of the floor price. Moreover, they prefer to let the market run at its own pace, he said.

However, the participation of general investors is higher in Bangladesh's stock market and people make investments paying heed to rumours, he said.

On this logic, the BSEC set the floor price, he said, adding that if the market underwent any continuous, unjustified fall, the regulator can consider reinstating it.

"But now, the decision of lifting the floor price is okay," he said.

A top official of a stock brokerage house, preferring anonymity, said the decision of setting the floor price was a big mistake as it was denting investors' confidence for a long time.

This intervention ultimately dragged down the turnover of the market. With the withdrawal, stock prices may fall further but it should not be reinstated and this should be publicly announced so that investors do not live in apprehension, he said.

"If the prices of stocks remain high artificially with a floor price but cannot be sold, how can the investors of the stocks benefit?" he asked.

So, the floor price cannot be the solution, he said, adding that the market index could fall now but at one point it would bounce back on its own strength.

Earlier on March 19, 2020 the stock market regulator imposed the floor price on all stocks by calculating their average prices from the preceding five days to stop the index from falling amidst the pandemic.

The decision was criticised by most analysts and foreign investors, prompting the regulator to start lifting the floor price in phases since April of 2021.