The share price of the three companies in the floor price will not be allowed to decrease
Published : 24 Apr 2024, 11:25 PM
The stock market regulator has intervened to stop a freefall in prices after the main index of Dhaka Stock Exchange or DSE lost 815 points or 13 percent in less than two and a half months.
The limit of share price decline in one day has been reduced from 10 percent to 3 percent.
Share prices of the three companies in the floor price will not be allowed to decrease.
Bangladesh Securities and Exchange Commission or BSEC issued a notice on the limit on Wednesday amid widespread frustration among investors about the market situation.
The new decision will be effective from Thursday.
The share market collapsed amid investor concerns when Bangladesh’s dollar reserves started to shrink after Russia invaded Ukraine in 2022, which triggered a financial crisis in Sri Lanka.
In response, the minimum price or floor price of all shares was fixed in September 2022. Although the system reduced transactions, it slowed the investors’ losses.
The institutional investors and the stock brokers’ association have been demanding the withdrawal of the floor, but the BSEC said it would be lifted once the market returns to normal.
Share prices and transactions increased after the Jan 7 general election. On Jan 18, the floor price of the remaining shares except 35 was removed.
After a few days, the market fell but showed signs of turning around, allowing the withdrawal of floor prices of all but three companies gradually.
The market rebounded significantly after the initial shock, with transactions exceeding Tk 10 billion, and the index reaching 6,394 points on Feb 13. However, the downward trend resumed thereafter. By April 24, after 43 working days, the index fell to 5,578.
As the volume of transactions fell to Tk 4 billion, BSEC met the stakeholders on Apr 22 to decide what to do. However, the investors saw two more consecutive days of big decline.
Despite this, financial reports published during this period indicate that many firms are recovering from the dollar crisis caused by the pandemic and the Ukraine conflict.
Bank reports for the fiscal year ending last December showed improved performance, with many offering attractive dividends exceeding those of the previous year.
In spite of these positive signs, the index continued its descent, leading investors to question the effectiveness of the regulator’s interventions.
In response, the latest BSEC notice highlighted terms such as 'investor and market interest' and 'short term.' However, it remains unclear how long these measures will remain in place.
BSEC Executive Director and spokesperson Rezaul Karim told bdnews24.com, "The decision was made to prevent abnormal transactions, support investor interests and the development of the capital market."