BSEC lifts floor prices from most shares, minimum price to remain for 35

357 of the 392 listed companies and mutual funds on the stock market will no longer have a minimum price

Published : 18 Jan 2024, 06:02 PM
Updated : 18 Jan 2024, 06:02 PM

The Bangladesh Securities and Exchange Commission, or BSEC, has scrapped the minimum fixed price or floor prices on shares in stock markets after one and a half years.

All stocks, except those of 35 companies, will no longer have a minimum price from Sunday. Of these companies one each is in the banking and insurance sectors. The most – eight – are in the power and energy sector.

Currently, 392 companies and mutual funds are listed on the stock market. Of these, 357 no longer have a floor price.

No special instructions have been given regarding the circuit breaker share prices for these companies, so the maximum limit will remain 10 percent.

BSEC announced the decision on Thursday. However, no clear explanation was given for why minimum prices were maintained for 35 companies.

However, BSEC Executive Director Rezaul Karim noted three considerations that led to the decision.

If floor prices were completely removed, companies with margin loans might face ‘forced sales’, some might affect the main index, and the shares of some stocks may fall further due to selling pressure, Karim said.

BSEC will decide on the floor prices for these companies after gauging the impact of the current decision, he said.

The stock market regulator introduced floor prices on Mar 19, 2020, soon after the first COVID-19 infections were detected in Bangladesh.

In June that year, BSEC began lifting floor prices, first in the insurance sector and then in some others. From April to June 2021 it removed them in stages.

Then, in February 2022, as Russia began its attack on Ukraine, the stock market began to drop again amid mounting anxiety. BSEC then imposed price floors again from Jul 28 that year.

In the face of demands from certain investors, the floor prices were removed from 169 companies and the maximum drop in share prices was fixed at 1 percent in December, 2022. Since then, some companies were seen to drop by 1 percent or thereabouts for 40 straight working days. A floor price was later imposed for these companies in March, 2023.

Though the index managed to recover somewhat afterwards, share trading fell sharply. Institutional and individual investors were not able to place orders and sell shares. Transactions fell by a significant extent.

Under these circumstances, large investors, including the Stock Brokers Association, requested BSEC to lift the floor. However, BSEC did not wish to take any ‘risk’ until after the election.

The regulatory body announced it would remove the floor prices in stages after the election.

Stock market transactions and indices began to increase after the polls. Companies that had previously struggled to find buyers have seen the demand for their shares rise.