Bangladesh
2 months ago

Limiting daily stock correction to 3pc

DSEX keeps sliding on adverse reaction to policy intervention

A stock market investor in Dhaka's Motijheel reacts after seeing buyers for his shares on Thursday afternoon. The capital market regulator introduced a new rule limiting daily decline, which caused a negative market reaction with many shares lacking buyers. — FE Photo by Shafiqul Alam
A stock market investor in Dhaka's Motijheel reacts after seeing buyers for his shares on Thursday afternoon. The capital market regulator introduced a new rule limiting daily decline, which caused a negative market reaction with many shares lacking buyers. — FE Photo by Shafiqul Alam

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The Dhaka bourse on Thursday failed to break out of losing streak despite the regulatory move limiting stocks' daily allowable correction to 3 per cent from 10 per cent.

In a market review, EBL Securities said the depressed market observed a further backlash as investors negatively reacted to the regulator's effort to stop the market's decline.

"The sellers remained predominant right from the start of the Thursday's session as they were wary of the market's outlook," which led to a majority of the scrips being stuck to the revised price level of the lower circuit breaker, said the brokerage firm.

The DSEX, broad index of the Dhaka Stock Exchange (DSE), lost 99 points within just one hour after the daily trading began.

Later, the DSEX showed a timid recovery but failed to overcome the initial losses, finally closing at 5,518 points. With that, the loss was 1.08 per cent or 60 points from the previous session.

As many as 186 stocks witnessed correction more than 2 per cent, and 39 of them nearly touched the lower circuit breaker.

Meanwhile, the board of directors of the Dhaka bourse held a meeting with the Bangladesh Securities and Exchange Commission (BSEC) to discuss the market situation and to put forth some suggestions.

The DSE board members said they would like to see the market function without any intervention.

"The BSEC has assured us of ensuring the market's movement without any intervention," said DSE Chairman Hafiz Md. Hasan Babu.

"The BSEC itself is not in favour of lowering the circuit breaker. It imposed restriction on stock price decline as a temporary measure," he added.

The DSE board also requested the securities regulator to empower it so they could take decision in the interest of the market.

Presently, the DSE needs the regulator's permission before transferring any company to 'Z' category.

Many companies earlier continued to keep the status as B category stock without providing the minimum required cash dividends.

The DSE failed to transfer the stocks to 'Z' category for a delay in getting the regulatory approval.

"The DSE will submit a set of proposals so that the companies having weak fundamentals cannot go public," Mr. Babu said.

Asked about the DSE's demand for power in changing the listing category, the DSE chairman said the regulator had accepted the proposal and that some amendments would be brought to the rules of listing.

Richard D' Rozario, a DSE director, said they told the regulator that frequent changes in policy decisions made investors confused.

Experts meanwhile criticised the latest measure curtailing the scope of stock correction a day.

On Thursday, blue chip companies played a pivotal role in dragging the broad index. The DSEX lost 156 points in three sessions in a row.

Square Pharmaceuticals solely wiped out 11.7 points on Thursday while Renata, British American Tobacco Bangladesh Company, Beacon Pharmaceuticals, BRAC Bank, and LafargeHolcim Bangladesh jointly erased 20.9 points of the index.

Renata was the second highest loser after Bata Shoe.

The DS30 index declined 10.17 points, owing to the price corrections witnessed by the blue chip securities.

Grameenphone was the exception as it experienced a 1.08 per cent gain.

Many junk stocks saw appreciation and some of them made it to the chart of top 20 gainers.

Of those, Khulna Printing & Packaging, which had remained closed and reported losses for the last five fiscal years, experienced a 9.28 per cent gain.

Of the total issues traded on Thursday, 69 advanced, 300 declined and 27 were unchanged on the DSE trading floor. The prime bourse posted a turnover of Tk 5.11 billion, 15 per cent less than the previous session.

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