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The Financial Express

'Floor price' keeps buyers aloof

Mohammad Mufazzal | Published: June 04, 2020 10:03:16 | Updated: June 05, 2020 10:03:14


FE file photo FE file photo

Trading on both the bourses in the country remained dull as the majority of sale orders placed above the 'floor prices' kept the buyers aloof in last few sessions.

As per existing system, the market prices of the listed securities have no scope to fall below individual floor prices set in the middle of March last to contain the abnormal price fall.

Talking to the FE, the officials of some merchant banks and brokerage firms said under the existing system the buyers have not enough scope to purchase securities at their desired prices.

"Retailers' contribution in turnover is very insignificant. Low turnovers are also being caused by trades executed in block board," said the managing director of a leading merchant bank.

A trader of a leading brokerage firm said investors placed more than 0.5 million orders on Tuesday on the premier bourse to sell their shares owned in a company of engineering sector, but only 1,367 sales orders were executed on Wednesday.

"Very insignificant number of sale orders were executed in last four sessions after reopening of the market on Sunday. Many buyers' sale s orders remained unexecuted," the trader said.

Preferring anonymity, the trader said the market prices of the majority number of securities have also remained unchanged in last four sessions as the buyers prefer fluctuations of prices in case of purchasing securities.

"It's also true that the P/E ratios of most of the securities are much lower following abnormal price corrections observed before introducing the floor prices. Nevertheless, buyers do not prefer to purchase securities at the prices which remain static," the trader added.

Before setting floor prices, the country's both the bourses witnessed free fall in broad index following the outbreak of Covid-19.

Both the bourses set floor prices of listed securities on March 19 to contain abnormal price fall following a directive of the Bangladesh Securities and Exchange Commission (BSEC).

As per the BSEC directive, opening price of any listed security shall be set at the average of the closing price of immediate preceding five trading days of March 19, and this average price calculated for each security shall be considered as floor price and the lowest limit of the circuit breaker.

And the upper limit of the circuit breaker and other conditions shall remain unchanged.

As a result, the market prices of the listed securities have no scope to go below the individual floor prices set on March 19.

"Due to floor prices, the closing prices of majority number of the listed securities remained almost same and unchanged in last four sessions," said a trader of another brokerage firm.

Asked, a top official of the securities regulator said the floor prices of the listed securities would be lifted considering the better market situation.

Following execution of lower number of sale orders, trade volume also declined on both the bourses in last few sessions.

Before the introduction of floor prices, the Dhaka Stock Exchange (DSE) featured a turnover above Tk 4.29 billion on March 18.

But the DSE's turnover came down to Tk 491.21 million on March 19. On the day, the trading, however, was conducted for a very limited timeframe.

Later, the DSE posted its turnover above Tk 1.45 billion on March 22, above Tk 2.54 billion on March 23, above Tk 1.39 billion on March 24, and Tk 3.48 billion on March 25.

After a 66-day break, the trading resumed on Sunday and the DSE posted a turnover above Tk 1.43 billion on the day. The turnover value was above Tk 1.97 billion on Monday, above Tk 1.55 billion on Tuesday and above Tk 1.52 billion on Wednesday.

mufazzal.fe@gmail.com

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