Regulator limits daily stock decline to 3pc in battered market

The securities regulator has reduced the single-day permissible price decline of stocks to 3 per cent from 10 per cent for all securities except for six that still have floor price imposed on them.

The stock market has been battered since the withdrawal of the price restriction from most stocks in January, rattling investors. The prime index of the Dhaka Stock Exchange (DSE) plunged 758 points or 12 per cent since then.

The latest measure will slow down stocks' fall on the bourses.

The 10 per cent limit of price appreciation a day of stocks, however, remains unchanged for all securities, according to a directive issued by the Bangladesh Securities and Exchange Commission (BSEC), effective from Thursday.

Mohammad Rezaul Karim, an executive director and spokesperson of the BSEC, said the regulator issued the directive to contain "abnormal" transactions for the sake of investors and the market as well.

Post-floor-price market value of the DSE, calculated by multiplying the total number of companies' outstanding shares with the current share prices, shrank by Tk 852 billion.

On Wednesday, the prime index sank below 5,600-mark after three years as some of the large-cap stocks experienced huge selling pressure.

The floor price will continue to be in place for BEXIMCO, BSRM, Islami Bank, Khulna Power Company, Meghna Petroleum, and Shahjibazar Power Company.

Md. Ashequr Rahman, managing director of Midway Securities, says any ad hoc intervention brings no positive result for the capital market. After a certain level of correction, the market will turn around based on its own strength.

The securities regulator had put in place a reduced price limit of lower circuit breaker but the measure eventually failed to bear any fruit.

Mr Rahman said the price decline experienced by some companies after 12:00noon on Wednesday was not rational.

"Probably, a group of investors already got an indication that the lower circuit breaker will be reduced. So, they offloaded their holdings not to get trapped for another period."

Earlier in March 2020, the stock market regulator set the lowest price of all stocks by calculating the average prices from the preceding five days to stop the index from falling amid the pandemic.

The decision was criticised by most analysts and foreign investors. The BSEC then lifted floor prices in phases from April 2021.

At the end of July 2022, it once again restricted stock price movement to avoid negative impacts of global economic uncertainties caused by the Russia-Ukraine war.

The decision was again castigated widely. However, the regulator continued with the floor price for 18 months until January this year.

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