The Financial Express

Unusual price spike in stock market: Regulator plans curb on newly listed firms

BSEC chief hints at imposing a circuit breaker on the price movement in first two or three sessions

FE Report | Published: October 04, 2019 10:04:10 | Updated: October 06, 2019 11:06:54

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The securities regulator plans to contain the unusual price hike in the shares of listed companies in initial trading sessions, even in debut trading.

The Bangladesh Securities and Exchange Commission is considering a mechanism like circuit-breaker in which prices will be capped to a certain limit.

The commission's chairman professor M Khairul Hossain disclosed this on Wednesday while speaking at a programme on "investor education and protection" held at a city hotel.

The Central Depository Bangladesh Limited (CDBL) organised the programme as part of observing the World Investors Week 2019.

"Under the fixed price method, the commission approves an IPO (initial public offering) proposal with an offer price of Tk 10 each. But on the day of debut trading, the company's share price closed at around Tk 70 each," Professor Khairul said.

The commission chief said general investors get affected after the gradual decline in the prices, which jump abnormally in initial sessions.

"After the initial bubble, the prices of the newly-listed companies started to fall, which impacts the index," he said.

Elaborating on the possible mechanism, he said a circuit breaker may be imposed on the price movement of the shares of newly-listed companies in the first two or three sessions.

In the existing system, there is no circuit breaker on the price movement in first two sessions of such companies.

In his speech, professor Khairul hit out at the 'so called' institutional investors for fixing irrational prices of the shares of the companies, which went public 'abusing' the book building method.

He said as eligible investors, many institutions fixed share prices under the book building method.

But that price level did not sustain in the long run and investors lost protection, the commission chairman said.

Keeping this in view, the securities regulator has further brought amendment to the public issue rules, making a mandatory provision for purchasing shares at respective prices quoted at the bidding.

"The bidding process of the companies, whose IPO proposals were submitted under the previous amendment, will also have to be conducted following latest amendment," Mr Hossain said.

He also said the insider trading must be prevented for the sake of investor interest and the market stability.

In his speech, chairman of the CDBL Sheikh Kabir Hossain underscored the need for arranging more interactive seminars for institutional investors.

Mr Kabir said huge amount of money was also injected in 1996 but the stock market's slide could not be contained.

"We will not be able to make the market stable riding on the funds provided only by the central bank. The institutional investors should play their due role while making the general investors conscious," Mr Kabir said.

CDBL managing director Shuvra Kanti Chowdhury said his company has formulated a module to address investors' complaints.

The securities regulator introduced the module on September 30.

Md Shakil Rizvi, a former DSE president, Mohammad Nasir Uddin Chowdhury, managing director at LankaBangla Securities, and Md Moniruzzaman, managing director at IDLC Investments, spoke at the technical session of the programme, among others.


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