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The much-vaunted floor price as controls on listed securities, save 35 biggies, goes now after 18 months avowedly for restoring normal functioning of Bangladesh's capital market.
Bangladesh Securities and Exchange Commission (BSEC) Thursday issued an order to this effect, allowing free play to market forces on the bourses.
The regulator had imposed the floor-price benchmark for a second time on July 28, 2022 to arrest freefall of stock prices following the global economic slowdown triggered by the Ukraine-Russia war.
As per the regulatory decision regarding partial withdrawal of the floor price, the regular circuit-breaker having 10-percent limits to both upper and downward price movements will be applicable to all securities, other than the 35, from Sunday.
The securities regulator has yet to take any decision on unfettering those 35 securities, including Grameenphone, British American Tobacco Bangladesh, BEXIMCO, Robi Axiata, Islami Bank Bangladesh and IDLC Finance.
The revised circuit-breaker imposed at the time of imposing floor will be applicable to this band of 35 until the price-control mechanism is lifted from them.
Of them, the market price of National Polymer Industries on Thursday crossed the floor price on Dhaka Stock Exchange (DSE).
A senior BSEC official said on anonymity that decision regarding withdrawal of the floor of 35 securities remained pending in view of their significant impact on the index.
According to sources, top ten kingpins (of this group of 35 biggies) can influence the market as they have 20-percent stake in the trade index.
"The regulator is likely to lift the floor price of these within a very short span of time," he said.
The DSE Brokers Association, Bangladesh (DBA) welcomes the withdrawal of the floor price.
"We expect stakeholders will play their due role and the market will be stable within 2-3 months," says DBA President Saiful Islam.
Ups and downs are a common phenomenon of the capital market across the globe.
"It will not be rational if investors take abrupt decision after withdrawal of the floor. The market will move based on its own strengths," he said.
According to Dhaka Stock Exchange (DSE), a total of 218 listed securities, including mutual funds, remained stuck in the floor-price fences as of Thursday.
The market prices of the remaining 174 listed securities, including National Polymer Industries, are above the floor price.
Of them, 34 are above 5 per cent of the floor price, 21 above 5-10 per cent above the floor price and the remaining 119 are above 10 per cent of the floor price as of Thursday.
Asked about immediate impact of lifting the floor price, managing director of Midway Securities Md. Ashequr Rahman said the securities which remained stuck at the floor for a long time are very likely lose price on Sunday.
The market is likely to observe selloffs in the first week of lifting of the floor price.
"The diversions of the funds will be clear in the second week and the junk stocks which so far experienced abnormal price hikes will see price fall as investors will search for good stocks," says Mr Rahman.
The securities regulator imposed the floor price in May, 2020 following the outbreak of the covid-19 pandemic. Later, the floor was withdrawn in phases and the mechanism was completely removed from the market in June 2021.
Before withdrawing the first floor price, the market experienced record turnover as investors and even business entities dumped huge idle funds into the market amid stagnant business activity.
The securities regulator imposed floor price for all listed securities on July 28, 2022 after the DSE broad index, DSEX, dropped below 6000-point mark under the post-covid global economic situation.
In the subsequent two sessions, the market rebounded riding the price- controlling mechanism.
But investors' participation gradually declined in the absence of price recovery of the listed securities and such price-control mechanism drew huge criticisms from home and abroad.
The regulator had said they were not in favour of price restrictions but the mechanism was introduced to save small investors.
In December last, the stockbrokers who once supported the floor price urged the regulator in a meeting held with the BSEC to lift floor for the sake of restoring normalcy on the market. Gradually, all other market operators spoke in favour of withdrawing the floor price.