Floor price relaxed for just block market trading
Amid the low participation of investors, the Bangladesh Securities and Exchange Commission (BSEC) has relaxed trading in the block market allowing shares to be transacted up to 10% lower than the floor price.
In a block market, buyers and sellers are fixed in advance. In other words, they agree to set a price, and then buy and sell shares in this market. But shares cannot be bought or sold for fewer than Tk5 lakh here.
However, the floor price mechanism imposed by the regulator aiming to save small investors will remain in place on the main trading platform of the Dhaka and Chattogram bourses.
In other words, the share price of any company cannot fall below the fixed floor price.
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"The regulator has no plan to remove the floor price from the main trading platform of stock exchanges as long as it protects small investors," BSEC Chairman Professor Shibli Rubayat-Ul-Islam told The Business Standard.
On 29 July, the commission imposed the mechanism to stop shares from falling drastically after the market suffered a bearish turn amid the country's economic uncertainty brought on by the Russia-Ukraine war.
There has been a debate over the floor price mechanism since the beginning.
According to market intermediaries, the floor price will provide temporary benefits. But the shares of most companies will get stuck in this price trap.
Due to this mechanism, foreign and big investors will be in trouble and it is also a barrier to making investment decisions, they added.
As a result, out of 319 companies traded on Dhaka Stock Exchange (DSE) on Tuesday, the shares of 234 scrips are stuck at the floor price.
And the report of the brokerage firm Royal Capital says that currently, 306 companies' shares are at the floor price. As a result, DSE's daily turnover has nosedived from Tk2,000 crore to Tk500 crore.
Meanwhile, the DSE key index DSEX has fallen 382 points in the past month on rumours that the floor price will be lifted.
The falling trend continued on Tuesday as well. On this day, DSEX fell by 35 points to 6,218 – the lowest since 21 August.
The turnover of the DSE also dropped 22% to Tk560 crore.
The port city bourse, Chittagong Stock Exchange (CSE), also settled on the red terrain. The selected indices CSCX and All Share Price Index CASPI declined by 29.5 and 48.7 points respectively.
On Tuesday, the Bangladesh Merchant Bankers Association issued a statement regarding the rumours of lifting the floor price.
The statement - signed by the secretary general of the association Riyad Matin – reads that rumours have been spread that the floor price would be withdrawn using the name of the association.
"The association has never commented on the floor price," reads the statement.
