Floor price to stay, BSEC urges for intermediaries' efforts

In a meeting with the representatives of capital market intermediaries on Wednesday, the Bangladesh Securities and Exchange Commission (BSEC) officials said the floor price on the remaining 232 scrips would remain in place until the secondary market gets the due momentum.

The regulator instead asked broker-dealers, merchant banks and asset managers to try and increase fund inflow and confidence in stocks, especially at a period when exports started to rise, imports are subdued, energy and power situation improved a lot, and the balance of payment tensions eased to a decent extent. 

BSEC Chairman Professor Shibli Rubayat-Ul-Islam expressed the regulator's stance that floor price will not be removed from the remaining shares "until the expected improvement of the health of the secondary market," according to BSEC Executive Director and Spokesperson Rezaul Karim. 

The meeting, held after the closing bell at the Securities Commission Building in the capital, had over a hundred industry representatives. 

According to sources, stockbrokers expressed their concerns about the lost revenue from the trade execution business because of the floor prices that are barely allowing scrips to trade at the fair value. 

Merchant bankers pointed out that leveraged investment accounts are accruing interest everyday against their margin loans and the held stocks are barely generating any return while floor prices are not allowing sale of the stocks. 

The situation, if prolonged, would weaken the accounts and add to the markets' negative equity problems. 

BSEC officials, in response, said if all the institutions invest enough, and work together to attract investment after the two and a half month-long correction, the market should get its strength back and all the issues would be resolved. 

However, the tactic barely worked to help the market rebound in the recent months and turnover in the Dhaka Stock Exchange (DSE) had shrunk below Tk200 crore a week ago, after 29 months. 

Asset managers in the meeting urged the regulator to advocate against the triple taxation on mutual fund investors' dividend income, imposed earlier this fiscal year. 

The dividend mutual funds earn from their held shares and interest from bonds were not being taxed earlier as the mutual funds deduct tax on the dividend they pay to their unit holders. But, now, the dividends are taxed once while mutual funds earn, and then when redistributed among unit holders. Finally, the ultimate unit holders again pay tax on the dividend income if their annual sum goes above a limit. 

Merchant bankers reiterated their request to the BSEC chairman for advocating against the central bank policy for including listed bonds and mutual funds in calculating the capital market exposure limit of banks. 

Investment Corporation of Bangladesh (ICB), the largest de-facto market maker, often suffers from liquidity crunch when the central bank imposes its single party borrower exposure limit and capital market exposure limit on banks while they lend to ICB and that should not happen. 

BSEC chairman assured the industry players that the points would be communicated with the government and in the next budget speech there should be a reflection of that, Rezaul Karim told The Business Standard. 

Following the weakness in the first two sessions of the new year, stocks showed some strength in two consecutive days. 

DSEX, the broad-based index of the DSE, closed 0.28% higher at 6,202 on Wednesday and turnover crossed Tk291 crore, up from Tk 199 crore in the previous session.