How price floors are set to go away
This time a large set of stocks, most likely mid-cap ones, is set to get rid of the price floors
Following the relaxation of downward restrictions for 168 scrips last week, the securities regulator is now considering the same for another set of scrips from the beginning of 2023.
"The announcement might come any day," said a top official of the Bangladesh Securities and Exchange Commission (BSEC).
This time a large set of stocks, most likely mid-cap ones, is set to get rid of the price floors. A narrow lower limit for daily correction would be imposed just like that for the 168 scrips which now have no floor, but are not allowed to fall by more than 1% a day.
Right now, there are 232 scrips under floor restriction and they would take at least two tranches to get their price floors removed, according to the BSEC official.
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The last tranche will not take many days if the regulator observes a decent buying interest in the immediate sessions of relaxation, he said.
Amid the ongoing debate and dilemma regarding the floor price, the regulator seems to have been encouraged by the recent market scenario where some buyers are getting active to bag some oversold stocks before the year ends.
On Tuesday, 326 of the 400 DSE scrips had no bidder. They were either stuck on the floor or at the 1% lower limit.
On Wednesday, around two dozen of them returned in spontaneous trading.
Turnover in the Dhaka Stock Exchange (DSE) dipped below Tk200 crore on Monday as puzzled investors went on the sidelines on the first session of floor relaxation for the 168 low-cap stocks and mutual funds. At best 1% of the beneficiary owner's accounts were active in trading on Monday, and the number has been increasing since then.
A mixed bag reaction
Amid the macroeconomic turbulence sparked by the Russia-Ukraine war, the BSEC imposed the floor at the end of July this year so that no scrip can go further down.
However, riding on a few dozen scrips, the market had some short term rallies and it came down again.
With the deteriorating economic, business and market outlook, the market began to fall in the mid-October and the bears are still in control.
Responding to several big sell-offs following market rumors that the floor might be removed, top BSEC officials were assuring investors that the floor would not be removed until the market gets its strength back to a decent extent.
But the market did not regain strength and now, the investors, mainly retail ones who bought the regulator's verbal assurance, sound frustrated for not seeing the 2020 floor magic repeating and the regulator sticking to its commitment.
On the other hand, the investors who have been suffering for the lack of selling opportunity despite their need for cash or exposure reduction during market correction are warmly welcoming the regulator's move.
Also, the investors who have been waiting with cash for opportunities after sell-offs are positive about floor price removal.
Top regulatory officials, on several occasions, did say that the unconventional interference in the secondary market was done for the sake of majority retail investors' protection from any drastic capital erosion.
And, now the retail investors are puzzled if they are still exposed to the risk or not.
BSEC Spokesperson and Executive Director Rezaul Karim told The Business Standard last week, the commission is in a position to gradually come out of the temporary restrictive measure because of the prolonged illiquidity in the market.
Without commenting on the tentative time and size of the next trenches, he said the regulator would act based on the market scenario and it would not allow any free fall.
