Market participants to work on more stocks to get rid of floor

Market intermediaries would work on more stocks to create demand, especially the fundamentally strong large-cap ones, to make the market vibrant, discussed a meeting of top broker-dealers with the securities regulator.

The Bangladesh Securities and Exchange Commission (BSEC) Chairman Professor Shibli Rubayat Ul Islam along with his team sat with the top stockbrokers on Tuesday (20 June), and the regulator assured the market people that it would continue its efforts to increase fund flow and the liquidity in the market.

"The market did enter a vibrant rhythm and recently there had been some abnormal selling pressure," Professor Islam told The Business Standard, "We mainly tried to hear from the brokerage industry why it was happening."

Around a hundred stocks came up from the floor prices over a hundred days till the first week of June and some of them again fell back to the floor prices in the last two weeks.

High volatility already halved daily turnover in the bourses of Dhaka and Chattogram and the meeting discussed how the market could continue recovery.

Also, the major stocks in terms of market capitalization have long been stuck on the floor prices the regulator imposed on individual stocks at the end of last July, and the meeting discussed how the stocks should get rid of the floor problem.

Amid a lack of buyers at the artificially held prices, investors were unable to sell the blue-chip stocks that were stuck on floor, while many small cap weaker stocks took off the floor and came back in regular trading.

The BSEC would continue its regulatory support so that funds flow into undervalued stocks, said Professor Islam.

For example, earlier this year, the regulator eased margin loan rules for the shares of well performing stable companies. Also the market stabilisation fund built out of the unclaimed dividends within listed firms, new large mutual funds, central bank support through reduced provisioning against banks' capital market investments and allowing off-exposure special funds for capital market investments helped fund flow into stocks.

However, the banks barely increased their bets in stocks amid high inflation and a heating up money market environment.

Professor Islam said many of the market participants have enough funds to increase their investments and in the meeting the regulator requested broker-dealers to take a stronger role to help the market recover.

The million dollar question of when the unconventional floor price will go away was still unanswered as the market as a whole was not that strong to absorb any sudden supply of the floor-stuck stocks.

Earlier this week, top brokers and merchant bankers, in a meeting with the officials of Dhaka Stock Exchange, prescribed for ease of new investors' account opening, shortening the trade settlement cycle and introducing new tradable products including derivatives.