Rhythm came back in capital market for withdrawal of floor price

Kamruzzaman Bablu :
After almost one and a half years of recession, country’s capital market has started to come back in normalcy.

The market is gradually accelerating and fluctuating with returning to the rhythm after overcoming the depression as the Institutional investors come back with actively.

So far many of the individual investors have turned away they become active as the share price has dropped below the floor price. Moreover, share prices are also revised with regularly and modestly in daily trading after withdrawn.

If it is possible to maintain this dynamic trend of the capital market in the future by preventing manipulation and proper management of laws and regulations, the confidence among domestic and foreign investors will also increase, which will sustain the market in the long run, claiming the market insiders.

The market review showed that the main stock market index of Dhaka Stock Exchange lost 257 points to 6 thousand 79 points from 21 January to the next 6 working days after the withdrawal of the floor price on 18 January.

Even in the last year and a half, the maximum transaction was 1 thousand 654 crore rupees. On the other hand, during the period of floor price, the transaction fell below 200 crore.

Average daily turnover for the year and month was hovering between 400 and 500 crore. As a result, many brokerage houses went bankrupt. Many investors were in deep despair as their capital was also trapped.

Foreign investors also disappear due to lack of confidence in such an erratic market. This pessimism is observed mainly due to blocking the normal movement of the market with the floor price.

But after illuminate the floor price on 18 January, the main index of both exchange sharply increased in every official day.

Continuation of the market, index of DSE is experienced a remarkable surge in trading activity, reaching significant heights on Thursday.

The Dhaka Stock Exchange (DSE), the nation’s primary stock exchange, recorded a trading volume exceeding Tk 1,850 crore, marking the highest level since September 2022.

This surge in trading has had a substantial impact on the overall stock market, with the prices of shares from various companies listed on the DSE witnessing a significant increase. Simultaneously, the main price indices have shown a notable upward trend.

Former chairman of Bangladesh Securities and Exchange Commission (BSEC) Farooq Ahmed Siddiqui told The New Nation that imposing the floor price meant closing the market.

Through which the last one and a half years of trading of good shares was stopped.
On the other hand, there has been an increase in the buying and selling of junk shares.

There has been manipulation.

This happened only because junk shares were traded. Although it is late, due to the removal of the minimum price limit from the market, although there was initial hesitation, now normal trading is going on.

Turnover is also increasing. It seems that the market players (market intermediaries) can run their institutions with ease.

Secondly, the market has not shown any downside since the removal of the price limit. But it will be observe for a few more days to understand the markets trend.

At the same time, policy support is needed to build confidence in the market.

Because now the currency market is very unstable. Liquidity crisis hits the market.

Despite all this, I will say that the stock market is going well. The less control the market can have, the better, he said.

The role of the regulatory body is to ensure market transparency and accountability in the trading of shares.

The capital market regulator BSEC imposed the first floor price on the shares and mutual fund units of all listed companies on July 28, 2022 to prevent the fall in share prices.

Although the measure was said to be temporary to protect ordinary investors, a long year and a half passed after that.

However, the floor price was withdrawn from 167 companies on December 21 of that year, but the floor price was imposed again from March 1, 2023.

Among them, the general stock market activity came to a standstill with the effects of the national parliament elections and political unrest.

As a result, before and after the election, there was a demand to remove the floor price from the market-related and analyst level.

The decision to withdraw the floor price came on January 18 after the formation of the new government and cabinet after the national elections.

On that day, the floor price was withdrawn from all but 35 companies.

Later on January 22, the floor price was withdrawn from 23 more companies.

Now the remaining 12 companies.

However, even though the floor price has been withdrawn, the share circuit breaker is still in place.

DSE director Shakeel Rizvi told The New Nation that ordinary investors, who had stayed away before the elections, are now coming back. A new IPO is coming. There has been interest among investors in this regard.

Now if the dollar market comes down and no major events happen in the global community, hopefully the market will be fine.

As the market is doing well, the remaining 12 companies with floor prices need to be withdrawn.

Capital market analyst and former caretaker government advisor Dr. AB Mirza. Azizul Islam told The New Nation that the market is doing well after the withdrawal of floor price.

However, the main problem of the stock market is that new good companies are not coming to the market.

The index is moving between 6 thousand 200-300. In this situation, he is reluctant to call the stock market dynamic.

“Our stock market has very little relationship with the international stock market.

ADB, World Bank, IMF all say that growth will slow down in 2024.

There are also concerns about the internal situation.

There is also some uncertainty.

These are not satisfactory for business environment.

So we do not think that the stock market will be very good in the near future, told this eminent economist.