The stock market with the unconventional floor price support has regained vibrancy to generate over Tk1,000 crore in turnover every day, and people on the street are talking about which stock to chase right now for staggering gains.
Everything is happening leaving 52% of scrips stuck on the price floor that came into effect from the last trading session of July.
According to the 4 October market report by the research team of brokerage firm Royal Capital Ltd, 193 of the 369 scrips in the Dhaka Stock Exchange (DSE) were stuck at the floor price – meaning there were lots of sale orders amid no buyers at the lowest allowable price.
The price floor being loved by a large number of investors, mostly retail ones, is also annoying serious market participants, especially institutional investors, who want the market to remain free enough to find more buyers and sellers for the sake of liquidity and a genuine price discovery mechanism.
Blue-chip shares, that are stuck on the floor, increased the agonies of serious investors as many are unable to sell large-cap stocks such as Grameenphone, Square Pharmaceuticals, Brac Bank, Renata, Singer Bangladesh, regardless of their need for cash or will to hold onto investments.
Ten of the 30 blue chip companies on the DSE are hibernating on the floor having bare trades at the price level.
BAT Bangladesh, Brac Bank, Fortune Shoes, Grameen Phone, Islami Bank, LankaBangla Finance, Renata, Robi, Singer Bangladesh, and Square Pharmaceuticals were the DS30 companies stuck on the floor on Tuesday.
Like many, CFA Society Bangladesh President Shaheen Iqbal in a recent capital market show hosted by The Business Standard, opined that the floor price should not be in place because it was disrupting the price and hindering the development of the capital market.
A stock might go down and also come back to its fair level in a free environment, he said, referring to the argument that a fall in stock prices is not the end of the world.
The floor steroid, however, worked in helping the market recover from its 14-month low at the end of July.
DSEX, the broad-based index of the DSE surged by 9.43% to 6,544 on Tuesday, from 5,980 on 28 July 2022.
The Bangladesh Securities and Exchange Commission (BSEC) made the price floor effective from 31 July, which is not allowing any scrip to trade below the then price level.
Responding to the criticisms of the stock market regulator's repeated market disruption moves, BSEC Chairman Professor Shibli Rubayat-Ul-Islam in August said that the commission was undone because of the market structure – the dominance of retail investors who needs some protection.
Floor is so strong in the investors' psyche in the bourses of Dhaka and Chattogram that a rumour in early September that the regulator might revoke the controversial price floor triggered a massive selloff in the stock market and the market later bounced back after the top BSEC officials' assurance that the commission was not even thinking of anything like that.