The Bangladesh Securities and Exchange Commission (BSEC) has no plan to withdraw the floor price restriction until the national election is over, its Chairman Professor Shibli Rubayat-Ul-Islam told the EconomistPost on Saturday (December 9).
“After the election, we will start planning and accessing the best possible ways to withdraw the floor price,” he said in a telephonic interview.
“The post-election five years should be a golden period for the economy of Bangladesh,” he said, adding that the stock market then should not require the restrictive measure that was imposed at the end of July 2022.
Besides, the economic headwinds brought by the Ukraine war, investors were “going slowly ahead of the election” to be held on 7 January and the two factors together dragged down trading turnover in the stock market, said the regulatory chief of the capital market.
The floor price was imposed “to protect the capital of the small investors who significantly dominate the stock market of Bangladesh,” he said.
He also accepted that the restriction, as a side effect, is depriving the market of liquidity—the ease of selling securities.
Not even half of the listed scrips had buyers at or above the floor prices the regulator imposed for individual scrips based on the average closing price in the previous few sessions in late July last year.
When a stock has no buyer at an artificially held price, investors rarely remain interested in it regardless of how undervalued it was, revealing the market behavior for the last one and a half years.
Meanwhile, market participants having most of their funds stuck at floor prices, were chasing small-cap scrips without caring about their fundamentals and that created bubbles in many of the junk stocks.
On the other hand, the blue-chip stocks other than a handful of exceptions rarely saw buyers at or above the floors, leaving institutional and serious individual investors in pain.
Who invested borrowed funds are facing piling up interest liabilities while their investment shows no return.
“We will keep the objective of the floor price in mind before coming out of it,” said the BSEC chairman.
