Turnover shrinks to Tk178cr, stocks open 2023 with losses
Turnover at the Dhaka Stock Exchange (DSE) nosedived to a two-and-a-half-year low in the first trading session of the year as a depressed market suffocated by the floor price pushed nearly 99% investors to the sidelines.
On Sunday, the daily turnover shrunk to Tk178.42 crore – the lowest since 7 July 2020.
The Bangladesh Securities and Exchange Commission (BSEC) imposed the floor price on 28 July 2022 to arrest the free-fall of stocks. But the floor price mechanism drove most of the investors away from actively trading and the turnover kept on dwindling.
A senior officer at a brokerage firm said because of this significant reduction in trading, brokerage firms are the most affected as their incomes have also decreased. Many are even counting losses.
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"But the BSEC's experimental move to relax the floor price for 168 small-cap scrips did not help at all with increasing the market liquidity either. On the contrary, it backfired," he added.
Stockbrokers said the removal of the floor price for 168 scrips and putting a 1% lower price limit for a day added to the factors hurting investors' confidence in the market, and they are barely buying any shares.
The scrips have yet to resume trading because the 1% drop was insufficient to attract buyers. Also, the broken regulatory promise of not lifting floor prices until there was a significant improvement in the market conditions harmed buyers' trust.
Many large investors said they are merely watchful, because they believe they cannot predict what the BSEC might do regarding the removal or keeping the floor prices on the remaining scrips.
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 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.
Even the common institutional trend of fund injection into major portfolio stocks before the end of the year was not visible in 2022 as investors were unwilling to take additional risk amid uncertainties and they did not want to get stuck with new funds.
Such fund injections collectively help stock prices recover at the year's end, and lenders and other financial industry firms need less provisioning, which helps them post more profits.
"What if the floor remains in place and no buyer comes at the current price for an extended period of time?" a portfolio manager at a merchant bank asked.
Many of his portfolio stocks are stuck on the floor, and he is finding it difficult to sell some for cash unless he offers discounts to block market buyers, where prices can go up to 10% below floor prices.
"On the other hand, what if we inject funds into some good scrips and the floor prices are removed sooner?" he added.
Meanwhile, DSEX, the broad-based index of the DSE, kept sliding slowly over the session on Sunday and closed 0.18% lower at 6,195, compared to the previous trading session.
The EBL Securities said, in its daily market review, the market witnessed a downbeat momentum throughout the session as investors continued to offload their holdings and opted to stay on the sidelines to observe the market momentum amidst the prolonged bearish sentiment in the market.
Most of the sectors displayed dismal returns, out of which IT, services, and travel exerted the most corrections, while ceramic, and banks exhibited meagre positive returns on the bourse.
