Big drop in shares after floor price withdrawal

❐ Staff Correspondent

Shares of listed companies Beximco and Islami Bank saw a sharp decline on the first day after the withdrawal of the floor price imposed on their stocks.

According to data from the Dhaka Stock Exchange (DSE), after the Bangladesh Securities and Exchange Commission’s (BSEC) new decision came into effect, the share prices of the two companies began to move freely based on market demand and supply. As a result, both stocks fell close to the circuit breaker limit within a single trading day.

Before the removal of the floor price, Beximco shares were stuck at Tk 110.10, while Islami Bank shares were fixed at Tk 32.60 until Monday.

After the floor price was lifted, Beximco shares dropped by 9.99% to Tk 99.10, while Islami Bank shares fell by 9.82% to Tk 29.40.

On Monday, the BSEC, through an order signed by Chairman Masud Khan, withdrew the floor price restrictions imposed on the shares of Beximco and Islami Bank.

The Surveillance Department of the Market and Intermediaries Affairs Division of BSEC also instructed the reinstatement of the standard upper and lower circuit breaker limits for all listed securities.

The order stated that the decision was taken to protect investors’ interests, ensure market development, and restore a normal price discovery mechanism in the capital market. With this, the earlier order issued on August 28, 2024, imposing floor prices and related restrictions on Beximco and Islami Bank shares has been revoked.

It further said that under a June 17, 2021 directive, the standard circuit breaker system for all listed securities will now be in effect again, allowing share prices of Beximco and Islami Bank to fluctuate within normal market-determined limits.

Market analysts said that the long-standing floor price had distorted natural price discovery for these two stocks. With its removal, the market is now reflecting true supply and demand dynamics, which became evident on the very first day.

The floor price mechanism was first introduced on March 19, 2020, during the tenure of then BSEC chairman M Khairul Hossain to prevent a sharp market fall. Although it was later withdrawn in June 2021, it was reintroduced on July 28, 2022 for all listed securities and mutual funds.

Subsequently, the restriction was gradually lifted for most companies. Until recently, only Beximco and Islami Bank remained under the floor price system, which has now been fully removed by the current commission.