Dhaka stocks in a half-hour trading session on Thursday shot up by more than 10 per cent, ending a four-day rout as the Bangladesh Securities and Exchange Commission in an unusual move set the floor prices of the companies’ shares to halt coronavirus-centric panic sales.
DSEX, the key index of Dhaka Stock Exchange, gained 10.29 per cent, or 371.01 points, to close at 3,974.96 points on the day after losing 627 points in the previous four sessions.
Trading on the DSE started at 2:00pm and continued till 2.30pm for making the system ready in accordance with the BSEC’s latest circular on the companies’ share price movement. Normally, trading on the DSE starts at 10:30am and continues till 2:30pm.
Share prices started soaring from the very beginning of Thursday’s session and climbed more firmly as the shortened session progressed as the market regulator limited share sales to keep the market afloat.
The BSEC on Thursday morning issued a directive saying that the floor price or lowest limit of the circuit breaker of any listed company would be set based on the average of the closing prices of preceding five trading days.
Therefore, many investors could not execute sales that made the index immune to falling below a certain position, market operators said.
In addition to that, the opening prices of many companies were set at 10-20 per cent higher than their previous day’s closing prices, which had a positive impact on the index and helped the market shoot up in an artificial way, they said.
For example, share prices of Grameenphone were closed at Tk 219.5 on Wednesday and its opening price and lowest price was set at Tk 235.5 for Thursday, which is 7 per cent higher than the previous day’s closing. GP closed at Tk 235.5 per share with a minimal amount of trading on Thursday.
Investors, who might not have wanted to buy a share of the company at Tk 219, had to buy it at Tk 235, which was unprecedented.
Share prices of City Bank were closed at Tk 15 on Wednesday while its lowest price and opening price of each share of the company was set at Tk 16.2 for Thursday, which is 8 per cent higher than the previous day. The bank ended the session at Tk 16.2 per share.
The mechanism raised the share prices of even non-performing companies and did not allow any scrip to fall that artificially hiked the index.
Prime minister Sheikh Hasina at a meeting with finance minister AHM Mustafa Kamal and BSEC chairman M Khairul Hossain on Wednesday asked the minister and the BSEC chairman to take action for stabilising the capital market.
Market operators and analysts are confused about the effectiveness of the new rule.
Share market analyst professor Abu Ahmed told New Age that setting a floor price of a company was illogical and a way to cover up the disease without diagnosing it properly.
He said that the regulator took the wrong and artificial way of raising index as it failed to implement other logical ways.
Abu Ahmed said that the banks and institutional investors were supposed to support the market, but they did not bother to follow the government direction.
Former BSEC chairman Faruque Ahmed Siddique told New Age that the rise in the index appeared to be artificial and posed doubt about its sustainability.
He also said that financial support could be better than the mechanism of the regulator.
The BSEC took the initiative as the market continued diving sharply on coronavirus panic and no other mechanism worked to halt the plunge.
Before Thursday’s gain, the DSEX lost 1,164.18 points in 21 trading sessions, eroding Tk 69,780 crore in market capitalisation in the period mainly due to the outbreak of COVID-19 virus globally.
About 2,20,000 people around the world have been infected with the deadly virus and 9,000 deaths were reportedly globally till date.
The virus has so far infected eighteen people in Bangladesh and killed one.
The government hinted that the country might be put under lockdown to prevent the further spread of coronavirus in the country.
A number of banks on Wednesday started injecting funds in the stock market as per a direction of the government, but rampant panic sales nullified the market stabilising efforts.
EBL Securities in its daily market commentary said that trading on the Dhaka bourse started after a three-and-a-half-hour delay and the emergency crisis response efforts from the capital market regulator fuelled the index with a positive adjustment due to the introduction of the new circuit breaker.
‘Due to these efforts, investors may gain some confidence in the market which has been suffering amid the coronavirus pandemic fears since the declaration of local infected cases and international trading disruptions,’ it said.
The average share prices of all the sectors advanced on Thursday.
Share prices of textile soared by 16.5 per cent, non-bank financial institution 12.6 per cent, energy 11.3 per cent and bank 7.1 per cent.
The turnover on the DSE totalled at Tk 49.12 crore on Thursday compared with that of Tk 429.03 crore in the previous trading session due mainly to the shortening of trading session.
Of the 356 scrips traded on the bourse on Thursday, 141 advanced, just 49 declined and 152 remained unchanged.
DSE blue-chip index DS30 soared by 10.16 per cent, or 122.37 points, to close at 1,325.81 points on the day.
Shariah index DSES also advanced by 10.14 per cent, or 84.65 points, to end at 919.43 points.
Monno Ceramics led the turnover chart with its shares worth Tk 4.02 crore changing hands on the day.
Uttara Bank, Square Pharmaceuticals, National Bank, Mercantile Bank, Aziz Pipes, Paramount Textile, Continental Insurance, Linde Bangladesh and International Leasing and Financial Services were the other turnover leaders.
Hakkani Pulp gained the most on the day with a 29.34-per cent increase in its share prices while Bangladesh Industrial Finance Corporation fared the worst, dropping 13 per cent.
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