Revoking floor price for stocks is a timely decision: Experts

The decision to revoke the floor price for stocks imposed last year on hundreds of companies to arrest declining share prices has been applauded by experts and stakeholders.

“The decision was taken at the right time,” said Shakil Rizvi, a director of the Stock Exchange.

“This will allow investors to trade shares at their will. Floor prices were imposed at special moments to prevent falling prices”, he added.

Another DSE Director Rakibur Rahman said that floor price imposition is not a solution to the problems faced by the capital market.

“Investors got no benefits out of it at the end of the day. The share price of a company should not be as much as it should have been, because of the floor price. The company’s directors take advantage of this,” he said.

He argued that there is no such floor price in any stock exchange in the world. “We are the ‘A’ category by international capital market standards. If the share price is held back by taking measures, we will fall behind by international standards. It shouldn't be.”

On Thursday, Bangladesh Securities and Exchange Commission (BSEC) lifted the floor price (the minimum limit for falling prices) for stocks, allowing the normal circuit breaker on the rise and fall of prices for stocks.

The BSEC removed the floor price for 30 listed firms in the second phase on June 3 and 66 companies on April 7. To prevent the stock market from freefall, the regulator set the floor prices for some stocks on March 19 last year.

Policy Research Institute (PRI) Executive Director Ahsan H Mansoor said, “The floor price disrupts the normal trading. So it has been reasonable to revoke the floor price.”

“Now the economic situation has changed. The stock price couldn’t be the same as it was before when the coronavirus broke out,” he said.

Chief Executive Officer at Aims of Bangladesh Yawar Sayed said the banks should be encouraged to invest more in the capital market apart from lifting the floor price to shore up the capital market.

Capital market analyst and economist Professor Abu Ahmed said, “This decision should be taken earlier. Then, the transaction would also increase. Yet, it is not right to control the market by force. It does not bring good results in the long run. The capital market should be allowed to run at its course.”