Stocks sell off as investors recall bad days of 2020

Today marks one year since the floor price of individual scrips was introduced in the Bangladesh stock market.

The relevance of the market saviour mechanism almost disappeared with the market rally since mid-2020. But it reappeared in investors' psyche with the resurging Covid-19 infection curve last week.

With ongoing vaccinations in recent weeks, following the head-turning market rally, floor price, which the Bangladesh Securities and Exchange Commission (BSEC) imposed on 19 March last year, went almost out of mass investors' minds unless any significant dilution took place for corporate actions.

However, the same investors turned shakier as soon as the health ministry proposed postponement of scheduled public exams, stopping all public gatherings and in case of a higher infection rate, a shutdown similar to the previous year's one.

The stock market, observing a stunning rally over the last six months of 2020, has been in a rational correction over the last two months, while the reappearance of the virus increased sellers' activities in the market.   

Indices at the two bourses in Dhaka and Chattogram fell by more than 1% on Thursday with a moderate decline in trading turnover.

"For the first time, the memories of last year's floor price imposition came back so strongly in my mind," Azad, a retail investor, told The Business Standard on Thursday at a Motijheel trading floor.

"Honestly, I thought, like the virus, the floor price will not be a relevant topic in our market anymore, but the virus curve increases concern," he said, adding that he had sold 10% of his holdings on Thursday.

A stockbroker handling a number of institutional clients said most of his clients put more sale orders than purchase on Thursday as they preferred a little reduction in market exposure amid the reappearing public health uncertainty.

The investors' behaviour was reflected in the day's gainer-to-loser ratio, as less than 10% of scrips at the Dhaka Stock Exchange (DSE) advanced on Thursday.

Some were asking whether the stock market would again see a trading closure for a long period if a shutdown came. 

The Bangladesh stock market went through no trade from 25 March to 30 May last year, as the nationwide shutdown instructions did not include the bourses among essential services, like banks and hospitals.

Also, a then-backwardness in the automation of market activities was blamed for the closure.

However, the market seems to be sufficiently prepared now for remote trading as the bourses had to increase efforts in IT.

Meanwhile, the BSEC assured investors of trading continuation regardless of the Covid-19 situation.

BSEC Executive Director and Spokesperson Rezaul Karim said, "Stock market trading will go on as long as bank transactions will be there."

At 3pm by when DSEX, the broad-based index of the Dhaka bourse, fell by 1.48% and blue-chip index DS30 fell by 1.8%, Azad and one of his friends concluded that they are less fearful of the virus and also its impacts on the market this time.

It was like the end of the world in March 2020, they said.

But people learned to live with the virus and also learned that the economy, businesses, and markets bounce back one day, they added.

The two friends now pray for two things, public awareness against the resurgent virus and the investors' nerves.

"Let no scrip retest its floor price again," said Azad, who makes a living by trading stocks.

Of the 369 active scrips on DSE, 81 are still stuck at the floor price as no buyer is interested in the mandatory heights that the BSEC set based on the average of five-day closing price prior to the evening of 19 March 2020.

DSEX fell below 3,600 points on 18 March last year, which was 4,800 a month before. Floor prices pushed the index up to 4,000 immediately and it rallied to nearly 6,000 in mid-January this year riding on economic resilience and a moderately flooded money market.  

The DSE broad-based index closed at 5,434 points on Thursday.