Bottom circuit breaker increased to 5%

With the return of the market strength, the Bangladesh Securities and Exchange Commission (BSEC) has widened the bottom circuit breaker – the allowable limit for stock prices to go down in a day – to 5% from the existing 2%.

In an order to both bourses of the country, the market regulator said on Wednesday the new interim circuit would be effective from Thursday.

The upper circuit breaker is still unchanged at 10%.

Earlier on 8 March, BSEC narrowed down only the bottom circuit to 2% from 10% to arrest the sharp fall in stock prices that was expedited by the Ukraine war.

The disruption slowed down the fall, but at the expense of liquidity – the availability of buyers and sellers.

As the majority of buyers were reluctant until stock prices came down to an expected low and the narrowed bottom circuit prolonged the correction phase, daily stock market turnover came down to a year-low level.

However, regulatory pushes against aggressive selling practices alongside the sought market support from intermediaries and banks after a moderate price correction, helped the market rebound on Tuesday and the recovery continued on Wednesday.

DSEX, the broad-based benchmark of the Dhaka Stock Exchange, recovered around 190 points in the last two sessions while it lost around 350 points in the previous three weeks.

Gaining 0.74% on Tuesday and 1.17% on Wednesday, DSEX now stands at 6606. Turnover in the premier bourse rose to Tk606 crore on Wednesday.

Institutional participation in buying triggered the recovery, while individual investors followed through, said market people.

BSEC on Tuesday asked for information on how much the brokerage industry is investing out of their funds and that worked as a push to the broker-dealers for buying stocks in line with their pledge in a 30 March meeting with the regulator.

The commission also wrote to the four state-owned banks – Sonali, Janata, Agrani and Rupali – on Wednesday requesting them to build their Tk200 crore concessional stock investment funds and support the market.

It had earlier written to all scheduled banks to participate in the market support plan through investing from their respective Tk200 crore funds.

The Bangladesh Bank in early 2020 allowed banks to build such funds and offered them exclusion of the very capital market investments from their capital market exposure. But, most of the potential investment is yet to come.

Average investors, discouraged by the stock market's volatility and their investment portfolio health, seem to be appreciating BSEC's continuous efforts to retain the stock market height it gained since the mid-2020.

However, a large number of experts, local and foreign institutional investors are found to be irritated with the regulator's unconventional restrictive measures and its involvement in steering the secondary market, which is ideally the job of the investment industry.

They instead urge BSEC to concentrate on its core job of market regulation and ensuring good governance at all levels.