'With no other way out, we imposed a price floor,' BSEC Chairman

The Bangladesh Securities and Exchange Commission (BSEC) does not want any restriction on market prices, but it had to interfere to protect small investors in a market largely comprised of retail investors, said BSEC Chairman Professor Shibli Rubayat Ul Islam.

"With no other way out, we imposed a price floor," he said, speaking with journalists at the "CMJF Talk" event at the Capital Market Journalists Forum conference room on Sunday.

Because of the level of financial literacy and dominance of institutional investors, developed markets need no such protective measures, he added.

His commission had been seeking market support from intermediary industries and some large individual market players as the indices of the bourses were in freefall, and nothing worked to stop the intensifying fall attributed to macroeconomic turbulence.

The BSEC Chairman said small investors were panic selling as negative news updates weakened market sentiment.

Local and foreign fund managers criticise market interference that hurts market liquidity as a floor price mostly creates a situation where the seller finds it difficult to find a buyer within the allowable price range.

A price floor sends a message that the economy is going through a state of emergency and there should never be a way out to help investors, said an investment banker seeking anonymity.

The BSEC chairman said the equity-only capital market would not help increase the GDP to market capitalisation ratio of Bangladesh and his commission is working to build a vibrant bond market here.

He generally advised risk averse retail investors to invest in the capital market through professional asset managers as they tend to secure a decent risk-adjusted return in the market.

The central bank is also working on revising the basis for banks to calculate their exposure to capital markets, said Shibli Rubayat-Ul-Islam.