Stocks continue to fall despite BSEC assurance of price floor continuation

Dhaka and Chattogram stocks continued their fall for the second consecutive session on Monday as investors did not lend an ear to the market regulator's clarification that the price floor is not going to be revoked any time soon.

Investors rushed for profit booking from the stocks that gained much in recent weeks, stockbrokers said.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), fell by 0.9% to close at 6,431 points on Monday.

Hitting a 16-week high of 6,585 on Sunday morning, the major stock index faced a sharp selloff amid a rumour that the regulator might revoke the price floor it imposed at the end of July.

Professor Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), on Sunday evening said the commission has no plan to withdraw the floor price.

Echoing the chairman, BSEC Commissioner Shaikh Shamsuddin Ahmed told The Business Standard on Monday, "Anyone talking about this (floor withdrawal) is actually fuelling a rumour."

"The commission is not even thinking about lifting the floor price. It has no plan or intention to lift the floor price in the foreseeable future," he added.

The commissioner suggested investors to not pay heed to any word regarding floor price removal, unless the commission makes such a decision.

Many investors seemed to have been puzzled on Monday and the common question of why the market keeps falling sharply without any update on the price floor arose among them.

Sheltech Brokerage Chief Executive Officer Mesbah Uddin Khan believes profit booking pressure was the main reason and he feels nothing unusual there.

Turnover in the Dhaka bourse rose to an 11-month high of Tk2,296 crore on Sunday, which sharply dropped to Tk1,400 crore on Monday.

In the DSE, 38 scrips advanced, 263 declined, while 68 remained unchanged on Monday.

No sector, except for life insurance, managed to avert contraction in their respective market capitalisation, while paper, service, jute, ceramic, and travel and leisure sectors faced the sharpest fall.

According to a LankaBangla Securities report, the average price-to-earnings (PE) ratio in the DSE stood at 15.35 based on the annualised earnings per share, which was 14.09 based on the last four quarterly earnings of listed firms.

The PE ratio is a widely followed indicator used to learn how expensive stocks are compared to their corporate earnings. The lower the ratio is, the cheaper the stocks are assumed to be.

The average dividend yield in the DSE was 3.33% which reflects how much cash dividend investors are getting against the market price of securities.