Share market must allow to follow on its own course

DSEX, the main index of the Dhaka Stock Exchange (DSE), the main stock market in the country, fell by 77 points and fell close to 6,000 on the first working day of this week. Although the price had fallen, the transaction increased slightly from the previous day. Sunday recorded  the lowest position of this index in the last one and a half years.

The index stood at 5,981 points on 28 July in 2022. As the index fell below 6,000 points on the day, a floor price was imposed on the share prices to prevent a further fall. But the authorities, although belatedly, admitted that it was not normal. Though the market fell on Sunday, both the index and the transaction increased in the stock market on Tuesday.

After a year and a half, in the first phase the floor price for all companies and mutual funds except 35 was withdrawn from 21 January. In the second phase, the floor price of another 23 companies was lifted from 23 January. We consider this to be the right decision.

The top executives of several leading brokerage houses of the bourse said that the price of some shares fell by 30 to 50 per cent in the six working days between 21 and 28 January. As a result, shares of many companies have come under forced sale. However, when the share price started increasing, the pressure of selling in the market also decreased.

People related to the stock market said that a buyer crisis emerges in the market when forced sales increase. It also spreads fear among the investors, leading to decrease in new investment. But buyers appear when the price increases.

Faruq Ahmed Siddiqi, former chairman of the capital market regulatory body, Bangladesh Securities and Exchange Commission (BSEC), told Prothom Alo, “If someone has investment in good shares, he does not need to panic and sell those shares. Even if the price of these shares falls temporarily, it will turn around.”

According to the related sources, BSEC held a meeting with DSE authorities regarding the exclusion of 83 companies from the DSEX and the inclusion of manipulated shares in the index during the annual adjustment of the index, but no decision was taken regarding the inclusion of the companies in the index or the adjustment of the index.

According to Prothom Alo’s investigation, shares of the companies that have been abnormally increased in the last one and a half years through irregularities and manipulation are now determining the ups and downs of the DSEX index. This led to the exclusion of a significant number of listed companies from the index. On the one hand, the contributions of companies known to be bad has increased in the index calculation, on the other hand, the representation of good companies has decreased. As a result, the DSEX index is sending a ‘wrong message’ to investors.

The question is, will the BSEC continue this wrong message of the index or take the initiative to correct the index?

The authorities tried to keep the stock market artificially buoyant by imposing a floor price, which was not a correct step. The stock market should be allowed to operate at normal speed. The concerned people must take care so that nothing like the situation of 1996 and 2010 reemerges. At that time, the “big players” of the stock market artificially increased the price of some shares and grabbed millions of taka. Although there was an inquiry committee over the 2010 share scam, the government did not try to implement its recommendations or bring those responsible to book.