The stock of Grameenphone (GP) tumbled almost 9 per cent on the Dhaka Stock Exchange on Sunday, the first trading day after it got rid of the floor, as investors dumped their holdings fearing further erosion.
As per a directive issued on February 6, the Bangladesh Securities and Exchange Commission (BSEC) withdrew the price restriction for the leading telecom operator, which was in place for more than 18 months.
Right from the start of the trading session, GP saw massive selloffs. By the time the session ended, GP, the most valued stock in terms of market capitalisation, lost Tk 25 per share to Tk 261.6 per share.
GP's price erosion alone accounted for a loss of almost 16 points of the benchmark index of the DSE. The index lost 39 points in total.
"This is the much expected correction of GP as the floor price removal prompted investors to encash holdings," said Md Sajedul Islam, managing director of Shyamol Equity Management.
Investors, who had been into the floor price trap with GP shares for a long time, wanted to get rid of their holdings, he said.
The "artificial mechanism" had been in place to prevent stocks from going down, said Mr Islam. "After the removal of floor, it's usual that the stock will fall."
However, according to him, since GP is considered one of the best performing blue-chip stocks, investors will be interested in betting money on the stock once they consider the price-level rational.
During the Sunday session, some 2,254 trades were executed with 0.74 million GP shares changing hands, leading to a turnover of Tk 195 million.
Meanwhile, GP posted a 10 per cent growth in profit year-on-year to Tk 33.06 billion for 2023, supported by higher revenue from increased voice only and data only services.
Despite higher income, GP declared a 125 per cent cash dividend for shareholders for 2023, the lowest in 13 years, while the dividend payout ratio is the lowest in four years, as the telecom operator had to spend more on dispute resolutions in the year.
On Sunday, the DSEX, the prime index of the DSE, went down 39 points to settle at one-month low of 6,215. It shed nearly 58 points in the past three days.
The withdrawal of floor price of GP, a large-cap stock, coupled with the transfer of six more stocks to the Z category, exacerbated the market's downturn, said EBL Securities.
Top negative index contributors were GP, Square Pharmaceuticals, Brac Bank, IFIC Bank, and Khan Brothers PP Woven Bag Industries. They jointly accounted for 29 points fall of the index.
Two other indices also ended lower. The DS30 index, which consists of blue-chip companies, lost 13 points to 2,113 while the DSES index, which represents Shariah-based companies, fell 10 points to 1,349.
The turnover stood at Tk 9.81 billion, up slightly from Tk 9.16 billion the day before.
Losers took a strong lead over gainers, as out of 392 issues traded, 242 saw prices fall, 110 witnessed price appreciation and 40 remained unchanged.
Low-cap stock Fu-Wang Ceramic became the most-traded shares, with shares worth Tk 525 million changing hands, followed by Central Pharmaceuticals, BD Thai Aluminum, Active Fine Chemicals and Monno Fabrics.
Sunlife Insurance was the day's top gainer, posting a 9.71 per cent rise while GP was the worst loser.
The Chittagong Stock Exchange also ended lower with its All Shares Price Index (CASPI) losing 87 points to 17,841 and the Selective Categories Index (CSCX) shedding 52 points to 10,691.
BATBC to get rid of floor today
The floor price of BAT Bangladesh will be removed today (Monday), as per the February 6 directive of the stock market regulator.
In a directive, the securities regulator said the price restriction for BAT Bangladesh shares would be removed the day after the record date, scheduled for March 3.
BAT Bangladesh stock has been stuck at the floor price of Tk 518.70 per share since September 2022.
The floor price is the lowest price set by the securities regulator, at which a stock can be traded. In January this year, the commission withdrew the restriction for most stocks about 18 months after its enforcement.
Presently, BAT Bangladesh is the second-largest firm in terms of market capitalisation, worth Tk 280 billion as of Sunday.
Market insiders fear that BAT stock will also see correction after the departure of price restriction as the company declared a 100 per cent cash dividend for 2023, the lowest in over a decade.
On July 28, 2022, the market regulator imposed floor price on all securities to prevent shares from falling beyond a certain level amid domestic and global macroeconomic strains.
The BSEC removed floor price for most stocks on January 18 this year.
The floor price is still applicable to six companies --- Beximco, Bangladesh Steel Re-rolling Mills, Islami Bank, Khulna Power, Meghna Petroleum, and Shahjibazar Power -- believed to be at risk of freefall and have a huge impact on the index.
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