MD Ashequr Rahman While most stocks experienced corrections on Sunday, as expected after the removal of floor price, the performance of some stocks stood out in signs that the market will soon get back to its natural course.
Immediately after the closing of the day's trading session, Md. Ashequr Rahman, managing director of Midway Securities, shared with the FE his views about the market's response to the latest regulatory move, why he is optimistic about the market's recovery and what, he thinks, needs to be done for the market to thrive.
He drew attention to the performance of BRAC Bank.
"I believe BRAC Bank is one of the best banks in Bangladesh," he said, the price of which was Tk 38.5 per share [floor price]. The stock could not overshoot the floor and was devalued at Tk 35.8 only after an announcement of stock dividends.
On Sunday, in absence of the floor price, BRAC Bank initially slid to Tk 32.30 per share, at which point investors exerted a buying pressure pushing the stock to Tk 36.30 a share. That was a gain of 1.4 per cent.
"This BRAC Bank share price event is very significant. We always say good shares have a demand. Whenever the price of a good share goes down, investors flock to buy that share, driving the price up."
But this mechanism of price discovery was missing in the last 18 months when the price restriction was in place.
On the contrary to BRAC Bank, National Bank, which also traded in a large volume, fell from Tk 8.3 to Tk 7.50 a share. This bank has been embroiled in financial frauds.
Mr Rahman said that what happened to both the banks showed how the market could have struck a balance without floor prices, which were set after the outbreak of the Russia-Ukraine war to prevent freefall of stocks.
"If the stock market watchdog could avoid imposing floor price, good stocks would have attracted investments."
What is expected in future?
Mr Rahman forecast what may happen in the next two weeks.
"I believe the trading in the stock market will get a boost. There are shares which will be corrected for another three days. Stocks that had no buyers today shall get buyers soon."
The market started regaining its normal functioning though 35 stocks are still languishing on the floor.
"It would be better if the market watchdog withdraws the floor price of those stocks too.
"Tuesday is extremely important. The people, who purchased shares today, will try to sell their shares on Tuesday. It is important to watch how the market reacts that day, important to watch whether the market has the strength to absorb a selling pressure."
Similarly, the next one or two weeks will bring forth the direction of the market.
"Within two weeks, we will see good stocks sorted out from bad ones."
Punishing manipulators is imperative
However, Mr Rahman emphasized the need for some regulatory actions in favour of the market.
Referring to the bad stocks that continued their rally on Sunday, he said regulators should take immediate and stringent actions against share price manipulators.
"My request to market regulators will be to remove the floor price of the remaining 35 stocks and to take significant actions against manipulators.
"This is very much possible as everything is recorded. If regulators now take actions [against manipulation], a new capital market will evolve where good stocks will be invested in.
"If bad stocks continue to get investments, wise investors will leave the market."
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