DSE seeks circuit breaker on new stocks; market hits 18-month low

The premier bourse yesterday urged the stockmarket regulator to impose a circuit breaker on new stocks to check an abnormal rise in prices from the first day.

A circuit breaker is a method by which the regulator can automatically halt a share's trading for the day if its price goes beyond set limits.

When a listed firm posts corporate declarations, a circuit breaker is imposed on the company's share price for the next day. But, there is no such check on a newly listed company's shares for the first five trading days, said Swapan Kumar Bala, managing director of Dhaka Stock Exchange.

“So, we requested the regulator to standardise the circuit breaker system for newly listed companies,” Bala told reporters after a meeting with Bangladesh Securities and Exchange Commission.

In recent times, the prices of new issues rose manifold just after their debut and the trend continued for the next few days too, due to the absence of the circuit breaker.

The DSE also urged the regulator to restrict credit services, popularly known as margin loans, for purchasing shares of newly listed companies for at least one month from debut.

Currently, investors can buy into the new issues on credit from the first day of trading.

The Dhaka bourse also identified limiting the banks' investment exposure to the capital market as a major setback to the stockmarket, which has stayed in the red for long.

Pointing to the exposure limit, it asked the BSEC to discuss with the central bank and find ways to overcome the situation.

All banks are scheduled to bring down their investment exposure to the stockmarket to the permissible limit by July 2016.

The BSEC sat with the Dhaka bourse to discuss current market situation as well as capital market development at the backdrop of a high volatility in the secondary market, which hit an 18-month low yesterday.

DSEX, the benchmark index, declined 51.91 points or 1.26 percent, before finishing the day at 4,047.28 points.

Selling pressure mounted from early trading as a bunch of corporate declarations with mixed performances came, making investors cautious, LankaBangla Securities said.

The day's turnover, another important indicator of the market, however rose 20.9 percent to Tk 382.31 crore on transactions of 7.66 crore shares and mutual fund units.

United Power Generation and Distribution Company topped the turnover leader's chart with trade of 27.91 lakh shares worth Tk 53.36 crore, followed by ACI, ACI Formulations, BSRM and MJL Bangladesh.

Losers outnumbered gainers 226 to 54 while 31 securities remained unchanged on the DSE.

Reckitt Benckiser was the day's best performer, advancing 10.67 percent, while RD Food Products was the worst loser, shedding 33.85 percent.