Index rises riding on a few securities

The stock index in Bangladesh rose last week although prices of most stocks remained unchanged as the floor price was in play.

It was set in a way such that it prevented the fall of all but 169 companies, which were allowed to incur a reduction of just 1 per cent. In contrast, it permitted every stock to rise by 10 per cent.

The DSEX, the benchmark index of Dhaka Stock Exchange (DSE), rose 21 points, or 0.3 per cent, last week from that in the preceding week to reach 6,215.

The DS30, the blue-chip index, advanced 0.3 per cent to 2,199 while the DSES, the index that represents Shariah-based companies, increased 0.3 per cent to 1,358.

Among the securities to undergo trade, 234 remained unchanged, 105 dropped while only 56 made gains.

As most stocks were not allowed to fall, the index rose with the gains of several stocks, said a market analyst.

With most stocks remaining either unchanged or being able to move just slightly down, they could not influence the rise of the index, he added.

The Bangladesh Securities and Exchange Commission (BSEC) set the floor price of every stock at the end of July last year to halt the free fall of the market indices amidst global economic uncertainties.

The floor price was determined based on the average of closing prices of July 28 that year and the preceding four days. In effect, it prevented the stocks from incurring any reduction.

At the end of December, the BSEC lifted the floor price for 169 companies.

However, the circuit breaker was set in a way such that the companies' stock prices could not drop by over 1 per cent from that on their previous day's closing price.

However, the cap for increases remained unchanged at 10 per cent.

The benchmark index of the premier bourse closed the week on a moderately positive note, said International Leasing Securities in its weekly market review.

The market remained choppy as bargain hunters showcased an appetite to make purchases of stocks at lucrative prices during the last three consecutive sessions of the week, it said.

The week opened amidst a gloom prevailing among the investors as they did not find the market going in any clear direction in the new year, it said.

Optimistic investors regained their confidence when regulators assured of retaining both the floor price and lending rate cap, said the brokerage firm.

Investors increased their participation in the market over the week riding on the assurances, it said.

Consequently, average turnover increased 87.24 per cent from that on the previous week to reach Tk 424.3 crore.

Among all the sectors, IT rose 6.4 per cent, paper 5.1 per cent and travel 4.8 per cent whereas jute dropped 4.8 per cent, tannery 0.9 per cent and food 0.7 per cent.

The Caspi, the all-share price index of Chittagong Stock Exchange, rose 54 points, or 0.3 per cent, to end the day at 18,353.