BSEC lifts minimum price cap on Beximco, Islami Bank stocks for free market return

The Bangladesh Securities and Exchange Commission (BSEC) has withdrawn the floor price - the minimum price limit - imposed earlier on shares of Beximco Limited and Islami Bank Bangladesh PLC, paving the way for a return to normal market-based trading.

The decision was made at a special commission meeting held today (8 June) and subsequently formalised through an official circular.

With effect from tomorrow, both stocks will trade freely without any minimum price restriction, ending a prolonged period of regulated pricing that had limited natural market movement.

BSEC spokesperson Abul Kalam confirmed that the removal of the floor price will come into effect from tomorrow.

He said the last floor price levels stood at Tk110.10 for Beximco Limited while Tk32.60 for Islami Bank Bangladesh PLC.

Both the two stocks had been trading at these fixed levels for an extended period, leading to a virtual stagnation in market activity.

Market participants believe the decision will help restore a more realistic price discovery mechanism in the capital market.

However, they also warned that short-term selling pressure and volatility may increase in these two counters once trading resumes without restrictions.

The move comes after the new commission had already indicated plans to gradually withdraw floor prices as part of broader capital market reforms.

Earlier yesterday (7 June), during a meeting with the Dhaka Stock Exchange (DSE) delegation, the commission signaled its policy direction regarding market liberalisation and structural improvements.

Discussions also covered investor confidence building, deregulation, automation, modernised surveillance systems, simplified IPO approvals, and strengthening the autonomy of stock exchanges.

The floor price mechanism was first introduced on 19 March 2020 during the Covid-19 pandemic, when global markets faced severe volatility.

It was designed to prevent panic selling and sharp declines by setting a minimum allowable price based on the average of the previous five trading days. While it initially helped stabilize the market, prolonged use later created unintended consequences.

In 2022, against the backdrop of mounting global economic uncertainty - fuelled by the Russia-Ukraine war, acute dollar shortages, rising inflationary pressure, and a prolonged domestic market downturn - the regulator reintroduced floor prices across most listed securities.

The move, however, came at a significant cost. A large portion of the market became effectively inactive, as stocks could not trade below their set minimum limits, severely restricting liquidity and hampering the natural process of price discovery.

The regulator had defended the mechanism, arguing it was necessary to prevent excessive price declines, shield retail investors from panic-driven selling, and preserve overall market stability during a period of acute crisis.

Market experts, however, have long pushed back against the measure, contending that it distorted natural price formation and eroded the efficiency of the capital market over time.

Although most listed stocks were gradually freed from the floor price system, Beximco and Islami Bank remained exceptions due to their specific financial and operational challenges.

Market analysts noted that both companies were facing significant stress, including debt concerns and profitability pressure, raising fears of sharp corrections if restrictions were removed abruptly.

Experts now expect that lifting the floor price will lead to increased volatility in the short term, particularly in these two stocks.

However, in the long run, the move is expected to strengthen market-based pricing, improve transparency, and enhance liquidity across the market.

Globally, most developed and emerging markets do not use long-term floor price systems. The United States relies on circuit breakers to temporarily halt trading during extreme volatility.

India and China use daily price bands to limit excessive fluctuations, while Pakistan and Sri Lanka also apply temporary control mechanisms.

However, prolonged price freezing as seen in Bangladesh is rare internationally.

Market analysts view this decision as more than just a technical adjustment for two stocks. It is widely seen as a significant step toward a more liberal, efficient, and internationally aligned capital market structure in Bangladesh, where price discovery can function freely and investor participation can return to normal levels.