FTSE Russell, a leading global provider of index and benchmark solutions, has reduced the rating for the Bangladeshi capital market from “restricted” to “not met” in the efficient trading mechanism criterion.
According to the new rating, index changes for Bangladesh constituents of FTSE Russell equity indices would be frozen due to the continued imposition of a ‘floor price’ on the Dhaka Stock Exchange that impacts the ability of international institutional investors to replicate benchmark changes.
Consequently, the “Efficient Trading Mechanism” criterion for Bangladesh has been downgraded from ‘Restricted’ to a “Not Met” rating.
Additionally, FTSE Russell has commenced engaging with the relevant market authorities to establish the longevity of this restriction that has been imposed by the Bangladesh Securities and Exchange Commission (BSEC).
FTSE Russell, a subsidiary of London Stock Exchange Group (LSEG).
On July 28, 2022, the BSEC imposed floor prices on all securities to prevent shares from falling beyond a certain level amid the domestic and global macroeconomic strains.
The share prices of most companies have been stuck at their floor prices for an extended period of time, pushing investors towards liquidating their holdings and thus creating a liquidity crisis in the markets.
Earlier in March 2020, the securities regulator took a similar move to limit the free fall of shares following the global pandemic, when the DSEX fell below 3,000 points.
The BSEC chairman has repeatedly said that they had no alternative but to introduce the floor price mechanism to protect the interests of small investors and that the mechanism would not be withdrawn in the immediate future.
The ongoing Russia-Ukraine war, which started in February last year, spilled over its adverse effects across the globe, causing currency volatility, high inflation, and price hikes of all goods and raw materials in the global market.
bcm Bangladesh capital market FTSL