1.7 lakh BO accounts closed in 6 months for stocks gloom

The number of beneficiary owners (BO) accounts has decreased over the last six months in spite of the advent of 60 new stockbrokers in the stock market amidst expectations that the number of investors would increase. 

There are now 18.6 lakh BO accounts, a drop of 8.7 per cent from what was in mid-July, according to Central Depository Bangladesh.

The Bangladesh Securities and Exchange Commission (BSEC) has been giving the approvals for the new brokers in phases since 2021. There are now 291 in total.

While existing stockbrokers had been criticising the arrival of the newcomers, the regulator had responded saying that the approvals were given so that they could bring new investors to the market.

However, the opposite occurred.

The number of BO accounts is reducing as the business is being squeezed, both in the primary and secondary markets, said Mostaque Ahmed Sadeque, former president of DSE Brokers' Association (DBA).

Investors could not sell shares in the last three months due to the presence of the floor price, so their confidence dropped, he said.

The number of BO accounts will reduce further as confidence has not grown among people, he added.

At the end of July this year, the BSEC set the floor price of every stock to halt the free fall of the market indices amidst global economic uncertainties.

The floor price was the average of the closing prices on July 28 of this year and the preceding four days.

Due to the presence of the floor price, the turnover of the stock market dropped to less than Tk 350 crore and most of the stocks failed to attract investors.

Though the floor price was lifted for 169 companies last week, the circuit breaker's lower limit was set to allow stocks to fall by at most 1 per cent in a day, which is too little to turn the market vibrant, said Sadeque.

The BSEC should ensure support from institutional investors and then lift the floor price and set the circuit breaker's lower limit at 10 per cent as had been earlier, he said.

This may primarily cause the stock market index to fall, it would later rise again, added Sadeque, also managing director of the Investment Promotion of Services.

Actually, stock investors are not happy now with the business as the index was dull almost round the year. Some of them do not want to continue maintaining their BO accounts, he said.

The DSEX, the benchmark index of Dhaka Stock Exchange (DSE), dropped 9.45 per cent this year, shows the DSE data.

As the market index is not also performing well, initial public offerings (IPOs) are also slow to come by and it was another reason of the reduction in the number of BO accounts, added Sadeque.

In 2022, nine companies and one mutual fund issued shares or units in the stock market to raise funds whereas 13 companies had got listed in the previous year, shows the DSE data.

Many investors became inactive in recent times due to the gloomy scenario in the stock market and some of them are frustrated, so they closed their BO accounts, said a top official of a merchant bank, preferring anonymity.

Most of the BO accounts that had been closed were previously being utilised for gaining IPO shares, he said.

However, now the BSEC has included some conditions to the IPO process so the IPO hunters closed their accounts to save on the maintenance costs, he added.

Investors get a very small number of shares through IPOs but still have to keep an investment of at least Tk 50,000.

The BSEC introduced a pro-rata share allocation system in 2020 replacing a lottery system, enabling whatever is being allocated to be distributed in equal portions, resulting in everyone who subscribes to an IPO getting shares.

Some of the BO accounts were closed in July as investors did not pay their account fees on making low profits in the primary market, the merchant banker added.

The number of BO accounts stood at an all-time high of around 32 lakh in 2015.