The number of beneficiary owner’s accounts continued to decline as share market investors closed some 3,35,269 accounts in one-and-a-half month due to fresh volatility in the market and lack of initial public offerings.
According to data from the Central Depository of Bangladesh Limited, the number of active BO accounts dropped to 27,74,448 as of August 15 from that of 31, 09,717 on June 30.
The general index of the Dhaka Stock Exchange or DGEN rose sharply and fell again during the period as the capital market went through a severe volatility. The DGEN reached to 6710 points on July 24 from 6117 points on June 30, but as of August 14 the index again came down to 6172 points.
Turnover of the bourse also posted a record high of the year at the same time of Tk 1957.92 crore on July 24 which was Tk 954.84 on June 30, but dropped to Tk 439.89 on August 14.
‘Most of the BO accounts were closed due to non-payment of renewal fees in recent times as June was the year ending,’ said Saiful Islam, chief executive officer of BRAC EPL Stock Brokerage Ltd.
He said that the existing investors perhaps lost interest to pay renewal fees following recent downtrend of the market.
He also said that volatility in the market also discouraged new investors in opening new accounts.
‘The volatility in the market resulted in lack of fresh IPOs which was also a key reason for investors not to open new BO accounts,’ he said.
He said that usually more than half of the BO accounts are opened to subscribe primary shares and these accounts remain idle for most part of the year.
‘If fresh IPOs hit the market at regular interval the number of BO accounts would increase again,’ he added.
In 2009-2010, a total of 11,60,674 BO accounts were opened, posting a 82.83 per cent year-on-year growth, and the number of BO account holders was 14,01,165 at the end of 2008-2009, compared to 10,71,252 on June 30, 2008. The number of BO accounts was 25,61,839 on June 30, 2010.
Market operators said that although the growth in opening of BO accounts was high in the first half of last fiscal year, a prolonged bear run in December 2010 to June 2011 and lack of IPOs discouraged many potential investors in opening BO accounts, while many investors even closed their accounts.
The number of BO accounts reached around 32,60,000 in December 2010 as people rushed to open accounts with different brokerage houses lured by the booming share prices, especially from October to December.
The investors had continued to open BO accounts heavily till April 2011, despite massive slides in share prices from December to March, with the number of BO accounts reaching around 34,00,000.
‘But in the fag end of the last fiscal year, investors seemed to lose interest in opening BO accounts when around three to four lakh BO accounts were closed as investors did not renew their accounts,’ said a market operator.
He said the high renewal cost of Tk 500 for BO accounts also discouraged the primary investors from maintaining the accounts.
Market operators said the Securities and Exchange Commission discouraged floating of IPOs in the second half of 2010-2011 due to lack of liquidity in the market after the stock debacle. ‘As a result, those who only intend to subscribe primary shares were discouraged from opening BO accounts.’
Only four companies and two mutual funds floated IPOs in last six months while the total number of IPOs in the just-concluded fiscal year was 19.
Source: New Age
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