Express (August 29, 2011)
The number of beneficiary owner's (BO) accounts continued to decline as stock market investors closed 3, 53,077 BO accounts in the last two months mainly due to fresh volatility, lack of IPOs and higher renewal fees.
According to data from the Central Depository Bangladesh Limited, the number of active BO accounts dropped to 27, 56,640 as on August 26 from that of 31, 09,717 on June 30.
A stock broker said that due to fresh volatility in the market, lack of initial public offerings (IPOs) and higher renewal fees for maintaining BO accounts are the major causes for declining BO accounts.
The benchmark general index of the DSE rose sharply and fell again during the period as the capital market went through a fresh volatility. The DGEN reached to 6,710 points on July 24 from 6,117 points on June 30, but as of August 25 the index again settled down to 6,212.
Turnover of the premier bourse also posted a record high of the year at the same time of Tk 19.57 billion on July 24 which was Tk 9.54 billion on June 30, but dropped to Tk 5.45 billion on August 25.
Capital market analyst Akter H Sannamat said, "The existing investors perhaps lost interest to pay renewal fees following recent downtrend of the market and most of the BO accounts were closed due to non-payment of renewal fees in recent times as June was the year ending."
Mr Sannamat also said that the fresh volatility in the market and lack of floating fresh IPOs also discouraged new investors in opening new accounts.
Mr Sannamat said that many new investors had bitter experience to the recent market crash and they are not interested to come back as a result they closed their BO accounts.
"Many potential investors who maintained 5-6 BO accounts earlier now maintain one or two accounts, as a result total BO accounts declined substantially," said Mr Sannamat.
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.
However, he said "If fresh IPOs hit the market, the number of BO accounts would increase again as many of them will open BO accounts.
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.
Although the growth in opening of BO accounts was high in the first half of last fiscal year, a prolonged bear run in mid 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 many people rushed to open accounts with different brokerage houses lured by the booming share market.
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.
Professor Mahmood Osman Imam, a finance teacher at the Dhaka University and capital market expert said "Mainly who maintained 5-6 BO accounts and applied for IPOs felt discouraged to continue their accounts as IPO floatations remain almost stuck."
"The recent volatility of the stock market, lack of IPOs and higher renewal fees promoted many potential investors to close their BO accounts," he said.
A stock broker said that the 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.
He said the high renewal cost of Tk 500 for BO accounts also discouraged the primary investors from maintaining the accounts as many investors maintained 5-6 BO accounts.
"The SEC has imposed an additional Tk 200 from Tk 300 in annual maintenance fee on each BO account from July 2010, which was also discourage many potential investors to open new BO accounts while many of them closed their accounts for higher renewal charge," he added.
At present a prospective investor has to pay up to Tk 1,200 to open a BO account.
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