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Looking back 2019: 2 lakh BO accounts closed, foreign investors at DSE keep pulling out fund

  • Published at 10:02 pm December 31st, 2019
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Mehedi Hasan/Dhaka Tribune

According to the latest data of the Central Depository Bangladesh Ltd (CDBL) data, the number of active BO accounts was 27,66,217 on December 31 last year, which declined to 25,65,302 on December 26 this year

Above two lakh beneficiary owners’ (BO) accounts were closed in the outgoing year, as lack of confidence and capital erosion led the investors to say ‘good bye’ to stock business.

In contrast, close to 57,000 new BO accounts were opened in 2018.

To make the situation even worse, portfolio investors in the prime bourse, popularly known as foreign investors, withdrew a record Tk941 crore  in nine years during the March-November period of 2019 as they went for large scale sale of shares due to protracted confidence crisis in the stock market, analysts say.

Lack of confidence, rising non-performing loans and liquidity shortage in the financial sector drove both the segments of the local and foreign investors from the securities market, putting a dent on the investment situation of the economy.

Talking to Dhaka Tribune, market analysts and insiders have said stock market regulator BSEC stopped approving fresh initial public offerings (IPOs) proposals until making some changes to the public issue rules. The new public issue rules were approved in September that also impacted the closure of huge BO accounts.

They have said the continued market fall for the last 6 months coupled with frustrating performance of macroeconomic indicators' caused many local and foreign investors to count financial loss any frustration to leave the market.

2 lakh BO accounts closed in a year

According to the latest data of the Central Depository Bangladesh Ltd (CDBL) data, the number of active BO accounts was 27,66,217 on December 31 last year, which declined to 25,65,302 on December 26 this year. A total of 200,915 BO accounts have been closed in the outgoing year.

Stock market insiders say the investors usually open new BO accounts to apply for IPOs. Only a small number of BO account holders are typically involved in secondary market.

Minhaz Mannan Emon, a DSE director, has told Dhaka Tribune that good companies are not going public, and BSEC did not approve a single IPO since April 30. 

Besides, investors were not paying fees to renew their accounts as they could not make profit and faced huge losses, causing the closure of huge number of BO accounts.

According to the CDBL data, out of a total 25,65,302 BO accounts, 18,79,340 belong to males and 6,85,962 to female investors.

Currently, (as of December 26, 2019) 2,419,777 BO accounts are owned by Bangladeshi investors and 1,45,525 accounts by non-resident Bangladeshis.

A managing director of a top brokerage house has told Dhaka Tribune that Bangladesh Securities and Exchange Commission has been asking stock brokers to scrap multiple beneficiary owner accounts opened using a single National Identity Card, one bank account and similar phone number.

“The instruction of the securities regulator may have also contributed to contraction of BO accounts,” he added. 

Opening a BO account with the CDBL through a depository participant is a must for trading shares at the stock exchanges.

Net foreign investment at DSE continues fall

Foreign investors at the Dhaka bourse withdrew record Tk941 crore in the last nine months (March-November), according to the latest DSE data.

In 2018, net foreign investment dipped to negative Tk593.47 crore, which was Tk1,704.94 crore positive in 2017.

According to the premier bourse, the net overseas investment at DSE was Tk78.43 crore in 2011, Tk792.59 crore in 2012, Tk1,942.89 crore in 2013, Tk2,619.78 crore in 2014,Tk185.50 crore in 2015, and Tk1,340.98 crore in 2016.

Taking to Dhaka Tribune, stock market analyst and honorary professor at Dhaka University’s economics department Abu Ahmed has said most of the listed companies are suffering from lack of good governance. 

Companies’ sponsor directors often traded shares anonymously, violating securities laws, he mentions.

“They tend to make false financial reports. In this case, foreign investors will not invest in capital market,” he says.

“Soaring non-performing loans coupled with falling foreign portfolio investment triggered further sell-offs,” he explains.

On January 24, DSEX, broad index of DSE touched the highest peak of 5,950 points but as of December 29 the stock market lost about 1,450 points.

In the outgoing year, foreign investors sold off the shares, especially in large companies including Grameenphone, Olympic Industries, United Power Generation, British American Tobacco Bangladesh and Square Pharmaceuticals, says Bangladesh Securities and Exchange Commission (BSEC) Chairman M Khairul Hossain.

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