More than one lakh dispirited investors cut ties with the stock market

Dismayed by various factors, with the floor price mechanism being the primary concern, around 1.07 lakh investors chose to withdraw from the stock market, closing their beneficiary owners (BO) accounts altogether in a mere three months. 

Stockbrokers said because of losses from stock market investments, most investors were reluctant to pay a yearly fee even as small as Tk500 to keep their accounts active. This practice is not new though, as it's persistent since 2015 when the total operable BO accounts peaked at around 32 lakh. 

According to the Central Depository of Bangladesh Limited (CDBL), the total number of BO accounts dropped by 6% from 2 July this year and stood at 17.51 lakh on 5 October. 

Out of the 1.07 lakh BO account holders who exited, 79,220 were male and 28,098 female, and of the total, 5,896 BO accounts belonged to non-resident Bangladeshis.

Floor price and what else fuelled the exit

On condition of anonymity, a top official at a brokerage firm told The Business Standard, "Investors were closing their BO accounts for several reasons that include the floor price system, less initial public offerings, political tensions, and economic adversities such as rising inflation and interest rate hike."

He further said that big investors are not active in the stock market, which has made retail investors more disoriented. Investors are selling shares out of uncertainty and the increased cost of living.

From 2 July to 8 October, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) lost over 100 points, indicating an erosion of investor confidence.

In February this year, London Stock Exchange Group's concern FTSE Russel said index changes for Bangladesh constituents of FTSE Russel equity indices would be frozen due to the continued imposition of a floor price on the stock exchanges that impacts the ability of international investors to replicate benchmark changes. Consequently, the "Efficient Trading Mechanism" criterion for Bangladesh has been downgraded from "Restricted" to a "Not Met" rating.

Rezaul Karim, spokesperson and executive director of the Bangladesh Securities and Exchange Commission (BSEC), told TBS, "Investors will invest where there is an opportunity to get good returns. While it is accurate that a considerable number of investors have exited our stock market, there has also been an influx of new participants."

"We have many opportunities to get good returns from the stock market and we're making investors aware of those opportunities. We hope that the number of new investors in our stock market will increase in the coming days," he added. 

In July 2022, the BSEC set a floor price for every stock in an attempt to arrest the market freefall amid global economic turmoil. 

But due to this floor price, 60% shares became stagnant at a restricted price, making investors unable to trade those shares. In this situation, investors who could somehow manage to sell those shares, opted to do so and eventually closed their accounts.