IPOs lure investors into capital mkt
MOHAMMAD MUFAZZAL |
January 25, 2021 12:28:05
January 25, 2021 13:16:16
More than 50 per cent of the active BO (beneficiary owner’s) have no role in the country’s capital market as those accounts have either ‘zero’ balance or ‘never’ been used for trading purpose.
The number of active BO accounts reached 2.59 million as on January 21, driven by the capital market’s recent bull-run, according to data available with the Central Depository Bangladesh Limited (CDBL).
Robi’s IPO alone enticed more than 0.13 million into opening beneficiary accounts in November last.
But CDBL’s data revealed that some 51 per cent-56 per cent BO accounts had played little role in the capital market development during the last five fiscal years.
Around 35 per cent to 42 per cent accounts had no share balances during the period.
Furthermore, up to 18 per cent BO accounts were never used for trading in the capital market.
Market operators said most of the BO accounts are used for applying for initial public offerings.
“A section of investors maintain as many as 100 accounts targeting the IPOs. An investor may get IPO shares in 10 per cent accounts and then the remaining 90 per cent accounts will show zero balance,” said Golam Rabbani Hamidi, general manager at brokerage Modern Securities.
He said such investors run a few accounts for conducting transactions in the secondary market.
Last week, the securities regulator issued a directive, which will come into effect from April 1, to introduce the new system of allotment of IPO shares on pro-rata basis instead of lottery.
As per the new directive, investors willing to apply for the IPO shares must have shares of listed companies worth at least Tk 20,000 in their BO accounts.
“A substantial amount of BO accounts, opened for IPOs only, may be closed following the effectiveness of the regulatory directive. This step is likely to boost investors’ participation in the secondary market,” said Mr. Hamidi.
A senior CDBL official said in some cases, an investor opened more than 300 accounts.
“The practice of opening BO accounts only for primary shares should not be encouraged. That’s why, the securities regulator has issued the directive enhance investors’ participation in the secondary market,” the CDBL official said.
According to CDBL information, the number of active BO accounts stood at 2.55 million as on June 30, 2020.
Of the accounts, only 1.24 million accounts had share balance, while the remaining 35.41 per cent accounts had no share balances and 16 per cent accounts remained idle.
The number of BO accounts was 2.80 million in the FY 2019, of which 1.27 million had share balance.
On the other hand, 37 per cent accounts had no share balance and 18 per cent accounts were not used for any purpose.
In FY 2018, some 1.30 million accounts had share balance, same as FY’17’s.
In the FY 2016, the number of accounts having share balance was higher at 1.53 million.
To raise investors’ participation, the securities regulator in December took a decision on allowing investors to open BO accounts online.
To digitise the country’s capital market, the CDBL has started the work on developing a module through which investors will be able to open BO accounts online.
On completion of the process, investors having internet connections will be allowed to open BO accounts using Android mobile phones, laptops, and desktop computers.
Asked, CDBL’s managing director Shuvra Kanti Choudhury said the module development work has almost been completed.
“We hope investors will be able to open BO accounts from home in near future,” Mr. Choudhury said.
An investor has to pay an annual fee of Tk 450 for maintaining the account. Of the amount, Tk 200 goes to the public exchequer, Tk 10 to depository participants, Tk 100 to the CDBL and the remaining Tk 50 to the Bangladesh Securities and Exchange Commission.