During May, a mere 19 trading days saw nearly 15,500 investors liquidate all their shares in their Beneficiary Owners (BO) accounts. Concurrently, 8,000 new investors opened BO accounts and joined the market.
This data, sourced from Central Depository Bangladesh Limited (CDBL), which manages the BO accounts and automates the shareholding process for stock market investors, paints a concerning picture.
According to CDBL, the number of zero-share BO accounts stood at 3 lakh 68 thousand 435 on April 30. By the end of May, this figure had increased to 3 lakh 83 thousand 928 indicating that 15 thousand 493 investors sold off all their shares during the month.
The rise in zero-share BO accounts has led to a decline in active BO accounts, those holding shares. As of the last trading day in May, the number of active BO accounts had decreased to 13 lakh 30 thousand 329 down from 13 lakh 43 thousand 639 at the end of April. Active BO accounts are defined as those holding shares and participating in the market.
According to data from the Dhaka Stock Exchange (DSE), out of the 19 trading days in May, the market experienced a decline on 14 days. This downturn affected the prices of most traded shares, with many companies facing a scarcity of buyers. To curb the falling prices, the Bangladesh Securities and Exchange Commission (BSEC) set a maximum daily price drop limit of 3% in April.
Due to this limit, a significant number of investors rushed to sell their shares at 3% lower prices as soon as the market began to fall each day. As a result, many companies’ share prices dropped by 3% at the start of trading, leaving no buyers for these shares.
Market insiders believe this situation arose due to the continuous decline in share prices. Panicked investors are selling shares to minimize losses, while lending brokerage houses and merchant banks are forcefully selling shares, known as “forced selling,” to adjust loans. Consequently, the number of zero-share BO accounts is increasing day by day.
As share prices continue to fall, forced selling also rises. According to regulations, when a share price drops below a certain limit, lending institutions can sell the shares in the investor’s BO account to adjust the loan. This process is known as forced selling in the stock market.
DSE data reveals that the main index of DSE dropped by 333 points or 6.5% overall in May. The DSEX index stood at 5,585 points at the beginning of May and fell to 5,252 points by the last trading day on Thursday. This decline has led to an increase in the number of zero-share BO accounts. According to CDBL, about 16,000 investors sold all their shares in April as well. Therefore, in the past two months, approximately 31,500 investors have sold all their shares from their BO accounts.
