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Foreign investment in Dhaka Stock Exchance drops sharply

Publication Date : 03-05-2013

 

Foreign investment in the Bangladeshi stock market declined in April for the second month due to the overcast state of the market.

In April, foreign investment dropped 19 percent from the previous month to 734 million Bangladeshi Taka (US$9.2 million), according to data from the Dhaka Stock Exchange.

Foreign investors bought shares worth 1.1962 billion Bangladeshi Taka and sold stocks worth 462.2 million Bangladeshi Taka in the month.

“Stock prices have come down to such a level that the foreign investors do not need a huge amount to buy shares,” said Wali Ul Islam, chief executive officer of LankaBangla Securities, a preferred stockbroker for foreign investors.

A stock which cost 100 Bangladeshi Taka even a few months ago is now available for 20-25 Bangladeshi Taka, he said.

The lower prices, however, do not mean that the foreign investors would be rushing in to buy shares, Islam said.

“They have come here to make profit, so they are following a slow but steady investment plan.”
The market has been on a downtrend since the price debacle in 2011, with the DGEN, a key index of the Dhaka bourse, plummeting to 3,618 points towards the end of April, 2012 from 9,304 on January 2, 2011.

The daily turnover, too, dropped by an astounding 91.6 percent during that period, from 16.12 billion to 1.36 billion Bangladeshi Taka.

Islam, however, sees the situation reversing soon thanks to the recent move by the central bank to allow local stockbrokers to share commissions with their foreign counterparts.

Previously, commissions from trade made on behalf of investors referred by foreign stockers went solely to the local brokerage houses, an act that discouraged foreign stockbrokers from participating in the country’s capital market.

“We are carrying out full-on marketing to attract the global fund managers to our market.”
Also known as portfolio investment, foreign investment accounts for less than 1 per cent of DSE’s total market capitalisation.

Banks were the foreign investors’ preferred sector, but non-bank financial institutions, power and energy, pharmaceuticals, multinationals, telecoms and IT also caught their attention.

In 2012, foreign investors bought stocks worth 13.48 billion Bangladeshi Taka while sold shares worth 5.55 billion Bangladeshi Taka.

 

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