Foreign investment in stocks on the rise
The stock market is witnessing a rise in foreign investments as the dollar market in Bangladesh started to become stable after months of volatility.
According to Dhaka Stock Exchange (DSE) data, foreign investors bought more shares than they sold in April this year, which increased their net investment in the market to Tk81 crore compared to just Tk3 crore in March.
After a long hiatus, foreign investors are now buying more shares than they are selling. In April 2023, they bought shares worth Tk131 crore, against which they sold shares worth Tk50 crore.
In April 2022, the foreign share trading amount stood at Tk308 crore, out of which, Tk64 crore worth of shares were bought while Tk244 crore were sold.
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Richard D' Rozario, the managing director of Global Securities Ltd, has been elected president of the DSE Brokers Association of Bangladesh (DBA), a platform for trading right entitlement certificate (TREC) holders of the premier bourse.
Richard told The Business Standard (TBS), "Foreign capital withdrawals increased after the volatility of the dollar price began, which had an impact on the stock market. Now that the dollar situation is somewhat stable, they [investors] are coming back to the capital market."
"The confidence among foreign investors about the country's economy and stock market is increasing now. They are boosting investment in the hope of getting good returns," he added.
Most foreign investors pulled out of the stock market when the taka started to slide against the US dollar followed by the Russia-Ukraine war.
The confidence among foreign investors about the country's economy and stock market is increasing now. They are boosting investment in the hope of getting good returns.
In addition, the US Federal interest rate was hiked, which pulled the greenback towards the US, leading to a decrease in foreign investment in Bangladesh as in other countries of the world.
Moreover, in the last quarter of 2022, most of the listed companies could not do good business due to the increase in the prices of raw materials in the global market.
But the situation changed and the business of multinational companies improved in the January-March quarter of 2023. Multinational companies (MNCs) generally have more foreign investment than local companies.
According to DSE data, foreign investors sold more shares than they bought in the first two months of this year. But in March and April, they bought more shares than they sold off.
Hence, the net investment of foreign investors in the market has been positive for two consecutive months this year.
It is worthwhile to note that the net foreign investment in the capital market was negative for five consecutive years till 2022.
Ashequr Rahman, the managing director of Midway Securities, believes that the participation of foreign investors in the capital market is increasing as they are becoming more positive about the country's economy and business.
"Foreigners always invest based on the predictability of shares. There was great uncertainty in the country's economy and business over the rising value of the dollar, which is now somewhat stable," he added.
According to DSE data, the total turnover at the DSE stood at Tk10,296 crore this April, where the key index rose for 12 days and declined for six days.
A senior official of the Bangladesh Securities and Exchange Commission (BSEC) told TBS, "Expatriates and foreigners are slowly dialling up their investments in Bangladesh due to good branding of the country among various others."
"Since the price-earnings (PE) ratio is low in our market, there is an opportunity for investors to get more returns from here," he added.
Bangladesh Merchant Bankers Association (BMBA) President Sayadur Rahman said, "Since the pandemic, the tendency of foreign investors to withdraw capital from the stock market has increased. Later, when the dollar crisis arose, they moved to the sidelines."
"Now the dollar is fairly stable. The PE ratio of the market is lower than that of any neighbouring country. Some of the fundamental companies' share prices are also low. As a result, foreign investors are turning to Bangladesh's capital market," he added.
It is to be noted that there are foreign investments in Brac Bank, Beximco Pharmaceuticals, Navana Pharmaceuticals, Renata, Olympic Industries, Islami Bank, Delta Brac Housing, BSRM, Square Pharmaceuticals and Shepherd Industries companies.
As of April, foreign investment in Brac Bank is 33.4% of the total shares. Beximco Pharmaceuticals has 28.95%, Navana Pharmaceuticals 27.73%, Renata 22.73%, and Olympic Industries has 23.25%.
