Home ›› 30 Dec 2022 ›› Front
In a surprising incident, American investors withdrew a chunk of their funds from the Bangladeshi stock market in the months following the market regulator’s roadshow in the United States of America last year.
The US portfolio investment stood at $799.15 million at the end of FY22, down 21.38 per cent from the previous fiscal year.
The Bangladesh Securities and Exchange Commission (BSEC) organised a week-long roadshow in the US in the first month of the 2021–22 fiscal year as part of its efforts to attract foreign investors and non-resident Bangladeshis to the country’s stock market.
The roadshow titled “The Rise of the Bengal Tiger: Potentials of Trade and Investment in Bangladesh” was held in four cities in the United States – New York, Washington DC, Los Angeles, and San Francisco.
The stock market regulator’s initiatives, such as roadshows in various countries to bring in investments, appear to have produced no significant positive outcome, market insiders said.
The events were broadcast on the BSEC’s Facebook page.
When the camera panned to the audience, most seemed known faces from Bangladesh. Only at the roadshow held at Silicon Valley did the target audience show up.
Speaking to The Business Post, Faruq Ahmed Siddiqi, a former chairman of the BSEC, said foreigners do not invest at anyone’s request or order.
“They research and invest. At the same time, they invest considering the country’s policy, system, and other matters.”
He also said attracting investors and holding roadshows are not the job of the BSEC. “Its job is to regulate the market and ensure fair play.”
Faruq added that the roadshows could be organised by stock exchanges or other stakeholders.
He also stated that foreign investors began selling shares at the beginning of the year to avoid losses from a possible exchange rate correction as a result of the Russia-Ukraine conflict.
According to the Bangladesh Bank data, the United States-based investors accounted for about $800 million in portfolio investments in Bangladesh’s stock market in June this year, which was 53 per cent of the total foreign investments.
The data showed that the balance of foreign investments in the country’s capital market plunged to $1,506 million in the financial year 2021–22 from $1,908 million in FY21.
Of the amount, the US-based investors had $800 million in June 2022, which was 21.38 per cent lower than $1,016 million at the end of June last year.
“Even if the roadshows attract investors, it will not happen immediately. Moreover, they will analyse the potential of our companies before investing. It is a long-term process,” Mohammad Rezaul Karim, spokesperson for the BSEC, told The Business Post on Thursday.
Foreign investors began selling shares at the beginning of the year to avoid losses from a possible exchange rate correction in the aftermath of the Russia-Ukraine war, he said.
The US Federal Reserve recently raised its main interest rate by 75 basis points – the biggest increase since 1994 – to a range of 1.5-1.75 per cent to tame inflation.
As American inflation hit 8.6 per cent, a 40-year high, the US Federal Reserve went for a massive hike, the third since March, and it created negative impacts on portfolio investments in Bangladesh’s capital market.
Market insiders said Bangladesh’s stock market was no longer attractive to foreign investors due to multiple factors, including currency devaluation and the US rate hike.
Other countries’ portfolio investment
Luxembourg investors held the second position with $200.57 million (13.3 per cent of the total foreign investments) in the market in FY22 while the United Kingdom-based investors registered the third position with $178.17 million (11.8 per cent).
The two countries had investments of $283.28 million and $177.46 million respectively in Bangladesh’s capital market in FY21.
Singapore-based investors invested $112.48 million in FY22, which was lower than $143.9 million in FY21.
The other countries had $64.89 million in investments in the country’s stock market in FY22.
Investment from Mauritius and the Cayman Islands plummeted by 53 per cent each to $23.19 million and $14 million respectively in FY22 compared to the previous fiscal year.
Investments from Canada, the British Virgin Islands, Pakistan, and the UAE rose to $49.59 million,
$38.52 million, $14.9 million, and $11.1 million respectively in FY22 from $46.99 million, $15.15 million, $14.51
million, and $10.77 million respectively in FY21.
Net foreign portfolio investments in companies listed with the Dhaka Stock Exchange (DSE) hit the lowest in seven years in June 2022.
According to IDLC Finance’s monthly business review published in August 2022, foreign ownership stood at 3.9 per cent of the total equity market capitalisation on DSE at the end of June this year, dipping below a mark that has not been recorded since 2015.
Among all the listed companies with foreign ownership, BRAC Bank had the highest foreign shareholding of 36.1 per cent until June 2022, followed by Beximco Pharma with 28.6 per cent.
Olympic Industries ranked third with 25.7 per cent foreign ownership, followed by Renata Ltd with 22.9 per cent, Islami Bank with 20.6 per cent, Delta Brac Housing Finance Corporation with 19.3 per cent, BSRM with 17.5 per cent, Square Pharma with 13.9 per cent, Ring Shine Textiles with 10.2 per cent, and Shepherd Industries with 9.4 per cent.
Abu Ahmed, a stock market analyst and an honorary professor in the economics department at the University of Dhaka, said, “Most of the listed companies are suffering a lack of good governance. These companies’ sponsor directors often traded shares anonymously, violating the securities laws.”
“They tend to make false financial reports. In such cases, foreign investors will not invest in the capital market,” he said.
“Attracting good companies, simplifying the listing process, and bringing in the government and multinational companies will help the market grow,” he added.
