Foreign investors losing interest in MNCs

Foreign investors have been withdrawing investments in the multinational companies (MNCs) listed in the capital market by selling shares as transactions have been taking place based on floor prices for a long time, production costs have increased due to the rise in global economic instability, and dividends have reduced due to a lack of profits.

An analysis of the amounts of shares held by foreign investors in MNCs between December 2022 and November 2023 has revealed the development. The data is available on the Dhaka Stock Exchange (DSE) website.

Five of the 14 listed MNCs were at the floor price, or minimum share price set by the regulator, throughout 2023. At the floor price, basically, anyone who wants to sell shares can sell at the lowest price of the share fixed by BSEC, if any investor is interested in buying at that price.

Five companies remained at the floor price throughout the year, while shares of two companies were sold by foreign investors. One was unchanged while two increased.

Of the remaining nine MNCs, foreign investment declined in seven and increased in one while such investment remained unchanged in one.

Why the drop?

Talking to The Business Post, Debbrata Kumar Sarkar, the former chief research officer of BRAC EPL Investment Limited, said that the stability of the capital market can be measured by considering the state of foreign investment. Apart from domestic companies, foreign investors are most interested in investing in MNCs but such investment in them is decreasing nowadays.

He said the devaluation of the taka against the dollar is one of the reasons for this. Moreover, not only the investments of domestic investors are blocked due to the floor price, but the same situation is happening in the case of foreign investors as well.

Shares of MNCs like Grameenphone have been stuck at floor prices for a year. The share price of BAT Bangladesh is also similar. As a result, it can be said that foreign investment will naturally decrease in such markets, he added.

Abu Ahmed, a capital market analyst and former professor of economics at Dhaka University, said that foreigners are withdrawing investment by selling shares because the opportunity to extract profit from the capital market has decreased.

He said that if foreign investment is to be retained in the capital market, separate rules and regulations should be made only for them. The rules should not be the same for ordinary investors and foreign investors.

Regarding MNCs not being able to retain foreign investment, Ahmed said the global situation is largely responsible for this. The Russia-Ukraine war, devaluation of the taka against the dollar, decrease in profits due to an increase in production costs, and tendency to divert investments due to a lack of profit potential as long-term floor prices have negatively affected the sector.

Status of the listed MNCs

In 2022, Heidelberg Cement Bangladesh Ltd’s 0.28 per cent of its total shares was held by foreign investors, while the company's share price peaked at Tk 1,820. The company's peak price in 2023 was Tk 1,930, up 6 per cent from the previous year, but as of November 2023, foreigners had sold shares and brought it down to 0.04 per cent.

The situation is similar with LafargeHolcim Bangladesh Limited, another company in the cement sector. Foreigners held 0.78 per cent of the total shares in the company in December 2022. It came down to 0.70 per cent in November 2023.

At least 0.29 per cent of Unilever Consumer Care Limited's total shares were held by foreign investors in December 2022. It came down to 0.11 per cent in November 2023.

Foreign investors held 4.52 per cent and 1.97 per cent of the total shares in Singer Bangladesh Limited and Marico Bangladesh Limited, two listed MNCs, respectively, in December 2022.

But November 2023 saw the shareholdings of foreign investors at ‍3.90 per cent and 1.82 per cent, respectively, in these two MNCs.

The same thing happened at Reckitt Benckiser (Bangladesh) PLC and Grameenphone Ltd as well. Foreign investors held 2.82 per cent and 2.13 per cent of the total shares of the two companies, respectively. By November 2023, it came down to 2.78 per cent and 1.59 per cent.

British American Tobacco Bangladesh is the most talked-about dividend-paying company in the capital market, whose shares were stuck at the floor price in 2023. In this situation, foreigners sold their shares in the company and reduced partnerships.

In December 2022, 6.39 per cent of BAT Bangladesh’s total shares were held by foreigners. By November 2023, it came down to 6.07 per cent.

The country's popular shoe manufacturer, Bata Shoe Company (Bangladesh) Limited, also could not attract and retain foreigners during this period.

Foreigners held a 1.36 per cent stake in the company in December 2022. However, their participation declined by 0.01 per cent to 1.35 per cent in November 2023.

Meanwhile, foreign investors held 13.18 per cent and 28.88 per cent of the total shares, respectively, of Square Pharmaceuticals and Beximco Pharmaceuticals in December 2022. In November 2023, those increased to 13.56 per cent and 28.91 per cent, respectively.

RAK Ceramics (Bangladesh) Limited was able to attract the highest number of foreign investors during this period. The company had no foreign investment as of December 2022. But by November 2023, it stood at 0.23 per cent.

In Berger Paints Bangladesh Ltd and Walton Hi-Tech Industries, however, there was no change in foreign investor participation during the period.

In December 2022, foreign investors held 0.20 per cent and 0.10 per cent of the total shares, respectively, of Berger Paints Bangladesh Ltd and Walton Hi-Tech Industries PLC. Foreigners had the same participation in November 2023.