Asset managers for Islamic mutual funds in the country have been showing immense interest in the domestic pharmaceutical sector, thanks to its potential growth prospects and stability.
Pharmaceuticals and chemicals are the most prominent sectors in terms of holdings received from asset managers, with its five companies securing positions among the top ten stocks in asset managers’ portfolios.
The companies are Renata, Square Pharma, Marico Bangladesh, Beacon Pharma and Beximco Pharma.
Other sectors’ top companies are Grameenphone, LafargeHolcim Bangladesh Limited (LHBL), Bangladesh Submarine Cable Company Limited (BSCCL), Olympic Industries, and Beximco Sukuk.
The pharma companies logged healthy profits over the last decade, while the outbreak of the coronavirus pandemic led to a significant boost to their earnings due to the widespread use of hygiene products.
Bangladesh’s pharmaceutical products are being exported to 199 countries, generating over $175 million in turnover. The sector meets 97 per cent of domestic demand, which is worth about $3.5 billion, as per industry data.
The portfolio investment of asset managers was Tk 41 crore in Renata as of September, 2023, the highest for a single company, as per a report produced by EBL Securities, a leading stockbroker.
The second-highest Tk 40.5 crore AMCs’ investment was put in Square Pharma, followed by Tk 36 crore in Grameenphone, Tk 27 crore in Marico, Tk 23 crore in Beacon Pharma, and Tk 18 crore LHBL.
The total assets under management (AuM) of Islamic mutual funds stand at Tk 770 crore. Out of this, the AuM of closed-end Islamic funds is Tk 369 crore, while AuM of open-end Islamic mutual funds during the same period is Tk 401 crore.
Of this fund, Tk 181 crore invested in the pharmaceutical sector.
The Islamic mutual fund industry in Bangladesh started its journey with the launch of the country’s first Islamic mutual fund, named “IFIL Islamic Mutual Fund-1,” a closed-end fund floated by ICB Asset Management Company Limited in 2010.
Subsequently, in 2016, Asian Tiger Capital Partners Investments Limited launched Bangladesh’s first open-end Islamic mutual fund named “ATC Shariah Unit Fund,” according to the EBL Securities data.
In the open-end segment, ICB Asset Management Company Ltd leads the industry with a total AuM of Tk 69 crore, which accounts for around 17.35 per cent of the total Islamic open-end AuM, followed by Capitec Asset Management Ltd, which has a market share of 15.96 per cent with Tk 64 crore under management.
Meanwhile, in terms of the closed-end segment, the market is dominated by Strategic Equity Management Ltd (SEML), with a total AuM of Tk 101 crore, around 27.55 per cent of the total Islamic closed-end AuM, followed by LR Global AMC, which has a market share of 27.3 per cent with a total AUM of Tk 101 crore.
Thirty out of 37 mutual funds were trading at a discount. The market capitalisation of 37 funds stood at Tk 35.7 billion, while asset under management (AUM) of the sector stood at Tk 54.2 billion.
RACE holds the highest market share of 49.2 per cent with 10 funds and an AUM of Tk 26.7 billion.
Speaking to The Business Post, Managing Director and CEO at VIPB Asset Management Company Shahidul Islam said, “Companies in the pharmaceutical sector have witnessed amazing returns in recent years, with the pandemic paving the way as they made record profits in the last two years.
He attributed the higher growth of pharmaceutical firms to the rising demand for hygiene drugs in both the local and foreign markets due to the culture shock during the pandemic. The sector has had so much potential for a long time.
As a result, AMCs are very focused in the sector.
The ratio of Bangladesh’s mutual fund assets to its gross domestic product (GDP) is only 0.4 per cent, the lowest among the peer countries, representing the sector’s exponential growth potential, which still remains untapped.
The assets under management of Bangladesh’s MF industry, operated by 65 asset management companies (AMCs), stood at $1.6 billion as of last year.
In this context, the AUM of the Indian mutual fund industry operated by 43 AMCs was $472 billion during the same period. AUM refers to the total market value of investments that fund managers make on behalf of their clients.
Analysts and stock market insiders have attributed a lack of investable funds and less confidence to the unpopularity of mutual funds in Bangladesh.
“Mutual funds in developed countries are one of the most popular investment tools. In the USA, the size of the industry is larger than its economy,” said a stock market analyst.
The current ratio of mutual fund assets to Bangladesh’s GDP is only 0.4 per cent, which is 16.2 per cent in India, followed by 54 per cent in Malaysia, 1.3 per cent in Pakistan, 28.3 per cent in Thailand, 6.6 per cent in Vietnam, 195.7 per cent in the USA, and 180.8 per cent in Canada.
