The average price of mutual funds rose by 0.39 per cent and their net asset value (NAV) jumped by 0.31 per cent compared to the previous week, against a positive 0.92 per cent week-on-week change in the Dhaka Stock Exchange (DSE) key index.
Fund managers reported the NAV of closed-ended mutual funds for the week ending on Thursday. Based on the recently reported NAV and Sunday’s close prices, the sectoral price to NAV stood at 0.70x, according to the weekly report of BRAC EPL Stock Brokerage Ltd.
Among the asset managers, Vanguard performed the best in terms of the NAV return of its funds, gaining 0.89 per cent during the week. Meanwhile, among the 37 mutual funds, 32 of them were trading at a discount.
The market capitalisation of 37 funds stood at Tk 412 crore, while the asset under management (AUM) of the sector stood at Tk 589 crore.
The market observed buyer dominance in the majority of the sessions as investor confidence slightly rebounded owing to positive expectations after the national election, market insiders said.
Meanwhile, Dhaka stocks ended the first week of the national polls, which sparked a rally with the key index crossing the psychological threshold of the 6,300 mark after nearly four months.
Before the week of the election, Dhaka stocks ended on a flat note with lower market participation, owing to shaky confidence regarding market momentum.
The market closed in green last week. The key index, DSEX, gained 57.53 points and closed the week at 6,301.70 points. The blue-chip index DS30 gained 23.65 points and stood at 2,117.91 points. The Shariah-based index DSES gained 13.11 points and stood at 1,375.92 points.
Investors felt somewhat relieved from the prevailing concerns regarding the market’s momentum since the prevailing political uncertainties have somewhat eased down following the completion of the national election.
Meanwhile, the average market turnover in the market also surged by 37.6 per cent to Tk 549 crore as compared to Tk 399 crore in the previous week.
On Sunday, Dhaka stocks managed to stay afloat in green territory in the first session of the week, withstanding the profit-booking sell pressures from cautious investors, who were apprehensive regarding the strength of the market momentum following the recent uptrend.
DSEX inched up by 1.1 points and settled at 6,303 points as against 6,302 points in the previous trading session.
Investors were active on both sides of the trading fence, while buyers ended up on the dominant side by the end of the session as optimistic investors continued their chase to take positions in the current rallies.
Moreover, investors’ buying appetite was also concentrated on insurance sector stocks, as they were prompted by the allure of potential quick gains.
Meanwhile, the Dhaka bourse observed a marginal increase in participation as total turnover increased by 1.6 per cent to Tk 764 crore as against Tk 752 crore in the previous session.
RACE holds the highest market share of 50.2 per cent with 10 funds and AUM of Tk 29 billion. The fund manager has the lowest price/NAV ratio of 0.55x, while LR Global stands at the second lowest price/NAV ratio of 0.65x, followed by LR Global, VANGUARD, ICB AMCL, AIMS, SEML, CAPM, VIPB, and ATCP.
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 (AUM) of Bangladesh’s MF industry, operated by 54 asset management companies (AMCs), stood at $1.6 billion as of the last year.
In this context, the AUM of the Indian MF 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 MFs 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.
“But Bangladesh is lagging far behind its neighboring nations such as India in terms of the size of the mutual fund industry,” he added.
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.
Commenting on the issue, an official at the Bangladesh Securities and Exchange Commission (BSEC) said, “Mutual funds play a pivotal role in the stock market. But mutual funds in the last ten years failed to meet investor expectations.”
Professor Abu Ahmed, a capital market analyst, said, “A fund manager needs to restore investor confidence by ensuring transparency in managing funds professionally and offering healthy returns.
“The industry should be regulated painstakingly, as anomalies related to fund management have already been detected. The country’s mutual fund AUM to GDP ratio remains significantly low at 0.4 per cent. It has enough room to grow.”
