Investors from the United States of America (USA) withdrew a chunk of their funds from Bangladesh’s stock market throughout the last three fiscal years.
The American portfolio investment stood at $629.71 million at the end of FY23, down 21.20 per cent from FY22. This investment was $799.15 million at the end of FY22, down 21.38 per cent from the previous fiscal year, according to Bangladesh Bank data.
Meanwhile, foreign portfolio investment dropped over 20 per cent year-on-year to $2.33 billion in the financial year 2022-23, from $4.5 billion in FY19.
Market insiders say the foreign portfolio investment slumped mainly due to a lack of governance, the depreciation of the Taka, and the setting of floor price.
Portfolio Investment (equity securities) stock position classified by major sectors arranged in descending order of magnitude was – Pharmaceuticals and Chemicals: $580.00 million, or 42.1 per cent, Bank, Financial Institution, Insurance and Mutual Fund: $271.15 million or 22.5 per cent and Food and Allied: $195.79 or 16.2 per cent of total investments.
At the end of June 2023, the share of portfolio investment stock classified by major countries, arranged in descending order of magnitude, was – United States of America $629.71 million, or 52.2 per cent, Luxembourg $144.94 million, or 12 per cent and United Kingdom $135.01 million or 11.2 per cent of total foreign portfolio investments.
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 Bangladesh Securities and Exchange Commission (BSEC) organized a week-long roadshow in the US in the first month of Fiscal Year 2021-22 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 to be known faces from Bangladesh. Only at the roadshow held in Silicon Valley did the target audience show up.
Speaking to The Business Post, former chairman of BSEC Faruq Ahmed Siddiqi 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.”
“Attracting investors and holding roadshows are not the jobs 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.
“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.
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.