Foreign investments

Foreign investment on DSE shrinks to Tk 9,976 crore

A file photo shows investors watching stock price movements on a computer screen at a brokerage in the capital Dhaka. Total foreign investment in the Dhaka Stock Exchange fell to Tk 9,976 crore, or 2.19% of the exchange’s total market capitalization, in May. — New Age Photo

Total foreign investment on the Dhaka Stock Exchange fell to Tk 9,976 crore, or 2.19% of the exchange’s total market capitalization, as foreign investors withdrew around Tk 7,000 crore from the market since 2018.

Of the total market capitalization at DSE, managing sponsors of listed companies hold shares worth Tk 1,96,388.21 crore or 43.11%, institutional investors Tk 91,656.94 crore or 20.12 %, government Tk 14,805.42 crore or 3.25%, foreign investors Tk 9,976.57 crore or 2.19%, and general investors Tk 1,42,724.25 crore or 31.33%, depending on the EHR data in May.

The total market cap at DSE was Tk 5,16,765.32 crore as of May 31.

Total foreign ownership represented approximately 7% of DSE’s market capitalization at the end of 2017.

Foreign investors withdrew Tk 2,648 crore in 2021, Tk 2,606 crore in 2020, Tk 478 crore in 2019 and Tk 593 crore in 2018 from the market.

Also, they continued to sell shares in 2022 by withdrawing around Tk 700 crore from the market in the past five months ending in May.

Before the large-scale exodus of foreign funds in recent years, the highest overseas net sales were Tka 676.58 crore in 2010, DSE officials said.

Stock market investors, including foreign ones, are grappling with a variety of issues including rising inflation, continued depreciation of the taka against the US dollar, concerns over external debts and disruption of the global supply chain. due to the Russian-Ukrainian war.

Volatility and high risks in the market could tempt foreigners to put their funds in safe havens, market operators said.

As the United States and other countries have repeatedly raised policy rates, foreign investors have found it lucrative to invest in those countries, they said.

The continued outflow of foreign funds weighed heavily on the Dhaka stock exchange, they said.

Net foreign investment in the DSE has been negative since 2018 for a variety of reasons, including volatility in the country’s financial market, cap on interest rates on bank loans, restrictions on price floors, and better trending markets. developed.

In 2018 and 2019, foreign investors opted for sharp selloffs amid concerns over national elections and various anomalies in financial sectors.

The Covid pandemic in 2020 hit the stock market hard and forced the Bangladesh Securities and Exchange Commission to impose the price floor system on May 19 that year.

Market operators said the restriction irritated foreign investors and prompted them to sell shares.

Due to rising inflation and currency volatility since 2020, foreign investors have found it appropriate to transfer funds to other countries.

Allegations of fabricating financial documents, manipulating stock prices and approving fundamentally weak initial public offerings were also the other main reasons for the exodus of foreign funds, market operators said.