Net foreign fund drops further at Dhaka bourse

FT ONLINE

The net foreign fund in the Dhaka Stock Exchange (DSE) remained negative in July, the fourth straight month, as the foreign investors remained reluctant to put fresh stakes.

Analysts said overseas investment in the DSE turned negative further as foreign fund managers reluctant to put fresh stakes amid fears over political uncertainty ahead of the national election by the year-end.

The overseas investors collected shares worth Tk 4.12 billion but sold shares worth Tk 4.44 billion last month, resulting in their net position negative by Tk 327 million, according to statistics available with the DSE.

In June, the foreign investors' net position was negative Tk 2.06 billion, as they purchased shares worth Tk 4.46 billion and sold shares worth Tk 6.53 billion, the DSE data shows.

The net foreign investment was also negative Tk 247 million in April and Tk 2.82 billion in May.

"The political uncertainty ahead of national election coupled with depreciation of the taka against the US dollar kept the foreign investors at bay," said an analyst at a leading brokerage firm.

He noted that depreciation of the taka against the US dollar also made the foreign investors concerned about injecting fresh fund in the market as their profitability reduced due to the depreciation.

The banking sector scams and liquidity crisis in the financial market made the local and foreign investors remained wary, he added.

However, he said, the foreign investors were not the market drivers as their investment makes up less than 2.0 per cent of DSE's total market-cap.

DSEX, the prime index of the Dhaka Stock Exchange (DSE), eroded about 103 points or 0.20 per cent in July.

Foreign investors' preferred sectors were banking, non-bank financial institutions, power and energy, pharmaceuticals, telecoms and IT, said a merchant banker.

They also focus on some multinational companies those announce healthy dividends and generate good profits, he added.

In 2017, the overseas investors bought shares worth Tk 65.76 billion while they offloaded stocks worth Tk 48.71 billion to take their net investment to Tk 17.05 billion, the DSE data shows.

In 2016, the net foreign investment was Tk 13.41 billion, as the foreign investors collected shares worth Tk 50.57 billion and sold shares worth Tk 37.16 billion.