Stocks in the country are cheapest in the world, but yet to make any appeal among local and foreign investors.
Bangladesh is the most undervalued stock market and China the most overvalued market in the world, according to the latest valuations of Chicago-based leading investment research provider Morningstar.
The country’s stock markets have become cheaper following the widespread volatility in this year.
“Its is lack of confidence that drives prices down, making them cheaper,” said Mirza Azizul Islam, former finance adviser to the caretaker government.
“And frequent complaints of manipulation and weak regulatory framework holds back to restore confidence,” he said adding that incompetent legal system is another reason for losing appetite for stocks, though it is recently improved as special tribunal begins to function.
The cheaper price of stocks so far failed to woo foreign fund managers as foreign investment makes up only around 2% of total investment at Dhaka Stock Exchange, which is the lowest in South Asia region.
“The current investment environment is yet to create any fascination among local investors, let alone foreign investors,” said Aziz who is also a former chairman of Bangladesh Securities and Exchange Commission.
However, he said foreign investment is very risky in a retail dominated market. Because, most retailers having lack of investing knowledge and herd behaviour always follow foreign investors who may pull out fund from the market any time, he added. “So, I am not particularity anxious about wooing foreign investment.”
Morningstar Quantitative Valuation coverage published in June this year reveals that Bangladesh is the most undervalued stock market in the world, followed by other markets in the nearby regions; Iraq, Qatar and Saudi Arabia.
At present, the DSE benchmark index, DSEX, is hovering around 4,600-mark and in June when Morningstar made calculation the index hovered around 4,500-mark, indicating that the market has become more cheaper.
Morningstar’s quantitative equity research covers 30,000 companies globally. The calculation uses Morningstar’s Fair Value Estimate for stocks, which measures the ratio of a company’s quantitative fair value estimate to its last market close price.
Alongside China, Ireland, Russia and Japan look the most overvalued stock markets, it said.
Source: Dhaka Tribune
