The foreign portfolio investors continued making an exit as they withdrew Tk 1,399 crore from the Bangladesh capital market in the last financial year 2019-20, the highest-ever pull-out amid woes in the country’s financial sector including the stock market, government’s apathy towards the market and global pandemic crisis.
The net foreign investment at the country’s premier bourse stood at Tk 1,399 crore negative in FY20 against Tk 183.70 crore negative in FY19, according to Dhaka Stock Exchange data.
The foreign investors sold shares worth Tk 5,542.96 crore in FY20 against their purchase of shares worth Tk 4,144 crore.
In the last fiscal year, the foreign investment was negative in all the months except May that had only one trading day while in FY19 it was positive only in three months, which reflected the intensity of withdrawal of funds by the foreign investors in the last two years.
The government announced general holidays from March 29 to May 30 to check the spread of coronavirus in the country, and the country’s two stock exchanges had kept trading shut in the period. Trading on the bourses resumed on May 31.
The country first detected coronavirus cases on March 8 and death case on March 18 and the market went into a tailspin.
The foreigners increased share sales from January this year when the pandemic, which began first in China, started spreading to the other countries across the globe.
Before the pandemic crisis, the foreign investors triggered share sales for the bleak situation in the country’s financial sector, and volatility on the capital market, said market operators and experts.
They said that the country’s financial sector hit the headlines throughout the fiscal year due to scams, irregularities and for huge amount of defaulted loans that kept the investors in limbo.
In line with the previous fiscal year, the market was very volatile in the last fiscal year that hit the investors’ confidence further, they said.
Widespread anomalies on the market, poor regulatory control, approval of fundamentally weak initial public offerings and government’s apathy towards the market continued to ignite sell-offs of shares, they said.
Moreover, the depreciation of the local currency against the US dollar was another reason for the share sales by the foreign investors.
In addition to that, the developed markets gave better returns to the investors than the frontier ones like Bangladesh that was another reason for the foreign investment exodus, market experts said.
IDLC Investment managing director Md Moniruzzaman told New Age that the developed markets including the US market outperformed in the period compared with the poor performance of the frontier markets that caused fund diversion.
He also said that very poor performances by the country’s macroeconomic indicators especially export and import also prompted the foreign investors to withdraw funds.
Besides, the single-digit lending rate introduced by the government for all industries including SMEs that hit BRAC Bank hard, and a tussle between Grameenphone and the telecom regulator over audit claims also upset the foreign investors, he said.
Besides, the floor price system imposed by the Bangladesh Securities and Exchange Commission on March 19 to check free fall in share prices amid the pandemic irked the foreign investors, resulting in heavy foreign sales in June, market experts said.
They said that the foreign investors continued pulling funds out of the DSE amid a prolonged bearish trend at the market.
The key index, DSEX, shed 1,432.53 points over FY20 to close at 3,989.09 points on June 30, 2020 from 5,421.62 points on the closing day of FY19.
The average daily turnover at the bourse also plunged to Tk 381.61 crore in FY20 against Tk 614 crore in FY19.
The foreign investors sold shares worth Tk 4,201.51 crore in FY19 against their purchase of shares worth Tk 4,017.81 crore in the year.
The net investment by the foreign investors at the country’s premier bourse set an all-time high at Tk 2,493.57 crore in the FY 2013-14.
