The net foreign investment at the Dhaka Stock Exchange in May hit negative Tk 282 crore, highest in recent years, as foreign investors were running for an exit from the market amid chaotic situation in the country’s financial sector and political uncertainty ahead of the national elections.
The foreign investors sold shares worth Tk 624 crore in May, highest ever sell-offs in a single month by them, against their purchase of shares worth Tk 341.83 crore in the month.
The net foreign investment was also negative in April at Tk 24.7 crore.
The highest share sales by the foreign investors were in November last year when they sold shares worth Tk 617.24 crore against their buying of shares worth Tk 636.19 crore.
So far the net position of the foreign investment stood at just Tk 278.5 crore during the 2017-18 financial year while it was Tk 2,268.46 in the previous FY.
The continuous share sales in last two months by the foreign investors were fuelled by political uncertainty ahead of the national elections, bleak situation in the country’s financial sector and depreciation of the taka against the dollar, said market operators and experts.
Political uncertainty ahead of the December national elections has been a big concern for the foreign investors, they said.
Bangladesh Nationalist Party chairperson Khaleda Zia has remained in prison for more than three months and she was refused bail on several occasions while there is a cloud hanging over the BNP’s participation in the elections.
Market operators said that the media reports about the scams in the banking sector and liquidity crisis in the financial market had made the foreign investors wary about the near-term prospect of Bangladesh capital market.
The market stakeholders are disappointed with the heavy sell-offs by the foreign investors even after the finalisation of selection of the Chinese consortium of Shanghai and Shenzen stock exchanges as DSE’s strategic partner, they said.
United International University professor and stock market analyst Mohammad Musa told New Age that political uneasiness was the prime reason for the recent foreign sell-offs.
He also said that volatility in the country’s financial sector that further exposed by the profit fall in most of the banks kept investors on edge from the beginning of the year.
Former Bangladesh Merchant Bankers Association president Saidur Rahman said that the foreign investors went for heavy share sales to book profit.
He also said that foreigners might be observing the market ahead of the June 7 national budget declaration and the December national elections.
A senior DSE official said that depreciation of the taka against the dollar made the foreign investors concerned about injecting fund in the market as their profitability reduced due to the depreciation.
Moreover, foreigners observed that the market did not react to the news that a Chinese consortium signed share purchase agreement with the DSE, he said.
DSEX, the key index of DSE, shed 395 points in May, while it had gained 141.78 points in April. During the month of May, the DSEX witnessed just three positive sessions out of 21 trading sessions.
Because of heavy selling by foreign investors share prices of a number of heavyweight companies like Grameenphone, Square Pharma, BRAC Bank and City Bank plunged in May.
The net overseas investment at the country’s premier bourse was Tk 156.70 crore in March and negative Tk 94.72 crore in February.
In April, foreigners bought shares worth Tk 503 crore against their sales of shares worth Tk 528 crore.
The total foreign turnover on the bourse also declined to Tk 967 crore in May compared with that of Tk 1,031 crore in the previous month.
Market operators said that the foreign investors bought shares when the market was bearish to maximise their gains.
The net investment by the foreign investors at the country’s premier bourse surged to Tk 1,704.94 crore in 2017 from Tk 1,340.70 crore in 2016.
Overseas investors’ turnover at the bourse was Tk 3,362.11 crore in 2010, Tk 1,904.19 crore in 2011, Tk 2,355.23 crore in 2012, Tk 2,834.90 crore in 2013, Tk 6,600.94 crore in 2014 and Tk 7,465.4 crore in 2015.
The net overseas investment at the bourse was negative Tk 767.58 crore in the year of market crash (2010).