Foreign fund-flow in stocks turns around

Net foreign fund-flow in stocks turned around in January after remaining negative in the past three months as overseas investors were putting fresh funds after the national elections.

Market analysts said peaceful holding of election has boosted the confidence level of the overseas investors. “So the market is starting to reflect that.”

A stable political situation after the elections, the high growth of operating profits of most listed banks, coupled with the securities regulator's positive move on margin rules, prompted the investors to take fresh position on stocks, said a leading broker.

The overseas investors bought shares worth Tk 4.95 billion and sold stocks of Tk 3.20 billion, to take their net investment to Tk 1.75 billion in January, according to statistics from the Dhaka Stock Exchange (DSE).

In December, 2018, the overseas investors collected shares worth Tk 2.46 billion, but sold shares worth Tk 3.48 billion, resulting in their net position negative by Tk 1.01 billion, the DSE data shows.

The net foreign investment in the DSE was also negative in October (Tk 2.01 billion) and November (Tk 225 million).

In 2018, net foreign funds in stocks were in the negative Tk 5.93 billion as nine months out of 12 were in the negative territory. The overseas investors bought shares worth Tk 44.96 billion and sold shares worth Tk 50.89 billion in 2018.

Khairul Bashar Abu Taher Mohammed, secretary general of Bangladesh Merchant Bankers Association, said the overseas investors started to make fresh investments after the national elections held peacefully on December 30, 2018.

He expressed optimism that this year would be a positive one for the stock market if the upward movement continues and it gets policy support from the central bank.

The prime index of the DSE fell 859 points or 14 per cent to close the year at 5,385 in 2018.

However, DSEX, the prime index of the DSE, recovered 436 points or 8.10 per cent in January, the first month of 2019.

"Foreign investors are very smart -- they always invest in the capital market when the share prices are on the decline," said a local stockbroker, who deals with foreign investors.

He noted that foreign investors may continue to invest in stocks in the coming months in anticipation of steady economic growth coupled with discounted rate of many fundamental stocks.

The high GDP (Gross Domestic Product) growth, cool inflation and rising private sector credit growth lured in overseas investors, he added.

However, an analyst said, it is too early to say whether the foreign investors continue their investment as depreciation of the taka against the US dollar remain a major concern.

Banks shares were the top choice of foreign investors, who also seemed interested in power and energy, non-banking financial institutions, telecom, pharmaceuticals, multinational companies and IT companies.

Also known as portfolio investment, foreign investment accounts for less than 2.0 per cent of the premier bourse's total market capitalisation, which stood at Tk 4156 billion as of Sunday.

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