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Net foreign fund in stocks remains negative for sixth straight month

Babul Barman | Published: September 02, 2019 10:13:41 | Updated: September 03, 2019 11:33:55


Net foreign investment in Dhaka Stock Exchange (DSE) remained negative for the sixth straight month in August as the overseas investors continued to pull out their fund amid lack of confidence.

Market analysts said the foreign investors are selling off their shares due to the lack of confidence, depreciation of local currency against the US dollar and concern over the country's financial sector.

The telecom regulator's strict stance towards Grameenphone (GP) coupled with the government move to liquidate People's Leasing and Financial Services also dampened the foreign investors' confidence, said a leading broker.

In August, the foreign investors bought shares worth nearly Tk 1.77 billion while they sold Tk 2.79 billion worth of shares, taking the net position of negative Tk 1.02 billion, according to the DSE data.

In July, the net foreign investment was negative Tk 1.65 billion as they purchased shares worth Tk 3.09 billion and sold shares worth Tk 4.74 billion, the DSE data showed.

The net foreign investment in DSE was also negative Tk 1.24 billion in March, Tk 1.54 billion in April, Tk 652 million in May and Tk 105 million in June this year.

A local stockbroker, who deals with foreign investors, said a harsh decision on Grameenphone, the largest listed company of the DSE, by the telecom regulator ultimately affected the whole stock market.

The telecom regulator's move to declare GP a significant market power (SMP) in February this year has played a huge role in dampening the confidence of foreign investors, he added.

As an SMP, higher charges will be applied on GP, which will squeeze the business growth of the country's leading mobile phone operator.

The EPS of GP dropped to Tk 7.07 from 7.70 in the second quarter of this year. Its half yearly interim dividend dropped to 90 per cent from 125 per cent a year earlier.

In the last five months since April 01, GP's stocks plunged nearly 26 per cent or Tk 107 each to close at one year low at Tk 310 on Sunday.

The depreciation of local currency against the US dollar was another reason for withdrawal of funds by the foreign investors, he mentioned. 

DSEX, the benchmark index of the premier bourse, also eroded 1,174 points or 19 per cent in the past eight months of 2019.

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

Also known as portfolio investment, foreign investors' highest stakes in the JMI Syringes & Medical Devices - 50.23 per cent, followed by Olympic Industries with 44.16 per cent, Delta Brac Housing Finance - 43.29 per cent, Beximco Pharma 40.79 per cent and BRAC Bank 40.69 per cent and as of July 31, 2019, the DSE data showed.

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.

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