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The Financial Express

Year-end capital market

Net foreign funds in stocks rise 27pc

FE Report | Published: December 29, 2017 00:31:52 | Updated: January 01, 2018 10:35:05


Net foreign funds in stocks rise 27pc

The net foreign investment in stocks marked 27 per cent rise year-on-year in 2017 as overseas investors showed their confidence in the capital market of Bangladesh.

Analysts said the favourable macroeconomic indicators coupled with political stability boosted the foreign investors' confidence to park fresh funds in the securities here.

They said the steadily growing economy and mature market behaviour after the demutualisation of bourses encouraged foreign investors to put their money in the stocks.

Between January and December 2017, the overseas investors bought shares worth Tk 65.76 billion while they sold stocks worth Tk 48.71 billion to take their net investment to Tk 17.05 billion, according to statistics available from the Dhaka Stock Exchange (DSE).

In 2016, the net foreign investment was Tk 13.41 billion as the foreign investors bought shares worth Tk 50.57 billion and sold shares worth Tk 37.16 billion.

Foreign fund managers see the Bangladesh stock market as one with potential among the emerging markets due to positive macroeconomic indicators and a stable political scenario, said a local stockbroker who deals with foreign investors.

"Lucrative dividends declared by multinational companies also encouraged the investors to park money in the securities," he said.

Analysing the country's economic factors, he noted that declining interest rate on banks' deposit, overall market liquidity and companies' earnings were very favourable for foreign equity investors.

Foreign investors are mainly interested in buying bank shares as many bank stocks' prices more than doubled during the year.

For example, the foreign holdings of City Bank increased to 15.41 per cent in December 2017, up from 6.10 per cent in December last year.

The share holdings of foreign investors in other private banks are also increasing, giving a boost to the prices of banking stocks.

During the year 2017, DSEX, the prime index of the DSE, registered a cumulative gain of 1208 points or 24 per cent. The year-long rally was largely driven by financial stocks, especially baking issues.

The daily turnover, an important gauge, stood at Tk 8.75 billion on an average in 2017.

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

Also known as portfolio investment, foreign investment accounted for less than 2.0 per cent of the premier bourse's total market capitalisation, which stood at Tk 4,229 billion as of Thursday.

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