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Foreign fund in stocks sinks

It continues for seventh straight month


Babul Barman | Published: October 03, 2019 10:34:19 | Updated: October 05, 2019 10:37:10


Net foreign investment in Dhaka bourse remained negative for the seventh straight month in September 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 rattled foreign investors, they said.

In September, the overseas investors bought shares worth Tk 2.58 billion while they sold Tk 3.18 billion worth of shares, taking the net position of negative by Tk 604 million, according to the DSE data.

In August, the net foreign investment was negative by Tk 1.02 billion as they sold shares worth Tk 2.79 billion against their purchase of shares worth Tk 1.77 billion.

The net foreign investment in DSE was also negative by Tk 1.24 billion in March, Tk 1.54 billion in April, Tk 652 million in May, Tk 105 million in June and Tk 1.65 billion in July 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 to rattle 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 also fell to 90 per cent from 125 per cent a year earlier.

In the last six months since April 01, GP's stocks plunged nearly 17 per cent to close at Tk 344.70 on Wednesday, which impacted the overall market.

The DSEX has lost a cumulative 1,014 points or 17 per cent in the past eight months since January 24, when the index peaked at 5,950.

However, the government and top mobile phone operator have recently reached a consensus over settling the long disputed audit claims amicably which made investors optimistic.

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

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.

BRAC Bank with 42.99 per cent stake tops the highest foreign fund, followed by Delta Brac Housing with 42.82 per cent, Olympic Industries 39.95 per cent and Beximco Pharma 37.19 per cent as of August 31, 2019, the DSE data showed.

In 2018, net foreign funds in stocks were in the negative by 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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