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Net foreign fund in stocks slumps

Babul Barman | Published: May 31, 2019 10:50:51 | Updated: June 06, 2019 14:18:43


File Photo (Collected)

Net foreign investment in the Dhaka Stock Exchange (DSE) remained negative for the three consecutive months in May as overseas investors continued their selling spree.

Foreign investors collected shares worth Tk 3.20 billion but sold Tk 3.84 billion worth of shares last month.

As a result, net position of portfolio investors was negative by Tk 651 million, according to statistics available with the DSE.

In April, the overseas investors' net position was also negative by Tk 1.54 billion, as they purchased shares worth Tk 2.57 billion and sold shares worth Tk 4.11 billion, the DSE data shows.

In March, net foreign investment was also negative by Tk 1.23 billion, as they bought shares worth Tk 3.75 billion and sold shares worth Tk 4.98 billion.

Market analysts said the foreign investors sold shares in tandem with the local investors amid lack of confidence and dearth of quality stocks.

Foreign investors look for companies that performed well, maintain good governance and have growth potential.

"But we failed to provide them a long list of such companies," said an analyst at a leading brokerage firm.

He noted that researchers can recommend names of only 30 to 35 companies, out of more than 300 listed, to meet foreign investors' criteria.

He emphasised to bring quality stocks to attract foreign investors as well as increase the depth of the country's capital market.

A local stockbroker, who deals with foreign investors, said depreciation of local currency against the US dollar was another reason for withdrawal of funds by the foreign investors.

However, he said, the foreign investors are not the market drivers of the country's capital market as foreign investment makes up less than 2.0 per cent of DSE's total market cap and is the lowest among South Asian countries.

Stock indices also took a big hit in during the three months since March. DSEX, the benchmark index of the premier bourse, plunged 334 points or 5.84 per cent since March 1 to May 30, 2019.

However, month-on-month, DSEX added 175 points or 3.36 per cent in May.

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.

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 has the highest stake of foreign investors with 42.85 per cent, followed by Delta Brac Housing Finance - 42.81 per cent and Olympic Industries 39.88 per cent as of April 30, 2019, the DSE data shows.

Also known as portfolio investment, foreign investment accounts for less than 2.0 per cent of the DSE's total market cap, which stood at Tk 3,941 billion as of Thursday.

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