Net foreign investment remains negative for fifth straight month

Net foreign portfolio investment in Dhaka Stock Exchange (DSE) remained negative for the fifth consecutive month in July due to higher outflow of equity fund.

Market analysts said foreign investors continued to pull their funds from equities like local investors amid concerns over the country's financial sector, depreciation of taka against dollar and dearth of quality stocks.

The government's move to liquidate People's Leasing and Financial Services Limited, imposition of penalty tax on listed companies and the ongoing tussle between Grameenphone and the telecom regulator also dampened the foreign buyers' confidence, they added.

In July, foreign investors bought shares worth Tk 3.09 billion and sold off shares worth Tk 4.74 billion, forcing the net position to reach a negative Tk 1.65 billion, according to the DSE data.

In June, the net foreign investment was a negative Tk 1.05 billion, as they purchased shares worth Tk 2.95 billion and sold off shares worth Tk 3.05 billion.

The net foreign investment in DSE was a negative Tk 1.24 billion in March, a negative Tk 1.54 billion in April and a negative Tk 652 million in May.

A local stockbroker, who deals with foreign investors, said the overseas investors look for companies that maintain good governance, generate good profits, have growth potential and announce healthy dividends.

"But we cannot offer them a long list of such companies."

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

He emphasised the need to bring quality stocks to the market and increase the depth of the market in order to attract more foreign investment.

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

However, he said, the foreign investors are not the market drivers, as they account for less than 2.0 per cent of DSE's total market capitalisation, also the lowest among South Asian countries.

In the last seven months (January-July) of 2019, DSEX, the benchmark index of the premier bourse, also slumped 247 points or 4.58 per cent.

In 2018, the net foreign funds in stocks were a negative Tk 5.93 billion, as the overseas investors bought shares worth Tk 44.96 billion and sold off shares worth Tk 50.89 billion.

Shares of banks and financial institutions were the top choice for foreign buyers, who also seemed interested in power and energy sector, telecoms, pharmaceuticals, multinational companies and IT companies.

The foreign investors held the highest stake in the Delta Brac Housing Finance (42.77 per cent), followed by BRAC Bank (42.52 per cent) and Olympic Industries (40.19 per cent) as of June 30, 2019, the DSE data show.

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