Portfolio investment in DSE jumps 120 per cent in May

Net foreign investment in stocks marked a 120 per cent rise on month-on-month basis in May, after hitting eight months low in April, as overseas investors invested more funds in stocks, anticipating positive market scenario.

Market insiders said the favourable macroeconomic indicators, including declining interest rate coupled with political calm boosted foreign investors' confidence to inject fresh funds in the securities.

Foreign investors bought shares worth Tk 5.25 billion and sold stocks of Tk 3.72 billion to take their net investment to Tk 1.53 billion in May this year, according to statistics from the Dhaka Stock Exchange (DSE).

In April, net investment by overseas investors was only Tk 700 million, as they bought shares worth Tk 4.69 billion and sold stocks worth Tk 3.98 billion. The April's net portfolio investment in DSE was also the lowest in the eight months since August 2016.

A DSE official said foreign investment in the prime bourse increased in May and the trend will may continue in the coming days too as market offers discounted rate of many fundamental stocks.

"After hitting eight months low in April, the foreign investors came back in May, taking the advantage of lucrative price level of many fundamental stocks," he said.

"Foreign fund managers see the Bangladesh stockmarket 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.

Md Ashaduzaman Riadh, strategic portfolio manager of LankaBangla Securities, said, "Sustained revival of the foreign investors' interest was backed by the rising corporate profitability and increasing consumption level of Bangladesh".

Mr Riadh said, "If we analyse the economic factors -- first, in the way that they affect interest rate and overall market liquidity, and, second, in the way that they affect company earnings -- conditions were very friendly for the equity market".

He noted that among the frontier markets, Bangladesh did better in terms of declining interest rate, strong currency and GDP growth.

However, during the month of May, DSEX, the prime index of the DSE, registered a cumulative loss of 72 points.

Fundamentally sound issues like multinational companies, banks, non-bank financial institutions, power and energy, pharmaceuticals, telecoms and IT are foreign investor preferred stocks.

In 2016, net foreign investment at DSE was Tk 13.40 billion, which was 1.85 billion in 2015.

Also known as portfolio investment, foreign investment accounts for about 2.0 per cent of the DSE's total market capitalisation, which stood at Tk 3,734 billion as of Tuesday.

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