Maintaining a bullish stance in most part of 2014, foreign investors increased their exposure in Dhaka Stock Exchange (DSE) to a record high of over 34%.
According to the DSE, strong inflows from foreign investors in the concluded year have resulted in an all-time high in net foreign investment in the local stock market. Foreign investment in 2014 stood at Tk2,608 crore rising 34.3% from Tk1,943 crore in 2013, the data showed.
The factors, including a stable economic outlook, relative calmness in politics and a vast young population, played a major role in the rise of foreign portfolio investment, said stockbrokers dealing with foreign investment.
Fundamentally strong shares like telecommunications, IT, energy, multi-national company, banks and pharmaceuticals were the most bought stocks among overseas investors.
However, foreign investment in the local stock market remains the lowest among South Asian countries, making up less than 2% of DSE’s total market value.
The stockbrokers said before putting funds on any company, they would usually prefer long-term investment in the companies with good fundamentals and love to talk with the company management too. In September last, Chad Cleaver, a fund manager at Luxembourg-based VAM Funds, said, “We believe the frontier markets provide an inefficient landscape.”
A frontier refers to a type of country that is not a developed market.
Cleaver told a news portal, Fund Selector Asia, the frontier markets offer the attraction of high rates of growth and return on the capital and they are still trading at a discount in both emerging and developed markets.
“Two countries in Asia that fit these criteria, where we have sizable overweight positions, are Vietnam and Bangladesh.” It is well known that inadequate energy and transportation infrastructures, political infighting, bureaucracy, corruption and a shortage of skilled labourers contribute to a challenging investment climate in Bangladesh.
Despite this, the country’s economy has managed to grow more than 6% a year for much of the last decade, indicating that Bangladesh has a promising economic growth histology, which mainly catches the eyes of foreign fund managers, said another stock broker.
He said the local currency against greenback also remained stable in recent period but in the neighbouring India’s currency depreciated against it.
He said the political front is relatively calm after the national election.