The withdrawal of funds was the highest ever in the history of the prime bourse of the country
Foreign portfolio investors at the Dhaka Stock Exchange (DSE) withdrew a record Tk1,399 crore in the just concluded 2019-20 fiscal year.
The withdrawal of funds was the highest ever in the history of the prime bourse of the country. With the pulling out of the funds, foreign investment at the DSE fell for the second consecutive year.
The foreign investors went for large scale sales of shares due to a protracted confidence crisis in the stock market even as a rampaging Covid-19 outbreak added to their worries.
According to DSE data, net foreign investment at the stock exchange slumped by Tk1,399 crore in FY20 against Tk184 crore in the previous fiscal year.
In the given year, foreign investors sold shares worth Tk 5,543 crore against their purchase of shares totaling Tk 4,144 crore.
In the last six months of the last fiscal year, foreign investment in DSE was Tk766 crore negative, as trading on the bourse remained closed for 66 days due to the public holiday announced as a step to halt the spread of the deadly coronavirus.
Talking to Dhaka Tribune, stock market analysts and insiders said foreign investors had intensified share sales from January this year to the end of the last fiscal year when Covid-19, which originated in China, began spreading to other countries across the globe.
They added that foreign investors, muddled by the continuous bearish market and haphazard environment in the financial sector, had kept selling shares amid the volatility of the market.
Stocks began to dip sharply from the beginning of the year, losing about 1,432 points, which descended even more as the year went by.
The DSEX, the benchmark index of the country’s prime bourse, concluded the year through losing 26.56% or 1,432 points to close at 3,989.08 points on the last working day of FY20. The DSEX was at 5,421.62 points on June 30 in FY19.
Investors went through a volatile financial sector amid financial scams, soaring non-performing loans and poor management that dampened investors' moods, according to market analysts.
On the other hand, a depreciation of the taka against the US dollar also contributed to the negative foreign investment.
Market operators also noted that a series of banking scandals, along with a lack of good governance in the capital market, had also discouraged portfolio investment.
Nihad Kabir, Chairperson of BRAC EPL Stock Brokerage Limited and MCCI President, said, “Good fundamental companies do not want to be listed in the stock market due to a lack of transparency in the IPO process and overall market operations.”
There were a very few (seven to eight) companies listed in the country’s stock market, where foreign investors were eager to invest, she claimed.
Quoting foreign investors, the trade body leader said there was a lack of transparency and accountability in the markets, which was a major barrier to making the market vibrant.
Talking to Dhaka Tribune on condition of anonymity, a stock broker said lack of confidence on the part of investors in the market resulted in continued share sales by local and foreign investors alike.
Net investment by foreign investors at the country’s premier bourse was at an all-time high of Tk2,494 crore in the 2013-14 fiscal year.
Overseas investors’ turnover at the bourse was negative Tk52 crore in FY10, negative Tk 404 crore in FY11, Tk 529 crore in FY12, Tk1230 crore in FY13, Tk2494 crore in FY14 and Tk1299 crore in FY15, Tk2268 crore in FY17 and Tk72 crore in FY18.
Abu Ahmed, a stock market analyst and honorary professor at Dhaka University’s economics department, told Dhaka Tribune that most of the listed companies were suffering from a lack of good governance. Companies’ sponsor directors often traded shares anonymously, violating securities laws, he mentioned.
“They tend to make false financial reports. In this case, foreign investors will not invest in the capital market,” he said.
BSEC Chairman Prof Shibli Rubayat Ul Islam said it was high time for investment in the stock market and brokerage houses should invite foreign investors to make investments here.
“Our stance is against manipulation to protect the rights of investors,” he asserted.