Foreign portfolio investment in the country’s capital market increased substantially in the recent couple of months as investors bet on lower prices.
It rose almost three times to Tk2.3bn in May this year, from around Tk800m in the previous month, according to net position of portfolio investment taken from Dhaka Stock Exchange records.
The May figure is the highest in last 12 months by a huge margin, demonstrating heavy buying executed by the foreign investors.
In dollar term, 10-month aggregate up to May this year since July last, net foreign portfolio investment stood at $192m, more than 13% down from $222m in the same period a year ago, according to latest Bangladesh Bank figures.
Foreign investment makes up only around 2% of total investment at DSE, which is lowest in South Asia region.
Cheaper prices of stocks have attracted increasing the fund flow in the stock market in the recent times, said Asaduzzaman Riyadh, research in-charge at Lanka Bangla Securities.
Also attractive yield of government securities and appreciation of taka against dollar contributed to the positive growth of net foreign portfolio investment, he said.
Recently, stock prices came down to their bottoms that attracted foreign investors to bet on stocks, mainly financials, power, Telecommunications and IT, said a stock broker.
Dwelling on the 10-month average, analysts attributed the trend to a host of factors, including political uncertainty.
They said the number of uncertainties attached to it dampened the spirit of foreign fund managers to consider Bangladesh as their investment destination.
“Political uncertainty mainly makes foreign portfolio investors to pack up and get out of the market to save their investment,” said an analyst, preferring not to be named.
Also, the low volume of trade is another frightening element for the foreign investors and they usually hold themselves to invest in a market where volumes hit their lowest levels, which the local bourse witnessing during over last two years.
“In a low volume situation, foreign investors find very few exits to offload their holdings so they usually keep themselves aside in such a situation,” he said.
The stock market is currently passing through the low volumes phase and during the first three trading sessions of current week, the volumes in value hovered around Tk5bn.
