Foreign funds in stock plunge on strong dollar

Net foreign investment in the premier bourse witnessed a drastic fall last month due to fears centring political uncertainty in the upcoming national election and the massive depreciation of the local currency against the US dollar.

Net foreign investment hit Tk 283 crore in the negative in May, when foreign investors purchased shares worth Tk 341 crore and sold that worth Tk 624 crore, according to data of the Dhaka Stock Exchange.

The net foreign investment was Tk 25 crore in the negative in April.

Fears of political uncertainty and the depreciation of the local currency have encouraged foreign investors to go for sell-offs, said a high official of a leading merchant bank requesting anonymity.

The current account deficit hit an all-time high of $7.08 billion in the first nine months of the fiscal year, according to Bangladesh Bank statistics.

The deficit was $1.37 billion in the same period in the previous year.

Since Bangladesh's current account deficit is widening, the taka is bound to depreciate further.

“So foreign investors are taking their profits now,” said another merchant banker.

Foreign investors were selling off shares to prevent erosion of profit and waiting for scopes of parking investment, as the market was at the risk of a fall, market insiders said.

These sales led to a decline in the benchmark index of Dhaka bourse—DSEX—by 354 points or 6.22 percent last month.