Foreign funds in stocks drop
The stock market regulator's initiatives such as roadshows in various countries to bring in investments appear to have produced no significant positive outcome as foreign investors reduced their stakes in the listed companies to book profits.
Eighteen listed companies had at least 5 per cent foreign investment at the end of their latest financial year on the Dhaka Stock Exchange (DSE). It dropped for 12 companies, three managed to retain them, and the position of overseas investors increased in three companies.
On average, 19.42 per cent of the stake of 18 companies was at the hand of foreign investors at the end of the last financial year. It went down to 16.39 per cent in August, according to the website of the premier bourse.
The bourse does not publish the monthly data on the foreign portfolio investment like it did in the past. The previous commission ordered it not to share the data, said a senior official of the DSE.
"Attracting investors and holding roadshows is not the job of the commission. Its job is to regulate the market and ensure fair play," said Faruq Ahmed Siddiqi, a former chairman of the Bangladesh Securities and Exchange Commission (BSEC).
"The roadshows can be arranged by bourses or other intermediaries," he said.
The commission held its first roadshow in Dubai last February. It organised a roadshow in the US in July and is currently having one in Switzerland. A number of roadshows are scheduled in the coming months.
"Even if the roadshows attract investors, it will not happen immediately. Moreover, they will analyse the potential of our companies before investing," said Siddiqi.
"Bangladesh has a very limited number of good stocks, so the BSEC should work on it. If it can bring any multinational company to the market, it will be a big contribution."
Forty-four companies had less than 5 per cent foreign stake at the end of their financial year. The share held by external investors rose at only four companies at the end of August. It dropped for 37 firms and remained unchanged for three.
"As the market has gained at a handsome rate in the last few months, foreign investors booked profit," said Mohammad Rezaul Karim, a spokesperson of the BSEC.
Sometimes, they rearranged portfolios, which is normal, he said, adding that the regulator was now receiving information from intermediaries that foreign investors were increasing their stake again.
A senior official of a brokerage firm said: "My experience is that they always take profit if the market gains at a higher rate and if they see any policy disruption."
The DSEX, the benchmark index of the DSE, stood at 3,989 points on June 30, the last day of the last financial year. It has surged 72 per cent to 6,869 points as of August 31, DSE data showed.
The closure of the market for around two months and the imposition of floor prices at the beginning of the coronavirus pandemic spooked the confidence of the foreign investors. So, they began massive sell-offs.
Trading was closed from March 25 to May 31 last year after the government enforced a countrywide lockdown to tame the virus.
On March 19 of 2020, the regulator imposed the floor price to protect stocks from any free fall, much to the dismay of overseas investors.
"Foreign investors don't like interruptions in the market mechanism," the broker said. In June, the BSEC lifted the floor price for all listed companies.