Foreign funds in stocks slide as unrest saps confidence

Net foreign investment in the capital market declined 18 percent year-on-year in January, as overseas investors followed a go-slow policy amid political instability in Bangladesh.

Their net investment reached Tk 228.21 crore last month, as foreign investors bought shares worth Tk 365.04 crore and sold shares worth Tk 136.83 crore, according to data from Dhaka Stock Exchange.

Net investment in January last year was Tk 278.37 crore, after foreign investors bought shares worth Tk 403.15 crore and sold shares worth Tk 124.78 crore.

Foreign fund managers rated Bangladesh as one of the top-frontier markets for their investment due to its positive outlook, said Wali Ul Islam, chief executive of Unicap Securities.

“But the ongoing political turmoil that began early last month led foreign investors to adopt a go-slow strategy. They are observing the political development.”

Foreign investors’ participation will increase when the political situation improves, Islam said.

“There was a time when only US-based fund managers were investing in our markets. But now, fund managers from Europe are also coming to Bangladesh.”

Also known as portfolio investment, foreign investment accounts for less than 2 percent of DSE’s total market capitalisation, which was Tk 316,568 crore after the close of yesterday’s trade.

Banks are the foreign investors’ preferred sector, but non-bank financial institutions, power and energy, pharmaceuticals, multinationals, telecoms and IT also draw their attention.

Investors include fund managers such as Morgan Stanley, JPMorgan, Goldman Sachs and BlackRock. They manage various types of funds like endowment funds, hedge funds, long-only funds and mutual funds, and they invest in the country’s capital market through these funds.

Net foreign investment in 2014 was Tk 2,619.79 crore, which was a 35 percent rise over the previous year, according to DSE data.