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Foreign investment in stocks declines

Sarwar A Chowdhury
In line with the declining trend in the last three months, foreign investment in the capital market dropped 45 percent in September.
The reduction, identified by market insiders, was due to a decline in share purchases and increase in sales by the foreign investors last month compared to the previous month.
Foreign investors bought shares worth Tk 167.55 crore and sold shares worth Tk 82.9 crore to take their net investment for the month to Tk 84.65 crore, according to data from Dhaka Stock Exchange.
In August, they bought shares worth Tk 220.36 crore and sold shares worth Tk 64.95 crore, resulting in net investment worth Tk 155.41 crore for the month.
A stockbroker however did find the declining trend in foreign investment alarming, as other markets in the subcontinent and elsewhere were also experiencing a similar downward spiral.
Besides, the stockbroker said, the Bangladesh capital market's reliance on foreign investors has always been limited.
"Our capital market has very few products and instruments available for foreign investors. This lack of diversified instruments makes our market unattractive, which places a limit on foreign portfolios," said Kh Asadul Islam, managing director and
chief executive of City Brokerage.
"It also prevents large investors form hedging their funds. In short, our capital market is seen as a bleak destination for foreign investors as they have limited products to invest in; resulting in limited activities, which translate into limited profit margins," he said.
He said the Bangladesh capital market is also unknown or a less lucrative destination for foreign investors than neighbouring Pakistan and Sri Lanka. “To overcome this hurdle, it is important to focus on building a credible brand value for our country and more specifically our economy," he said.
In order to become a competitive and attractive destination, it is important to increase the volume of the stockmarket, he added. "Less than 10 percent of our companies are listed in the stockmarket. Multinational companies and state owned corporations ought to be listed to spearhead
growth."
The future prospect of the Bangladesh capital market is promising. There remains tremendous scope for improvement not just by introducing new products like future options, but also by making the market infrastructure technologically more integrated and equipped, he said.
Also known as portfolio investment, foreign investment accounts for around 1 percent of DSE's total market capitalisation.
Banks were initially the foreign investors' preferred sector, but nonbank financial institutions, power and energy, pharmaceuticals, multinationals, telecoms and IT also caught their attention.
Between January and September, foreign investors bought shares worth Tk 1,885.97 crore and sold shares worth Tk 546.60 crore, showing a net investment of Tk 1,340.37 crore, according to DSE data.