Foreign investment at the Dhaka Stock Exchange hit a seven-year low in the outgoing fiscal year (2017-18) as foreigners continued cashing their investments at the stock market since February this year amid financial sector woes and political uncertainties before the national elections.
The net foreign investment stood at Tk 71 crore in FY18, plummeting by 96.83 per cent or Tk 2196.66 crore from last fiscal year (2016-17).
The FY18 figure was the lowest since the market crash in FY 2010-11 when the net foreign investment was Tk 404.59 crore negative.
The foreign investors sold shares worth Tk 5,828.7 crore in FY18, highest ever sell-offs in a single fiscal year by them, against their purchase of shares worth Tk 5,900.5 crore in the year that was lower than the previous fiscal year.
The foreign investment was also negative in three consecutive months (April, May and June) with the net investment position was over Tk 200 crore negative in each of the months.
The foreigners cashed out net Tk 725 crore from the stock market in the three months.
The highest single-month share sales by the foreign investors were in May this year when they sold shares worth Tk 624.17 crore against their buying of shares worth Tk 341.83 crore.
The continuous share sales by the foreign investors in the second half of the financial year were fuelled by political uncertainties ahead of the December national elections, bleak situation in the country’s financial sector, and depreciation of the taka against the dollar, said market operators and experts.
The political uncertainties emerged surrounding a graft case against Bangladesh Nationalist Party chairperson Begum Khaleda Zia.
A special court on February 8 sentenced Khaleda Zia to jail for five years in the corruption case, which her party said was politically motivated.
The foreign investors were making their exit as they dislike any unstable political situation in any country that hits the financial market.
Besides, the country’s financial sector hit the headlines throughout the fiscal year due to scams, huge capital flight and colossal amount of defaulted loans that kept investors in limbo.
The government, without taking necessary actions against the errant bankers, declared a series of bailouts to the scam-hit banks that brought huge criticisms from different corners with critics saying that the government kept the bank owners happy ahead of the national polls.
Market operators said that the media reports about the scams in the banking sector and liquidity crisis in the financial market had made the foreign investors wary about the near-term prospect of Bangladesh capital market.
United International University professor and stock market analyst Mohammad Musa told New Age that political uneasiness was the prime reason for the recent foreign sell-offs.
He also said that volatility in the country’s financial sector also kept the investors on edge from the beginning of the year.
A senior DSE official said that depreciation of the taka against the dollar also made the foreign investors concerned as their profitability reduced due to the depreciation.
The DSEX lost 4 per cent, or 227 points, in the outgoing fiscal year to close at 5,429.04 points on Thursday, the last trading day of the fiscal year. The index was at 5,656.02 points on June 30, 2017.
Because of heavy selling by the foreign investors, the share prices of a number of heavyweight companies like Grameenphone, Islami Bank, Olympic Industries, Square Pharma, BRAC Bank and City Bank plunged at the end of the outgoing fiscal year.
The total foreign turnover on the bourse, however, increased to an all-time high as it rose to Tk 11,729.2 crore in FY18, while it was Tk 10,009.37 crore in FY17.
The net investment by the foreign investors at the country’s premier bourse set an all-time high at Tk 2,493.57 crore in the FY 2013-14.
Overseas investors’ turnover at the bourse was negative Tk 52.06 crore in FY10, negative Tk 404.59 crore in FY11, Tk 529 crore in FY12, Tk 1,230.92 crore in FY13, Tk 2,493.57 crore in FY14 and Tk 1,299.84 crore in FY15 and Tk 2,268.47 crore in FY17.
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