Foreign investors at the Dhaka Stock Exchange withdrew investments for the record ninth month in November, pulling out Tk 876 crore from the market in nine months, mainly due to a lack of confidence in the market, pressure on the exchange rate and volatility of the financial sector.
Net foreign investment dipped to Tk 99 crore negative in November after investors had withdrawn Tk 96.92 crore in October.
The overseas investors sold shares worth Tk 321.3 crore against their purchase of shares worth Tk 222.4 crore in November.
In the last 23 months, foreign investors became the net sellers for 18 months, indicating extreme negative sentiments for the market, said market operators.
Before this year’s record, the overseas investors withdrew Tk 676.58 crore from the market in 2010-2011 when the market crashed.
The continuous foreign investment flight this year from the capital market has become a heavy drag on the market as overseas investors withdrew Tk 593.47 crore last year.
Market experts said that the foreign investors usually moved to inject funds when share prices came down to lucrative levels, but the trend was not seen this year due to poor confidence in the market.
The country’s capital market remained bearish for the last 10 months that caused the foreigners to grow worried about the market’s prospects.
The key index of DSE, DSEX, dropped by 1,219 points in the last 10 months with the DSE market capitalisation losing around Tk 63,000 crore.
They said that the falsification of financial documents by listed companies, widespread irregularities, asymmetric regulatory approach and approval of weak initial public offerings had made investors to lose confidence in the market.
The investors, especially the foreign ones, mainly depended on the financial disclosures of the listed entities to make investment decisions, said market experts, adding that if they found that the statements were fabricated, they shied away from the market.
The foreign investors were concerned about the prolonged tussle between Grameenphone and Bangladesh Telecommunication and Regulatory Commission over an audit claim, said a stockbroker.
The depreciation of the taka against the dollar had also negatively impacted foreign investors as the depreciation curbed profitability, he said.
The volatility in the financial sector had also reduced the capacity of the institutional investors to invest which played a key role in the continued plunge in stock prices, he said.
Market operators said that the government had failed to rein in the banks’ non-performing loans which were rising and made the country’s financial sector more volatile.
In the last 23 months, overseas investment was positive only in two months — January and February — this year and three months — January, March and September — last year. Total foreign turnover on the DSE declined to Tk 543.7 crore in November from that of Tk 560 crore in the previous month.
Net foreign investment was negative in 2018 with a nine-month decline based on political uncertainties over the December 30 national election. After the election, the foreign investors had heavily moved to buy shares in January and February this year with the expectation that the market would turn around but in reality the capital became more volatile.
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