Portfolio investments rise $710m in 2020

HM Murtuza | Published: 23:08, Jul 16,2021

 
 

Stock of portfolio investments, meant for the stock and bond markets, in the country rebounded by 17.66 per cent or $710.17 million in 2020 when major global economies witnessed a sharp increase in liquidity amid the launch of bailout packages to offset the economic impacts of the Covid outbreak.

However, net investment in equity securities (in terms of transactions) was in the negative, according to a Bangladesh Bank report on investments released on Thursday.

The data showed that the stock position of portfolio investments in the country’s stock and bond markets stood at $4.73 billion at the end of 2020 from $4.02 billion in 2019.

Prior to the rebound in 2020, the stock position of portfolio investments in the country dropped by 13.61 per cent or $633.74 million in 2019 from $4.66 billion at the end of 2018.

Of the $4.73 billion investments in 2020, investments by foreign companies in equity shares accounted for $2.995 billion and the remaining $1.74 billion was invested in debt securities.

Major stock markets, including the United States, China and India, observed sharp increase in investments as major economies were flooded with liquidity amid a very low interest rate regime, Policy Research Institute executive director Ahsan H Mansur told New Age.

Announcement of massive stimulus packages by the governments was another reason behind the excessive supply of liquidity, Mansur said.

‘In Bangladesh, we were getting a little share of the investments,’ he said, adding that the stock of investments was still not significant.

However, such portfolio investments are not stable as they change their destinations with the change in the investment situation, he said.

Besides, he also mentioned that the country’s stock market did not have adequate quality scrips for foreign portfolio investors to invest their money in.

Good scrips are very much overpriced and are not available as no one sells them, the executive director said.

The country’s big companies lack the interest to get enlisted on the stock market, he said, adding that large companies from the readymade garment sector or any other sectors could have helped attain notable portfolio investments on the stock market.

In terms of investments in equity securities, the United States was the largest investment source for Bangladesh with its investments reaching $1.11 billion at the end of 2020. US investments made up for 37.2 per cent of the total portfolio investments in equity securities.

US equity investments stood at $1.14 billion and $974.7 million in 2018 and 2019 respectively.

UK’s portfolio investments in Bangladesh was the second highest at $662.98 million at the end of 2020. The country’s investments almost doubled in 2020 from $346.72 million in the previous year.

UK’s portfolio investments in Bangladesh was $410.97 million at the end of 2018.

Portfolio investments in equity securities in the country from Luxembourg was the third highest at $307.15 million at the end of 2020, down from $329.7 million a year ago. Stock of portfolio investment in equity securities from Luxembourg was $418.53 million in 2018.

In 2019 and 2020, Luxembourg’s investors withdrew $111.38 million of portfolio investments in equity shares from Bangladesh.

At the end of 2020, stock of portfolio investments in equity shares in the country stood at $195.13 million from the Netherlands, $175.84 million from Saudi Arabia, $170.39 million from Singapore, $71.44 millin from Mauritius, $39.01 million from Kuwait, $35.31 million from the Cayman Islands and $32.91 million from Canada.

The country’s pharmaceuticals and chemical sectors attracted the highest overseas equity investors as their investment stock in the sector reached $1.06 billion at the end of 2020 from $521.62 million a year ago.

Foreigners’ equity investments in banks, financial institutions, insurance and mutual funds collectively dropped to $689.86 million in 2020 from $789.66 million a year ago. In 2018, the investment was $940.41 million. In 2020, investment in the food and allied sectors increased to $602.96 million from $562.59 million in 2019.

The BB report also showed that the foreign investors purchased shares worth $523.25 million against their sale of shares worth $827.68 million in 2020, meaning that the overseas investors pulled out $304.43 million in investments from the country’s capital market.

Besides non-resident transactions on the stock market, the central bank in its report also showed that the investors withdrew $338.43 million in investments from the country through the NITAs (non-resident investor’s taka accounts) in 2020.

Inflow to the NITA was $498.64 million in 2020 against the outflow of $837.07 million, the BB data showed.

Investment withdrawal from the country through the NITA was worth $64.90 million and $131.79 million in 2018 and 2019 respectively.

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