Net foreign investment at Dhaka Stock Exchange (DSE) fell for the eight consecutive month in October as the foreign investors withdrew their investment from the market.
According to the DSE data, the foreign investors sold shares worth Tk 328.92 crore against their purchase of shares worth Tk231.99 crore in October. The net foreign investment dipped to Tk 96.93 crore negative in October after Tk 61 crore negative in September. It was Tk 102 crore negative in August.
The foreign investors withdrew record Tk 777 crore in last eight months (March-October) this year from the country’s premier bourse due mainly to lack of confidence in the country’s capital market, widespread anomalies at the market and instability at the country’s financial sector.
The country’s capital market has been falling for last nine months that made foreigners worried about the market prospect. DSEX, the core index of the DSE, lost 265 points in October to end at 4,682.9 points on October 31.
The total foreign turnover on the DSE declined to Tk 560 crore in October from that of Tk 575.93 crore in the previous month.
The net foreign investment was Tk 593.47 crore negative in 2018 with nine months of decline on political uncertainties surrounding the December 30 national elections. After the elections, the foreign investors had moved to buy shares heavily in January and February this year with an expectation that the market would turn around.
The amount withdrawn in last eight months broke the previous record of withdrawal in 2009 when the foreigners had pulled Tk 440 crore out of the market in six consecutive months (January-June).
In 2010, the overseas investors withdrew Tk 676.58 crore from the market, highest pull-out in a year.
Investment by the overseas investors at DSE was negative in 17 months out of last 22 months. It was positive only in two months (January & February) of 2019 and three month (January, March & September) of 2018.
The pulling out of the fund from the stock market clearly shows that the foreign investors lost their confidence in the market as they saw no visual movement from the regulators to revive the market.
The investors, especially the foreign ones, mainly depend of the financial disclosures of the listed entities to make investment decisions. However, falsifying of financial documents by the listed companies, widespread wrongdoings, asymmetric regulatory approach and approval of weak initial public offerings were pushing the investors’ confidence level down.
Depreciation of taka against the US dollar may have dampened the mood of foreign investors in the last few months, as it decreased their profitability.
The foreign investors are also concerned about the prolonged tussle between Grameenphone and Bangladesh Telecommunication and Regulatory Commission (BSEC) over the audit claim.
The volatility in the financial sector also reduced investment capacity of the institutional investors that played a key role in the continued plunge in the stock prices.
The DSEX dropped by 1,265 points in last nine months with the DSE market capitalisation losing around Tk 65,000 crore in last nine months.