The exodus of foreign funds from the DSE explodes

An archive photo shows the Dhaka Stock Exchange building in Nikunja in the capital, Dhaka. Net sales by foreign investors on the Dhaka Stock Exchange continued to increase as foreign investors withdrew Tk 2,648 crore in 2021 after removing Tk 2,606 crore from the market the previous year. – Photo New Age

Net sales by foreign investors on the Dhaka Stock Exchange continued to increase, with foreign investors withdrawing Tk 2,648 crore in 2021 after removing Tk 2,606 crore from the market the previous year.

Before the large-scale exodus of foreign funds in recent years, the highest net foreign sales were Tk 676.58 crore in 2010, DSE officials said.

Net foreign investment in the DSE has been negative for four consecutive years due to volatility in the country’s financial market, the interest rate cap on bank loans, floor price restrictions and a better trend. in developed markets.

In 2021, foreign investors sold shares worth Tk 5,206.2 crore against their purchase of shares worth Tk 2,558.2 crore.

Foreign investors sold shares worth Tk 6,496.88 crore against their purchase of shares worth Tk 3,890.77 in 2020.

Bangladesh Merchant Bankers Association vice president and managing director of IDLC Investment Limited, Mr Moniruzzaman, told New Age that the market was closed for 66 days in 2020 due to the Covid outbreak, which has affected the sentiment of foreign investors because no other stock exchange in the world has been closed for so long for the pandemic.

In addition, the setting of floor prices for all listed companies discouraged foreign investors as they felt that the action was against the principle of the free market as they could not sell their shares of many companies due to the restriction, a he declared.

On March 19, 2020, the BSEC introduced the floor price system to prevent stock prices of listed companies from falling below a certain level amid the Covid outbreak.

On June 27, 2021, the BSEC lifted the restriction on the floor price of all listed companies.

Despite the bullish trend of the market in 2020-21, foreigners have kept withdrawing funds.

The DSEX grew 25.1% in 2021 after gaining 21.3% the year before.

Net overseas sales have grown significantly over the past two years as the market’s uptrend and high turnover have made it easy for them to withdraw funds.

Net overseas sales were Tk 488 crore in 2019 after investors withdrew Tk 593 crore the year before.

Foreign net sales were Tk 2,648 crore in 2021 compared to Tk 2,606 crore net sales in 2020, for a total amount of Tk 5,254 crore over the past two years.

Foreign investment first turned negative in 2018 after 2009-10 when the market has collapsed so far.

In 2018 and 2019, foreigners worried about a grim situation in the banking system and national elections.

The flight of foreign investment from the capital market over the past four years has become a major drag on the market, market experts said.

Market experts said allegations of fabricating financial documents, manipulating stock prices and approving fundamentally weak initial public offers were also the other main reasons for the foreign exodus.

Total overseas revenue on the DSE plunged to Tk 7,764.21 crore in 2021 from Tk 10,387.65 crore the year before.

About Mallory Brown

Check Also

How I would use £30 a week to earn extra income year after year

Image source: Getty Images The prospect of increasing income appeals to many people. What may …