Money market remains vibrant
Thursday, 31 December 2009
Continued from page 9
the early part of the year, as carry trades un-winded and investors flocked to the relative safety of short term US treasuries. However the dynamics in the local foreign exchange markets worked quite differently.
Due to the commodity price crash, value of imports dropped sharply. Capital machinery imports also declined indicating sluggishness in manufacturing sector investment. Exports also slowed down in certain sectors due to collapsing demand in the developed markets; however the resilience of the RMG and textiles sector helped to prop up our export receipts. The key source of funds in the foreign exchange market continued to be the Wage Earners Remittance , which recorded USD 9.7 Billion during FY09 ( growth of 22.4 per cent) and continued the robust trend into the later part of the year with USD 2.7 billion inflow in Q1 FY10.
The decline in imports and slower drop in exports as well as the record remittance resulted in a swelling current account surplus, which kept the local foreign exchange and Taka market very liquid throughout FY09. While this large liquidity overhang could have forced Taka to appreciate, judicious purchases by Bangladesh Bank to mop up excess liquidity helped to keep the exchange rate of taka broadly stable, and helped to preserve external competitiveness of our exporters. The USD/TAKA remained range bound through out the year and fluctuated within a narrow band. Currency trading volumes averaged around 20million USD a day, a significant portion of which was the regular purchases by Bangladesh Bank in the inter-bank market. In the inter-bank market, market participants were encouraged to start forward trading.
"As the major economies bounced back from recession, our exports should also experience a strong bounce and the export figure of USD 2.8 billion in July - August 09 confirms this," the StanChart review said.
The stimulus measures announced by the government and the easy monetary conditions set by Bangladesh Bank should also help to stimulate investment in the export sector. With workers remittance continuing to remain strong at the height of the crisis, going forward Bangladesh should continue to maintain a strong balance of payments position despite the increased cost of import driven by higher commodity prices in recent times.
The official foreign exchange reserves continued to accumulate rapidly through out the year and crossed the $ 7 billion-mark by Q4FY09. This trend continued into the second half of this year, and the forex reserves now stands above 10 billion for the first time in Bangladesh history.
While Bangladesh economy has proved to be reasonably decoupled from the financial crisis, the local equity market however experienced a moderate decline through the first three quarters. However from Q4 FY09 onwards the capital market bounced back robustly. At the end of Q4 FY09 and Q1FY10 market capitalization of DSE increased by 36.4 per cent and 5.6 per cent respectively.
Market Capitalization now stands above the USD 21 billion mark. The liquidity situation and turnover volume has increased dramatically with turnover up by 65.5 per cent.
The listing of Grameenphone shares has also had a galvanizing impact on the market. While many participants had feared that it might cause overly speculative disruptions in the market, the market has proved more mature than previously thought.
"This will encourage more Multinational and State Owned enterprises to list on the capital markets. This is a positive development, and should help to channel funds to the productive sectors in the economy, and also attract more foreign investment," the StanChart review said.
End Q1 FY10 data although not yet fully available continue to indicate that economy is on a similar path to Q4 FY09. By September there have been signs that output activities should pick up in the second half of the FY. The growth in the industrial sector is still stagnant, as both import of capital machinery and the disbursement of industrial term loans remain slack. Overall also growth of private sector credit has slowed down with a sharp fall in fresh investment initiatives, lag effect of which would likely be felt during first quarter of FY10.
However the investment climate may be improving gradually fuelled by the global recovery with signs of strengthened economic activities in US and EURO area countries. Furthermore government has announced financial stimulus package to boost certain priority sectors of the economy with special support for the industrial sector. BB has also taken measures like relaxing conditions for borrowing from the Central Bank, lowering the policy interest rates, as well as widening the range of financial assets admissible as collateral etc to maintain adequate liquidity and credit flow to the markets. Excess reserves of the banks with BB has started to decline and inter-bank call money rates have turned around from their near zero levels. Government has also been taking significant steps to plug the growing power and energy shortages and developing the underdeveloped infrastructure. Steps like private - public partnership will hopefully attract sufficient investments to lay the foundation for a stronger performance in FY10.
Overall Bangladesh's economy has performed well in 2009, and if the ambitious Budget, power and infrastructure investments can be implemented the 2010 promises to be an even more successful year.
Bangladesh economy performed remarkably well in the aftermath of the global economic crisis and our macro economic indicators remain in good shape. Real GDP is clocking 5.9 per cent growth, rapidly rising reserves crossed $10 billion mark and the financial system have remained sound. This relative stability helped to put Bangladesh in the limelight. In fact Bangladesh figures in a select group of countries that have emerged from the chocks of the global economic crisis with a decidedly positive growth outlook.
the early part of the year, as carry trades un-winded and investors flocked to the relative safety of short term US treasuries. However the dynamics in the local foreign exchange markets worked quite differently.
Due to the commodity price crash, value of imports dropped sharply. Capital machinery imports also declined indicating sluggishness in manufacturing sector investment. Exports also slowed down in certain sectors due to collapsing demand in the developed markets; however the resilience of the RMG and textiles sector helped to prop up our export receipts. The key source of funds in the foreign exchange market continued to be the Wage Earners Remittance , which recorded USD 9.7 Billion during FY09 ( growth of 22.4 per cent) and continued the robust trend into the later part of the year with USD 2.7 billion inflow in Q1 FY10.
The decline in imports and slower drop in exports as well as the record remittance resulted in a swelling current account surplus, which kept the local foreign exchange and Taka market very liquid throughout FY09. While this large liquidity overhang could have forced Taka to appreciate, judicious purchases by Bangladesh Bank to mop up excess liquidity helped to keep the exchange rate of taka broadly stable, and helped to preserve external competitiveness of our exporters. The USD/TAKA remained range bound through out the year and fluctuated within a narrow band. Currency trading volumes averaged around 20million USD a day, a significant portion of which was the regular purchases by Bangladesh Bank in the inter-bank market. In the inter-bank market, market participants were encouraged to start forward trading.
"As the major economies bounced back from recession, our exports should also experience a strong bounce and the export figure of USD 2.8 billion in July - August 09 confirms this," the StanChart review said.
The stimulus measures announced by the government and the easy monetary conditions set by Bangladesh Bank should also help to stimulate investment in the export sector. With workers remittance continuing to remain strong at the height of the crisis, going forward Bangladesh should continue to maintain a strong balance of payments position despite the increased cost of import driven by higher commodity prices in recent times.
The official foreign exchange reserves continued to accumulate rapidly through out the year and crossed the $ 7 billion-mark by Q4FY09. This trend continued into the second half of this year, and the forex reserves now stands above 10 billion for the first time in Bangladesh history.
While Bangladesh economy has proved to be reasonably decoupled from the financial crisis, the local equity market however experienced a moderate decline through the first three quarters. However from Q4 FY09 onwards the capital market bounced back robustly. At the end of Q4 FY09 and Q1FY10 market capitalization of DSE increased by 36.4 per cent and 5.6 per cent respectively.
Market Capitalization now stands above the USD 21 billion mark. The liquidity situation and turnover volume has increased dramatically with turnover up by 65.5 per cent.
The listing of Grameenphone shares has also had a galvanizing impact on the market. While many participants had feared that it might cause overly speculative disruptions in the market, the market has proved more mature than previously thought.
"This will encourage more Multinational and State Owned enterprises to list on the capital markets. This is a positive development, and should help to channel funds to the productive sectors in the economy, and also attract more foreign investment," the StanChart review said.
End Q1 FY10 data although not yet fully available continue to indicate that economy is on a similar path to Q4 FY09. By September there have been signs that output activities should pick up in the second half of the FY. The growth in the industrial sector is still stagnant, as both import of capital machinery and the disbursement of industrial term loans remain slack. Overall also growth of private sector credit has slowed down with a sharp fall in fresh investment initiatives, lag effect of which would likely be felt during first quarter of FY10.
However the investment climate may be improving gradually fuelled by the global recovery with signs of strengthened economic activities in US and EURO area countries. Furthermore government has announced financial stimulus package to boost certain priority sectors of the economy with special support for the industrial sector. BB has also taken measures like relaxing conditions for borrowing from the Central Bank, lowering the policy interest rates, as well as widening the range of financial assets admissible as collateral etc to maintain adequate liquidity and credit flow to the markets. Excess reserves of the banks with BB has started to decline and inter-bank call money rates have turned around from their near zero levels. Government has also been taking significant steps to plug the growing power and energy shortages and developing the underdeveloped infrastructure. Steps like private - public partnership will hopefully attract sufficient investments to lay the foundation for a stronger performance in FY10.
Overall Bangladesh's economy has performed well in 2009, and if the ambitious Budget, power and infrastructure investments can be implemented the 2010 promises to be an even more successful year.
Bangladesh economy performed remarkably well in the aftermath of the global economic crisis and our macro economic indicators remain in good shape. Real GDP is clocking 5.9 per cent growth, rapidly rising reserves crossed $10 billion mark and the financial system have remained sound. This relative stability helped to put Bangladesh in the limelight. In fact Bangladesh figures in a select group of countries that have emerged from the chocks of the global economic crisis with a decidedly positive growth outlook.