Net foreign investment in the Dhaka Stock Exchange (DSE) jumped to a record Tk 26.08 billion in 2014, registering an increase of 34.3 per cent over the previous year amid growing confidence and a positive outlook about the Bangladesh's market among the foreign investors.
Favourable economic factors, political stability and a positive market outlook encouraged foreign investors to inject money into local securities, stockbrokers who deal with portfolio investment said.
In the just concluded calendar year, foreign investors bought shares worth Tk 44.06 billion and sold shares worth Tk 17.98 billion, to take their net investment for the year to Tk 26.08 billion which is a record high, according to statistics from the Dhaka Stock Exchange (DSE).
In 2013, the overseas investors bought shares worth Tk 26.52 billion and sold shares worth Tk 7.10 billion, to take their net investment for the year to Tk 19.42 billion, the DSE data showed.
Foreign fund managers see the Bangladesh stock market as one with potential among the emerging markets, said a local stockbroker, who deals with foreign investors.
Bangladesh stock market is getting back its rhythm, especially this year, after three years of seeing a bearish trend since the inevitable price debacle in early 2011, they said.
The buying tendency of the foreign investors, most of whom are actually global fund managers, can also be attributed to the lower price-earnings (PE) ratio of listed companies, they added.
The price-earning (PE) ratio came down to a lucrative level and hovering around 16 to 18 throughout the year from over 30 in 2010, they said.
The overall market PE stood at 17.77 at the end of the year against 17.17 in the previous years, a level that indicates a good time for investment.
Aggressive overseas marketing by the local stockbrokers also attracted foreign investors to the Dhaka stock market.
"Improved regulatory framework and oversight, positive macro variables, relative market valuation level and reduced systematic risk from political front were the cheering factors for foreign investors," said Md Ashaduzaman Riadh, Strategic Portfolio Manager of LankaBangla Securities.
"Foreign investors are injecting fresh funds amid positive speculations, as the market is performed relatively better this year than the previous year," he added.
He also sees the jump in net investment as an outcome of an aggressive marketing abroad by stockbrokers to bring more foreign investment into Bangladesh.
"We have organised road shows, seminars and symposiums in several countries to attract foreign stockbrokers and fund managers to come to the Bangladesh market," he added.
Akter H Sannamat, managing director of Union Capital, however, said too much high foreign investment in Bangladesh stock is not a sign of healthy market. "If foreign investors put sale pressure at a time, the market will may face a trouble," he added.
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