Foreign investment in equities and bonds, generally known as portfolio investment declined significantly in the last fiscal year.
Statistics available with Bangladesh Bank revealed that net portfolio investment stood at $618 million at the end of fiscal year 2014-15.
The amount was 34 per cent less than the net portfolio investment worth $937 million in FY14.
The sharp decline in portfolio investment reflects lesser attraction of the foreign investors to the country's capital market.
The central bank statistics also showed that after witnessing negative net inflow of portfolio investment in FY09 and FY10, it started to be positive.
In FYs 11, 12 and 13, the net inflow of portfolio investment increased to $109 million, $240 million and $368 million respectively. In FY14, it posted record $937 million which was around 65 per cent of the net Foreign Direct Investment (FDI) in the same period.
According to the central bank's data furnished in its' Balance of Payments (BoP) table, net inflow of FDI was $1432 million ($1.4 billion) in FY14.
The net inflow of FDI, however, increased by 18.72 per cent in last fiscal year to $1700 million, according to the provisional estimation.
Thus, net portfolio investment in FY15 was around 36.4 per cent compared to net FDI inflow in the same period.
FDI implies investment by foreign investors directly in the productive assets of other countries while foreign portfolio.
On the other hand, foreign portfolio investment (FPI) means investing by investors in financial assets such as stocks and bonds of entities located in another country.
United Nations Conference on Trade and Development (UNCTAD), in its World Investment Report-2015, said: "FDI flows to LDCs have outpaced portfolio investment for the entire period of 2002-2014; they also remained less volatile than other investment (mainly bank lending)."
Dr. Biru Paksha Paul, chief economist at the Bangladesh Bank, said: "Portfolio investment is volatile in nature globally. Thus, decline in inflow of this investment is not a big concern at all."
He also said that foreign investors in the stock market generally look for quick and higher returns. "When they find returns are low or below their expectation, they generally offloads and shifted to other markets," he added.
In South Asia, India has received the largest amount of portfolio investment having a thriving and well-diversified stock market.
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