The country's public equity market still remained inaccessible to most foreign investors despite having compounded GDP (gross domestic product) for 40 consecutive years, according to the latest report.
The accessibility to the market was hindered due to little or no ETF (exchange-traded fund) coverage or American Deposit Receipt listings, it said.
Dawn Global launched the Asian Growth Cubs ETF listed on the New York Stock Exchange (NYSE) focusing on public equities in five emerging and frontier growth markets, including Bangladesh.
Cubs offers investors actively managed exposure to the fast-growing markets of Bangladesh, Indonesia, Pakistan, Philippines, and Vietnam which have been individually grown GDP faster than 6.0 per cent a year since 2000.
Meanwhile, Bangladesh and Vietnam have compounded GDP for 40 consecutive years, including 2020, the year of the coronavirus pandemic.
"Yet, these markets remain inaccessible to most foreign investors due to little or no ETF coverage or American Deposit Receipt listings," according to the report released recently.
"Most emerging market investors focus in Asia on China and India, yet there is a compelling long-term secular growth story in five Asian countries with a combined population of more than 860 million people, expected to grow to one billion by 2035, and with attractive demographics," said Maurits Pot, Founder and CEO of Dawn Global.
"The average age is 28 in these markets with a burgeoning middle class and accelerating digital adoption," he said.
Dawn Global is re-inventing the conventional approach to emerging markets equities investing by positioning CUBS as an actively managed, content-driven, thematically-designed, and regionally-diversified ETF, he also said.
The passive, index-driven emerging market ETF asset class is concentrated on six countries (the BRICS + Korea + Taiwan) overlooking the attractive and sizeable opportunity in the next generation of emerging and frontier growth markets.
Moreover, the index-driven market-cap weighting approach risks skewing portfolio construction to current size, not future growth potential.
"Therefore, instead of grouping emerging markets into a single product, we intend to give investors the option of which specific markets they have exposure to, through regionally diversified products," Mr Pot said.
International Monetary Fund (IMF) forecasts Emerging Asia to be the fastest-growing economic region globally until 2026 as the GDP in terms of the US dollar is forecast to grow over 8.0 per cent every year for the next six years.
Cubs GDP is similar sized to Indian GDP, yet Cubs market cap is 60 per cent smaller than Indian market cap, but GDP growing faster historically and with superior foreign-exchange depreciation versus the US$ since 2000.
Dawn Global believed that active investment management is required to identify the most compelling growth companies in these less covered markets and mitigate company and governance risks, according to a statement issued by the company.
The investment process involves top-down company screening and bottom-up company analysis to identify the most compelling investment opportunities.
The ETF's high-conviction portfolio is reviewed quarterly and re-balanced twice a year, through equal weighting across all securities to mitigate single country and single company risk. The portfolio is geared towards tomorrow's economy, with a bias towards healthcare, telecom media technology, consumer goods, and financials.
Exchange Traded Concepts, an ETF platform provider, is the investment adviser and Kingsway Capital Partners Limited (KCPL) is the investment sub-advisor to the fund.
Dawn Global is the sponsor of the fund and an appointed representative to KCPL. Foreside Fund Services LLC, a provider of investment management services, is the distributor of Cubs.
According to Investopedia.com, a financial content website, an Exchange Traded Fund (ETF) is a type of security that tracks an index, sector, commodity, or other assets which can be purchased or sold on a stock exchange is the same as a regular stock.
An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities while ETFs can even be structured to track specific investment strategies, it said.
Nonetheless, the ratio of the Dhaka Stock Exchange's (DSE) market capitalisation to the country's gross domestic product has remained very low compared with other countries.
The ratio of DSE market capitalisation to GDP was 16 per cent on December 31, 2020, which was 12 per cent in the previous year. The ratio was 17.21 per cent in 2018 and 21.62 per cent in 2017.
The total market cap of the DSE stood at approximately Tk 5,142 billion as of June 30, 2021.
However, 10 largest listed companies from telecom, banking, pharmaceutical, and textile sectors accounted for over 40 per cent of the Dhaka bourse's total market capitalisation.
About 341 companies are trading on the premier bourse.
Over the last two years, the key index, DSEX has grown significantly following the entrance of some new companies and regulatory reforms.
The index started 2020 with 4453 points and after one and a half year later on Wednesday (June 30, 2021), it closed at 6150 points, gaining over 949.1 points over the course of the year.
