Net foreign investment in the Dhaka Stock Exchange (DSE) entered a negative territory in February, as the foreign fund managers went on a selling spree throughout the month amid political tension.
Foreign investors collected shares worth Tk 3.93 billion but offloaded Tk 4.88 billion worth of shares last month, resulting in their net position of a negative Tk 947 million, according to statistics available with the DSE.
The figure is the lowest in the last five months since October 2017 when net position of overseas investors was negative Tk 1.51 billion.
In January, the overseas investors' net position was Tk 1.87 billion, as they purchased shares worth Tk 6.67 billion and sold shares worth Tk 4.80 billion, the DSE data shows.
"Fears of political uncertainty might have held back the growth of foreign investment in February," Khairul Bashar Abu Taher Mohammed, chief executive officer of MTB Capital, told the FE.
From the very beginning of 2018, the capital market is passing through a spell of volatility, and panic gripped the stock investors centring on the verdict in the Zia Orphanage Trust graft case in February, said Mr. Bashar, also the secretary general of the Bangladesh Merchant Bankers Association (BMBA).
The local and foreign investors also followed a 'go-slow' policy amid liquidity shortage while many of them booked profit, he noted.
Stock indices also took a big hit in February. DSEX, the benchmark index of the premier bourse, plunged 235 points or 3.89 per cent during the month.
Mr Bashar, however, said foreign fund managers are still see the Bangladesh stock market as a potential one among the emerging markets due to positive macroeconomic indicators.
Terming the selling spree a normal response of the capital market, a local stockbroker who deals with foreign investors said foreign fund managers from the developed markets switch their funds abroad only to take advantage of higher returns.
He said foreign investors are not the market drivers of the Bangladesh's capital market as foreign investment makes up less than 2.0 percent of DSE's total market cap and is the lowest among South Asian countries.
Foreign investors' preferred sectors are banks, non-bank financial institutions, power and energy, pharmaceuticals, telecoms and IT, said an investment banker who deals with foreign investment.
They also focus on some multinational companies that announced healthy dividends and generated good profits, he added.
In 2017, the overseas investors bought shares worth Tk 65.76 billion while they offloaded stocks worth Tk 48.71 billion to take their net investment to Tk 17.05 billion, the DSE data shows.
In 2016, the net foreign investment was Tk 13.41 billion, as the foreign investors collected shares worth Tk 50.57 billion and sold shares worth Tk 37.16 billion.
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