Net foreign investment in the Dhaka Stock Exchange (DSE) entered a negative territory in March again, after two months break, as overseas investors booked profit by selling shares.
Foreign investors collected shares worth Tk 3.75 billion but sold Tk 4.98 billion worth of shares last month, resulting in their net position of a negative Tk 1.23 billion, according to statistics available with the DSE.
In February, the overseas investors' net position was Tk 2.38 billion, as they purchased shares worth Tk 4.35 billion and sold shares worth Tk 1.97 billion, the DSE data shows.
Market analysts said the foreign investors sold shares to book profits after a significant investment in the past two months amid volatility in the foreign exchange market coupled with soaring non-performing loans in the banking sector.
The ongoing pessimism coupled with lower than expected dividend declaration by some banks dented foreign and local investors' confidence in the market, said an analyst at a leading brokerage firm.
He noted that depreciation of local currency against the US dollar was another reason for withdrawal of funds by the foreign investors.
A local stockbroker, who deals with foreign investors, said the overseas investors are pulling out their fund not only from Bangladesh but also from other frontier markets due to rising trend of dollar against local currencies.
Terming the selling spree a normal response of the capital market, he noted that the foreign fund managers from the developed markets switch their funds abroad only to take advantage of higher returns.
However, he said, the foreign investors are not the market drivers of the Bangladesh's capital market as foreign investment makes up less than 2.0 per cent of DSE's total market cap and is the lowest among South Asian countries.
Stock indices also took a big hit in March. DSEX, the benchmark index of the premier bourse, fell 220 points or 3.85 per cent in March to settle at three months' low at 5491.
In 2018, net foreign funds in stocks were in the negative Tk 5.93 billion as nine months out of 12 were in the negative territory. The overseas investors bought shares worth Tk 44.96 billion and sold shares worth Tk 50.89 billion in 2018.
Banks shares were the top choice of foreign investors, who also seemed interested in power and energy, non-banking financial institutions, telecom, pharmaceuticals, multinational companies and IT companies.
Foreign investors look for companies that performed well, maintain good governance and have growth potential, a leading broker said.
Foreign investors' highest stake in the Delta Brac Housing Finance - more than 43 per cent, followed by Brac Bank 41.72 per cent and Olympic Industries 39.84 per cent as of February 28, 2019, the DSE data shows.
Also known as portfolio investment, foreign investment accounts for less than 2.0 per cent of the premier bourse's total market capitalisation, which stood at Tk 4,132 billion as of Monday.
