The foreign investors are withdrawing their investments from the capital market in Bangladesh. As a result, it brought a negative impact on foreign investment or portfolio investment in share market. According to the information of economics studies, in the 8 months of last fiscal year (July to February), the foreign investors withdrawn USD equivalent to almost 77 million, which was more than around 30 million from the previous year. According to the market experts, the share market went through a negative impact within it due to epidemics, wars in various places in the world and subsequent global instability created from it. The crisis of trust was created among the global investors because of dollar crisis and depreciation of local currencies.
According to the concerned, foreign investment in the stock market was positive till the financial year 2019-20. That is, until that time, foreigners have bought more share that they sold shares. But since then, the investment has been continuously withdrawn. In 2020, the global economy came to a standstill due to the global lockdown due to the Corona epidemic. Since then, foreigners have been withdrawing capital from the stock market. This trend of capital withdrawal was accelerated by the war in Ukraine. Recent unrest in the Middle East has prolonged the crisis. According to the Economic Survey, 2024 data, in the financial year 2016-17, portfolio investment equivalent to USD 457 million came from outside the country into the capital market, which was USD 349 in the next financial year. This was followed by portfolio investments of USD 171 million in FY 2018-19 and USD 44 million in FY 2019-20. Since then, investors have been withdrawing capital by selling shares. The sold amounts were USD 269 million in 2020-21 fiscal year, USD 158 million in 2021-22 fiscal year, USD 30 million in 2022-23 fiscal year. According to sources, Dhaka Stock Exchange (DSE) shares were sold to China's Shenzhen-Shanghai Stock Exchange Consortium taking them as a strategic investor in 2018 to attract portfolio investment in the capital market. At that time, 25 percent shares of DSE were sold for about Tk 947 crore. Besides, the Chinese consortium offered to provide several technical facilities to DSE. The government has brought changes in the top positions of Bangladesh Securities and Exchange Commission (BSEC), the capital market regulatory body in the country, in order to restore the confidence of investors. Professor Shibli Rubaiyat-ul-Islam was appointed as the chairman. After taking charge, he organized road shows in various countries including the United States, United Kingdom, and Switzerland to attract expatriate and foreign investors to the capital market. However, the global instability has become a hindrance in achieving the benefits of these initiatives.
Experts say inflation has increased in developed and developing countries due to supply shortages after the Ukraine war. Central banks in the US and Europe raised policy interest rates to curb the inflation. When investors see a higher return on investment in their home country, they withdraw foreign investment. The same has happened in the stock market of Bangladesh. Foreigners are withdrawing capital from portfolio investments by selling shares.
Capital market analyst and former professor of department of Economics of Dhaka University Abu Ahmed told The Bangladesh Pratidin, “Since the war in Ukraine after the pandemic, foreign investors have been withdrawing their capital from the stock market. It wasn’t only seen in Bangladesh, but also a huge amount of foreign investment was withdrawn from India's capital market. At that time, the banks of the United States and Europe increased the interest rates. Additionally, the value of the local currency against the dollar in Bangladesh continued to be depreciated. Portfolio investors fear capital loss due to depreciation of Tk against the dollar.”
Abu Ahmed also said that foreign investors invest portfolio mainly in local currency. They invest dollars through bank, convert the dollars into money and buys shares in the stock market. When they sell those shares and go to buy dollars again, it is seen that the shares of Tk 85 have risen above Tk 100 as the value of Tk is falling. Foreign investors are seeing that due to the loss of value of the currency, they are able to sell more shares and get relatively less dollars. For this reason, they are withdrawing capital by selling shares.
(The report was published on print and online versions of The Bangladesh Pratidin on July 15 and rewritten in English by Lutful Hoque Khan)
