Foreign funds fall in Dhaka bourse

Foreign investment in the capital market witnessed a 93 percent year-on-year decline in 2015, driven by profit booking sales by overseas investors.

Last year, foreign investors bought shares worth Tk 3,825.46 crore and sold shares worth Tk 3,639.98 crore, to take their net investment for the year to Tk 185.48 crore, according to statistics from the Dhaka Stock Exchange.

The net investment by foreigners in 2014 was Tk 2,619.79 crore.

The foreign investors sold a bulk amount of shares, especially in the second and third quarters of last year, to realise the gains they made in the previous two years.

“They (foreign investors) offloaded fuel and power company stocks from their portfolios to book profit, in addition to other stocks,” said Md Saifuddin, managing director of IDLC Securities, which provides services to foreign fund managers.

The falling net investment is not alarming for the capital market, he said. “They are still interested in our market and they were taking position on new securities that were comparatively lower in value.”

Market insiders said the foreign investors had a big stake in Titas Gas, but they sold out a bulk amount of those shares, speculating that the profit margin of the state-run company would decline after the net profit distribution margin was re-fixed.

Last year, Bangladesh Energy Regulatory Commission re-fixed the net profit distribution margin following the new tariff structure for gas consumption in August.

The net profit distribution margin has been reduced by 33.72 percent, which means that if Titas Gas was receiving Tk 100 as net profit in 2014, it will get Tk 66.28 in 2015.

Foreign investors followed the news and reacted smartly by offloading Titas Gas shares from their portfolios, said market insiders.

Also known as portfolio investment, foreign investment accounts for less than 1 percent of DSE's total market capitalisation, which stood at Tk 314,900 crore at the closing of yesterday's trading.

Banks are the foreign investors' preferred sector, but non-bank financial institutions, power and energy, pharmaceuticals, multinationals, telecoms and IT also draw their attention.

Investors include fund managers such as Morgan Stanley, JPMorgan, Goldman Sachs and BlackRock.