US investors show renewed interest in Bangladesh Securities Market

The foreign portfolio investors, mostly Americans, eye Bangladesh securities market that remains largely unscathed amid the global meltdown.
Stock value worldwide lost 42 per cent in the just concluded year, according to the MSC world Index, an International Equity Indices widely used as global benchmarks in the industry. On the other hand, Dhaka stocks lost only 7.10 per cent in the past year.
"The foreign portfolio investors have showed their renewed interest as the macroeconomic potentials and return of democracy after two years might place Bangladesh among the most-preferred investment destination," said Saiful Islam, senior vice president of the Dhaka Stock Exchange (DSE).
The country's stock market performed reasonably well compared to the other global stock markets in 2008, the catastrophic year for the global financial markets, said Mr Islam, who helped bring in portfolio investment in the country.
DSE statistics shows, at the outset of the global financial crisis the foreign investors controlled only around three percent or around $600 million of the total market capitalisation of the DSE. But, by the end of 2008 such investment came down to around $400 million. Currently, the total market capitalisation of the DSE is over $ 15 billion.
According to Bloomberg, the New York-based financial information services company rated the Dhaka Stock Exchange the fifth best performing exchange in the world on currency adjustment basis in the past year.
Mr Saiful said for the past four years, the growth rate reached 6.0 percent plus, despite political instability and a series of natural disasters that usually strangle economic growth.
The foreign investors, mostly American, are now looking for emerging markets for their investment destination, to escape from economic recession in their country, he added.
Inflow of foreign portfolio investment is required for the robust growth of the securities market, the DSE senior vice president said.
Capital market analyst Yawer Sayeed , however, said there should be lock-in system in the secondary market to prevent foreign investors from selling shares at a time.
"But, I welcome their investment in large initial public offerings (IPOs) and corporate bonds in private placement, but not on small issues as it might affect the market in the wake of sudden withdrawal of funds," he added.
According to the DSE statistics, the foreign investors pulled their funds out of the local stock markets in 2008 to meet liquidity crisis faced by the their parent companies due to global credit crunch.
Foreign trade turnover at the market, however, dropped by more than 33 per cent to over Tk 13.17 billion in 2008 from the previous year's Tk 19.91 billion, it shows.
They sold shares worth Tk 7.67 billion in the just concluded year, while they bought shares worth Tk 5.50 billion last year.
Foreign trade turnover accounted for 1.97 per cent of the DSE total turnover in 2008, while it was 6.16 per cent in 2007. Source:- The Financial Express Dated: 11-Jan-2009