Liquidation of foreign investors hits record high in 2021

As in the previous three years, foreign portfolio investors also continued to sell on the Dhaka Stock Exchange in 2021.

Net sales by foreign investors hit an all-time high of Tk 2,648 crore in 2021, following the same level of Tk 2,606 crore in 2020, according to DSE data.

The continued liquidation of foreigners in the bull market and despite all efforts by the securities regulator to lure funds from foreign and non-resident Bangladeshi investors into the Dhaka and Chattogram stock exchanges frustrates market watchers.

They said some basic frustration has discouraged foreign investors who are serious about their freedom to enter and exit any position in shares of listed companies.

The closure of the stock exchange for more than two months during the first wave of Covid-19 in 2020 and the floor prices then imposed to stop the fall of the market, both criticized for having been against the spirit of the free market, have them discouraged in the Bangladeshi market.

Foreign investors, especially institutional ones, need to quickly exit any security or market regardless of the price, they said.

Moreover, the central bank’s cap on interest rates was not a move that free market fans appreciate.

On top of that, reasoned disclosures and incorrect accounting of some listed companies have long been a discouraging factor for foreign investors and recent developments including the push for more transparency in disclosures, accounts, corporate governance. , have not yet borne fruit for the market in terms of attracting foreign investors.

These are mostly local investors whose buying frenzy has allowed DSE indices to roughly double since mid-2020.

Foreign investors capitalized on market inflation in 2010 by selling overvalued stocks and returned in subsequent years to pick undervalued stocks after the stock market crash.

In 2018, following a decent market recovery and subsequent macroeconomic headwinds and political uncertainty, foreigners again became net sellers in the DSE.

Since then, the trend has persisted.

In 2021, foreign investors sold listed securities worth Tk 5,206 crore against their purchase of securities worth Tk 2,558, which were Tk 6,997 crore and Tk 3,890 respectively in 2020.

However, some foreign institutional investors like Asia Frontier Capital continue to hold DSE stocks, mostly blue chip stocks.

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