Analysts blame regulatory unpredictability and depreciation of Taka for the ongoing selloff
Foreign investors are selling more securities than they are buying at the Dhaka Stock Exchange (DSE). The trend continued for the record eighth consecutive month till October 31, 2019.
Prior to the 2010 crash, their longest selling record consisted of six months in a row.
Analysts blamed regulatory unpredictability and the depreciating value of local currency for the ongoing selloff.
According to the DSE, foreign portfolio investors bought securities worth Tk231.99 crore in October while their selling was Tk 328.92 crore. Trading securities worth Tk560.92 crore over the month, foreigners closed their position at Tk96.92 crore.
In September, foreigners' net sale came down to Tk60.35 crore from Tk102.53 crore in the previous month.
The then record long selling trail was expected to stop as the Finance Minister AHM Mustafa Kamal had come up to solve an ongoing audit claim dispute between Grameenphone and the government amicably, said an analyst at a top brokerage firm who serves a number of foreign clients.
But the initiative failed to stop the dispute to run up to the court and that hurt foreign investors' confidence again as they are concluding Grameenphone issues as an increasing regulatory risk in Bangladesh, he added.
Besides, the long-anticipated depreciation trend of Bangladeshi Taka against US Dollar is also pushing foreign fund managers to reduce their exposures in the DSE.
Foreigners are very sensitive to exchange rate risk, as that erodes their portfolio value in terms of US Dollar even if the assets are okay in local currency, said the analyst preferring anonymity.
Portfolio investment refers to buying and holding listed securities only. Foreign investors are included in this category until they join a listed company's board. Shares held by foreign promotors or sponsors of a listed company are also excluded while the DSE calculates foreign portfolio investment.
In 2019, only in the first two months foreigners added to their portfolio with an anticipation of a market rally to sustain.
But deteriorating money market liquidity along with a series of events that hurt investors' sentiment pushed the market to a downtrend.
DSEX, the key benchmark of the country's stock market, has lost over 20 percent from the interim market pick of January and has come down below 4,700 last week.
On Sunday, the index recovered 29 points to close at 4,712. But a 20 percent decline in trading volume remains as a question among analysts about the strength of the recovery attempt.
After the closing bell at the DSE, 190 securities advanced while 123 declined and price of 39 securities remained unchanged.