Policy uncertainty keeps foreign investors wary ofBangladesh stocks
Agencies Dhaka Foreign investors continue to pull out of the local stock market due to a mix of nearly half a dozen reasons, including policy and regulatory uncertainty, weak corpo...
Foreign investors are withdrawing from Bangladesh's stock market due to various factors, with policy and regulatory uncertainty being a major concern. In the fiscal year 2025-26, a net $223 million was pulled out, an increase from the $138 million in the previous year, according to Bangladesh Bank data. Net foreign portfolio investment has been negative since FY21, indicating more shares have been sold than purchased.
The Bangladesh Securities and Exchange Commission (BSEC) introduced floor prices in 2020 to prevent share price declines during the COVID-19 pandemic, lifting them in 2021, only for them to return the following year. Floor prices set minimum trading levels, restricting price movements. Kazi Monirul Islam, CEO of Shanta Asset Management, said the interest rate cap in the banking sector was another reason for the outflow.
The BSEC reintroduced floor prices for 169 companies in 2023, then lifted them from all but 35 in 2024 and all but two in August 2024. The BNP government lifted the remaining restrictions in June.
Market insiders attribute this uncertainty to past policy interventions, including the repeated use of floor prices and other regulations. Saiful Islam, president of the DSE Brokers Association of Bangladesh, noted that MSCI has paused regular index reviews after the floor price was implemented. He believes foreign investors compare Bangladesh with other markets and will invest elsewhere if better opportunities arise.
The banking sector's issues, such as interest-rate caps, deposit caps, and weak corporate earnings, also deter foreign investors. Regulatory decisions, like the BTRC's designation of Grameenphone as a significant market power, have further reduced investor confidence. Currency risks, tax concerns, and weak liquidity, with few large, liquid companies, also contribute to the negative sentiment. Despite these challenges, the market may still attract some foreign investment, but rebuilding confidence will take time.
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