No confidence, poor return
Special Correspondent: Foreign investors in the capital market are withdrawing their investment by selling shares from commercial banks as the alien stakeholders have faced the lack of trust on banks due to lower profit, sluggish economic activities and volatile financial condition amid the Covid-19 pandemic.
They have sold more than 389 million shares of 30 listed banks with the capital market in the country during last year.
This analysis was found by reviewing the picture of foreign investment in listed commercial banks of the country.
The data review shows that out of the 30 banks listed in the capital market, Dhaka Bank, ICB Islami Bank, Mutual Trust Bank, and Rupali Bank don’t have foreign investment. The remaining 26 banks have foreign investment in their shares.
At the end of December 2020, about 121 crore 50 lakh 86 thousand shares of these banks belongs to the foreigners. But a year ago, at the end of December 2019, the shares of the bank to foreigners were about 160 crore 41 lakh 13 thousand.
Analysts say the foreign investors are extremely clever. They invest where they see more profit and search huge profit. The country’s banking sector has been in trouble for a long time. Most banks are plagued with defaulted loans. Operating profit is also not going well. Due to this, investors are not getting confidence in the bank.
The foreign investors were the net sellers that indicated highly negative sentiment about the market, said market experts.
They said that the foreign investors backed away from investing in the Bangladesh capital market as the country’s financial sector remained volatile for the second year amid increased non-performing loans, high interest rate and pressure on exchange rate.
Besides, the government’s move to wind up People’s Leasing and Financial Services, a non-bank financial institution, exposed the sad episode of the sector.
A review of the data shows that out of 26 banks, currently holding foreign investment, they have increased their investment in only two banks during last year. Of these, foreigners have bought more than 2 crore 24 lakh 86 thousand shares of Eastern Bank in the last year. As a result, 3.17 percent or two crore 57 lakh 34 thousand shares of the company are now obtained by foreigners.
Besides, the foreigners sold the City Bank’s 552,91,000 shares out of the 982,85,000 that indicated that they have currently remain only 4.23 per cent shares while they also sold 518,42,000 shares of Brac Bank and still remain 52,46,50,000 indicating 39.57 pc foreign shares under the company.
The withdrawal investments by selling shares from other banks are Islami Bank Bangladesh Limited, Southeast Bank Limited, Al-Arafah Islami Bank Limited, Exim Bank Limited, First Security Islami Bank Limited, Mercantile Bank Limited, National Bank Limited, One Bank Limited, and Premier Bank Limited.
The foreigners sold 4,81,38,000 shares of Islami Bank, 4,56,55,000 from Southeast Bank, 207,65,000 Al-Arafah Islami Bank, 238,67,000 from Exim Bank Limited, 209,65,000 from First Security Islami Bank, 178,10,000 from Mercantile Bank, 266,77,000 from National Bank Limited, 193,00,000 from One Bank and 227,04,000 from Premier Bank.
Besides, AB Bank, Bank Asia, Dutch Bangla Bank, IFIC Bank, Jamuna Bank, NCC Bank, Prime Bank, Pubali Bank, Shahjalal Islami Bank, Standard Bank, Trust Bank, UCB Bank and Uttara Bank also lost the foreign investors against shares during the last year.
Meanwhile, Social Islami Bank Limited has enabled to increase foreign investment, which has 1.28 crore shares in the hands of foreigners, which is 1.37 percent of the total shares of the bank. In the last year, foreigners have bought three lakh 75 thousand new shares of the bank.
Former adviser to the caretaker government Dr Mirza A B Azizul Islam, also a former BSEC chairman, said that the foreign investors couldn’t gain confidence as the local investors were not showing confidence in the market.
Regarding the matter, former Governor of Bangladesh Bank Dr Salehuddin Ahmed said that foreign investors are very clever. They invest where they see more profit. At present, the share price of various companies have increased in the stock market, but the share price of the bank has not increased that way. Moreover, defaulted loans are increasing in the banks, leaving excess liquidity in them.
Neither the operating profit nor the post-tax profit is going very well for the bank. This may be the reason why foreign investors think it is better to stay away from bank shares for now. This is the main reason for foreigners to sell bank shares, he added.
Share market analyst and United International University professor Mohammad Musa said that the overall market situation was bad in 2019 that made the foreign investors cautious on the trading floor.
Besides, chaos at the financial sector, rising distrust in the market and depressing economic indicators hit the market sentiment, he said.