Foreigners prefer BRAC Bank, Prime Bank in July but pull back from BAT, Renata, Reckitt

Infographic: TBS

Prime Bank and BRAC Bank attracted the highest volume of foreign portfolio investments in July, while investors pulled back from BAT Bangladesh, Renata, and Reckitt Benckiser Bangladesh.

According to Dhaka Stock Exchange (DSE) data, net foreign portfolio investment rose by about Tk250 crore in July. A total of 145 firms had foreign portfolio investments during the month, with investments increasing in 24 firms, decreasing in 27, and remaining unchanged in 94.

Foreigners bought the largest volume of shares in Prime Bank, followed by BRAC Bank, IDLC Finance, Marico, and Uttara Bank. Purchases included Tk233 crore in BRAC Bank shares, Tk78 crore in Prime Bank, Tk19 crore in IDLC Finance, Tk11 crore in Marico, and Tk3.92 crore in Uttara Bank.

On the other hand, they sold a significant number of shares in BAT Bangladesh, Renata, Reckitt Benckiser, and United Commercial Bank. Sales included Tk48 crore from BAT Bangladesh, Tk29 crore from Renata, Tk15 crore from UCB, and Tk8 crore from Olympic Industries.

Analysts noted that foreign investors prefer firms with Strong business potential and good governance. However, because of the large number of so-called "junk stocks" in the market, foreign investment tends to concentrate in only a few companies.

They also pointed out that investors consider Bangladesh's broader economic outlook. Challenges such as macroeconomic instability, weak reserves, currency market volatility, and political unrest could discourage foreign inflows.

MSCI in its June '25 review said the floor price restriction imposed in July 2022 has been gradually lifted for the securities by the BSEC. Yet, two listed securities retained the restriction then, while market participants had reported delays in capital repatriation due to low liquidity in the onshore foreign exchange market. 

"As a result of these market accessibility issues, MSCI will continue to apply the special treatment introduced in February 2023," it added.

"This special treatment defers index review changes and the implementation of corporate events aiming to reduce the number of potential changes in the MSCI Bangladesh Indexes and mitigate concerns on index replicability."

"MSCI continues to welcome feedback on the accessibility of the Bangladesh market and may consult with market participants in case of further developments," it said.

Earlier, in September last year, In its September review, FTSE Russell, a concern of the London Stock Exchange Group and one of the world's leading market analytics and index providers, said that with the Bangladesh Securities and Exchange Commission (BSEC) removing the floor price for all stocks except Beximco Limited and Islami Bank Bangladesh, it will evaluate all other Bangladeshi securities for FTSE index eligibility based on their criteria for the September 2024 reviews.

"FTSE Russell continues to engage with the BSEC to confirm when the restrictions will be lifted on the two outstanding," it added.

Speaking at the Foreign Investors Summit 2025 on 13 August, organised by BRAC EPL Stock Brokerage, Anisuzzaman Chowdhury, Special Assistant for Economic Affairs to the Chief Adviser, said that unlike many countries, Bangladesh has not faced an economic crisis despite recent political changes.

He noted that GDP growth has remained stable while inflation has declined.

"In the context of the global economy, the July performance of Bangladesh's capital market shows that our economy is stable," Chowdhury said. "Amid a rally in global stock markets, Bangladesh ranked third in global market gains. This is remarkable for a market that was once plagued by plunder."

Calling on investors, he added: "Now is a good time to invest in Bangladesh. Our capital market is ready for long-term investments. This is a message not only for foreign investors but also for domestic ones."

By the end of July, leading firms with the highest levels of foreign portfolio investment included BRAC Bank (35.5%), Olympic Industries (33.96%), Beximco Pharma (27.55%), Navana Pharma (19.64%), Renata (19.43%), and Islami Bank (17.88%).

A managing director of a leading brokerage firm said, "Foreign investors generally invest for the long term. For this reason, they analyze a company's financials, management, and transparency before making investment decisions. From this perspective, the number of such companies in our country is not very high. That is why foreign investment in the stock market is still relatively low."

He also added, "Among foreign fund managers in our country, Brummer and Partners is the largest, managing nearly Tk2,000 crore in funds. In addition, Asian Frontier Capital manages some funds as well."

At the Foreign Investors Summit 2025, Takao Hirose, managing director of Contextual Investment LLC, delivered a candid message to Bangladesh: political stability and inclusivity are non-negotiable if the country hopes to attract long-term foreign capital.

Hirose was direct about the nature of global investors. "We are fast money, we are greedy money, and we are aggressive — but we are capricious," he warned.

"The moment we see you going out of control, we will go back to Japan. No violence, please. Differences of opinion are fine, but work them out. You are being watched by international investors — do not scare them off," he said.

He cautioned that foreign investment can act as a "turbocharger" for growth but can also be "a tremendously disruptive negative force" if instability takes root. "When foreigners come into your market, be careful what you wish for," he said, underscoring that stability is the price of retaining investor confidence.

He cautioned against overreliance on foreign capital without a strong domestic investor base, likening it to a "Faustian bargain" — accelerated growth in exchange for diminished control over capital markets. "You need a sound and robust domestic investor base. The depth of your market must be deeper," he said.

Ruchir Desai, fund manager at Asia Frontier Investments Limited, echoed the importance of stability, drawing comparisons between Bangladesh and Sri Lanka. Desai noted that Bangladesh's foreign investor confidence began waning around the 2018–19 fiscal year due to regulatory overhangs, interest rate caps, and stock market shutdowns.

"Confidence is critical," Desai said. "You can have great companies and demographics, but without stability, the economy will not take off."

For Bangladesh, he sees positive signs: inflation easing, exports rebounding, remittances strong, and valuations low. "The platform has been set. If you can build a stable political and policy environment, nothing should stop Bangladesh from meeting its potential over the next five to six years," he said.

Meanwhile, another analyst said, "Listed multinational firms paid a record dividend for 2024, mainly driven by a stable exchange rate and strong foreign exchange reserves. In contrast, for 2023, they paid lower dividends and, in some cases, could not repatriate their declared dividends on time, primarily due to an unstable forex market and currency shortages.

This year, however, Bangladesh has managed to overcome the crisis, which has encouraged foreign investment," he added.

A brokerage firm MD said, foreign investors have been net sellers at the DSE since 2018. The Bangladesh Bank's interest rate cap, the 55-day trading suspension in 2020, and the prolonged floor price restrictions, implemented twice, have heightened their concerns about Bangladesh, as they prefer an unrestricted market environment.

DSE Chairman Mominul Islam said at the foreign investor summit, our key priority is ensuring the regulator's complete independence. "Unlike before, regulators no longer intervene in the daily operations of the market. Legal reforms have been designed accordingly, addressing complaints that were especially common among foreign investors," he added.

Bangladeshi Stocks, however, are yet to get rid of the "special treatment" by the US-based analytics and index provider MSCI that started at a similar time last year.