Policy concerns trigger record Tk358cr foreign stocks sell-off in June
The June outflow almost doubled the Tk161 crore in foreign sales recorded in May and was nearly three times higher than the Tk124 crore seen in April.
The exodus of international capital from Bangladesh's premier bourse accelerated to an alarming pace in June, as foreign investors offloaded shares worth Tk358 crore – the largest monthly net sell-off so far this calendar year.
Despite recent attempts by the central bank to simplify tax repatriation procedures, global fund managers appear to be voting with their feet, driven by deep-seated concerns over regulatory interference and the shifting direction of the country's economic management, according to the stock market analysts.
Data from the Dhaka Stock Exchange (DSE) reveals a staggering imbalance in trade, with total foreign purchases amounting to a negligible Tk6 crore against the massive sell-volume, leaving the market's international participation at a historic low.
The June outflow almost doubled the Tk161 crore in foreign sales recorded in May and was nearly three times higher than the Tk124 crore seen in April.
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This persistent retreat by overseas investors comes at a time when the market is struggling to find a stable footing, as the loss of institutional foreign support drains liquidity from high-quality, large-cap scrips.
According to the DSE, portfolio investment data show that while foreign funds maintain holdings in approximately 130 firms, they actively trimmed their stakes in 19 major companies during June, while showing marginal interest in only 15 others.
The brunt of the selling pressure was felt by the market's most prestigious blue-chip entities.
BRAC Bank, long a staple of international portfolios, witnessed the most significant exit, with foreign investors offloading shares valued at a massive Tk186 crore. This move saw their stake in the bank slide from 35.89% in May to 34.69% in June.
Telecommunications leader Grameenphone followed a similar path, recording Tk42 crore in foreign sales as its international holding dropped to a mere 0.33%.
Other defensive giants such as Square Pharmaceuticals, Marico Bangladesh, and Renata also faced heavy liquidations, with sell values reaching Tk35 crore, Tk23 crore, and Tk16 crore, respectively.
Even British American Tobacco (BAT) Bangladesh and Beximco Pharmaceuticals were not spared, seeing double-digit crore outflows as global funds recalibrated their exposure to the Bangladesh market.
In sharp contrast to the aggressive selling, the appetite for fresh investment remained remarkably thin.
While foreign investors increased their holdings in a handful of companies like Shasha Denims, ITC, and Premier Cement, the monetary value of these entries was insufficient to offset the broader exodus.
Shasha Denims attracted Tk1.24 crore in new foreign capital, while ITC and Premier Cement saw inflows of approximately Tk1.10 crore and Tk1 crore, respectively. Marginal increases were also noted in LafargeHolcim Bangladesh, IDLC Finance, and Jamuna Oil, though analysts described these as minor portfolio adjustments rather than a renewed vote of confidence in the market.
Market experts and industry leaders point to a growing disconnect between the regulator's intentions and investor perceptions.
Moniruzzaman, managing director of Prime Bank Securities and senior vice president of the DSE Brokers Association (DBA), provided a blunt assessment of the situation. He told The Business Standard that renowned global investment firms are increasingly dissatisfied with the performance and policy direction of the central bank.
He further said, "In particular, the way Governor Ahsan H Mansur was removed has raised concerns among foreign investors about the future direction of the country's economy."
He also criticised the Bangladesh Bank's recent directive requiring commercial banks to maintain paid-up capital of at least Tk2,000 crore to qualify for dividend declarations.
According to Moniruzzaman, the move effectively bypasses the globally recognised Basel III framework and penalises shareholders of otherwise healthy banks. Furthermore, the central bank's decision to cap the interest rate spread – the gap between deposit and lending rates – at a maximum of 4% is being viewed as a regressive step.
"This type of regulatory interference destroys the confidence of foreign investors," he observed. He warned that the central bank's current trajectory is moving the country toward what is known as a "command economy."
In such a system, the central government or regulator controls all major economic decisions, ignoring the fundamental market forces of supply and demand to dictate exactly what is produced and how it is priced.
For international fund managers who prioritise market-driven dynamics and transparency, the shift toward a command-style approach makes the Bangladesh equity market appear increasingly high-risk and unattractive.
The irony of the situation is that this massive sell-off occurred despite a landmark policy shift aimed at doing exactly the opposite.
On 20 May, the Bangladesh Bank issued a circular eliminating the long-standing requirement for an auditor's certificate for every single transaction made by non-resident investors.
Previously, foreign investors were forced to obtain a certificate from a chartered accountant for every trade to determine capital gains tax before funds could be reinvested or repatriated – a cumbersome process that caused significant delays and increased compliance costs.
Under the new rules, authorised dealer banks now handle the tax withholding directly from sale proceeds, allowing for immediate credit to Non-Resident Investor Taka Accounts (NITA).
