In the wake of significant political changes in Bangladesh, foreign investors are beginning to show renewed interest in the country's stock market. Following the establishment of an interim government on August 8, 2024, which has implemented measures to combat stock manipulation, net portfolio investment from foreign investors surged to $49 million during July-August of the FY 2024-25, a substantial increase from just $3 million in the same period the previous year [61a5e81c].
This shift comes after a prolonged period of foreign divestment, where investors sold shares en masse starting from FY21, resulting in net sales of approximately $269 million. The depreciation of the Bangladeshi taka, which has fallen over 40% against the US dollar in the past four years, has also played a role in shaping investor sentiment [61a5e81c].
The recent lowering of interest rates by the US Federal Reserve by 0.5 percentage points to a range of 4.75%-5% in September 2024 has further contributed to a more favorable investment climate [61a5e81c]. Additionally, FTSE Russell has resumed its review of local stocks after halting this process in February 2023 due to the implementation of floor price mechanisms [61a5e81c].
Despite these positive developments, analysts emphasize that good governance and stable policies are crucial for attracting more foreign investment. The interim government must address these areas to ensure sustained interest from international investors [61a5e81c].
As Bangladesh grapples with economic challenges, including a struggling garment sector and high inflation rates, the return of foreign investors to the stock market could signal a potential turnaround for the economy. However, the government’s ability to maintain stability and implement effective reforms will be key to realizing this potential [fe89a8e5][b4b22494].