Political risks, banking stress drive foreign outflows from stock market
Business Desk :
Foreign investors pulled more money out of Bangladesh’s stock market in the first four months of the current fiscal year as political uncertainty and stress in the financial sector continued to dampen confidence.
Net foreign investment in listed equities stood at minus $66 million between July and October of FY 2025-26, meaning overseas investors sold more shares than they bought, according to Bangladesh Bank (BB) data.
The outflow marks a sharp deterioration from the same period a year earlier, when net foreign investment was minus $9 million.
Market participants say the widening outflows reflect growing caution among foreign funds amid concerns over political stability, weak corporate governance and mounting pressure in the banking sector, particularly among institutions facing capital and liquidity constraints.
Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), said foreign investors are worried that stress in parts of the banking sector could spread more widely.
“Only four to five banks are relatively stable, while the rest are under pressure,” he said, adding that confidence in financial stocks has weakened and risk appetite has declined.
The central bank’s decision to merge five listed banks and move toward the liquidation of nine non-bank financial institutions, most of them listed, has added to investor nervousness and heightened concerns about asset quality, governance standards and regulatory oversight.
Islam, also a director of BRAC EPL Stock Brokerage, said high inflation has hurt consumer spending, limiting the earnings potential of consumer goods companies.
He added that the market lacks new and attractive listings, noting that no IPO has been approved in the past year despite repeated calls to deepen the capital market.
Weak dividend records, poor corporate governance and limited communication with company management have further discouraged long-term foreign investment, he said.
Meanwhile, Mohammed Rahmat Pasha, managing director of UCB Stock Brokerage, said uncertainty surrounding the next national election remains a key concern.
“Until a democratically elected government takes charge, most long-term foreign investors prefer to stay away,” he said.
Pasha also pointed to lingering concerns after the imposition of floor prices in 2020 and 2022, which made the market illiquid and hurt foreign investors, leaving a lasting impact on market credibility and foreign fund mandates.
BB data show foreign investors withdrew $150 million in FY 2024-25, following $343 million in FY 2023-24.
Brokers say foreign funds may return gradually if political stability improves, market rules remain predictable and corporate governance strengthens, alongside a steady pipeline of quality new listings and clearer policy signals from regulators. They added that restoring trust will also require consistent enforcement of rules, improved disclosure standards and sustained efforts to strengthen market supervision.