Net foreign investment turns negative in early FY2025–26 amid weak banks, high inflation, poor governance, and lack of new listings
Foreign investors continued to withdraw funds from Bangladesh’s stock market in the first four months of FY2025–26, citing political uncertainty, stress in the banking sector, weak corporate governance, and limited growth opportunities.
According to Bangladesh Bank data, net foreign investment in listed shares stood at minus $66 million between July and October, meaning overseas investors sold more shares than they bought. In the same period last year, net outflows were much lower at minus $9 million.
Figure: Bangladesh Stock Mkt. Index Throughout 2024 – 2025 (Candlestick Chart)
Market insiders say financial sector fragility has deepened investor concerns. Saiful Islam, president of the DSE Brokers Association of Bangladesh, said only four to five banks are currently stable, while the rest remain under pressure, weakening confidence in financial stocks.
Only 4 to 5 banks are currently stable, while the rest remain under pressure, weakening confidence in financial stocks.
Saiful Islam
President, DSE Brokers Association of Bangladesh
Investor sentiment has further deteriorated following the central bank’s move to merge five listed banks deemed beyond repair and liquidate nine non-bank financial institutions, eight of which are listed.
High inflation has also squeezed consumer spending, limiting earnings growth for consumer goods companies. Combined with weak dividend records and a lack of large, well-managed new listings, foreign investors see few reasons to stay invested.
Figure: Bangladesh Stock Mkt. Index Throughout The Years (Candlestick Chart)
No IPO has been approved in the past year, despite calls to list state-owned enterprises. Poor communication and weak governance at many listed firms have also discouraged long-term foreign investment, as investors often lack timely disclosures and access to company management.
Political uncertainty ahead of the next national election remains a major concern. Market participants say earlier policy interventions—such as floor prices imposed in 2020 and 2022—also damaged confidence by making large parts of the market illiquid.
Bangladesh Bank data show foreign investors withdrew $150 million in FY2024–25, following $343 million in outflows in FY2023–24.
Brokers note that while valuations now appear attractive, cheap prices alone are not enough. A sustained return of foreign investment will depend on political stability, predictable market rules, improved governance, and a pipeline of quality new listings. Any comeback, they say, is likely to be gradual rather than sudden.
Source: Daily star.