HSBC says Bangladesh shares maintain alternatives for buyers
The South Asian nation has two inventory exchanges — Dhaka Inventory Trade (DSE) and the Chittagong Inventory Trade. The highest 30 listed corporations by market capitalization and liquidity in Bangladesh are on the DS30 index, which is up greater than 65% over a 12-month interval.
In a report printed this month, HSBC stated the Bangladesh inventory market is the place Vietnam was 5 years in the past — the Southeast Asian nation is a frontier market favourite amongst buyers. The financial institution says Bangladesh is nicely positioned to begin closing the hole with Vietnam.
“It’s much less correlated with international macro and fairness themes than Vietnam and likewise receives far much less consideration from analysts, creating alternatives for fund managers on the lookout for diversification and ‘hidden gems,'” HSBC analysts stated within the report.
Whereas the Bangladesh market is comparatively small, illiquid and never straightforward to entry, it has a market capitalization-to-GDP ratio of 14%, in accordance with HSBC. The ratio measures the overall worth of a rustic’s publicly listed shares, divided by its GDP and might make clear whether or not shares within the nation are overvalued or undervalued. A quantity beneath 50% signifies a market is undervalued.
The Bangladesh inventory market has greater than 300 listed corporations, and solely 7 shares have a market capitalization of greater than $1 billion, in accordance with the HSBC report. The broader DSEX index has lengthy been dominated by monetary shares however the weightage of shopper and health-care corporations is growing.
Joshi defined that the Bangladeshi financial system is bigger than Vietnam and likewise rising at a sooner tempo than the Southeast Asian nation. “They are going to want an increasing number of funding to capital markets in the event that they had been to maintain the expansion,” he stated.
With a inhabitants of some 163 million individuals, the nation’s GDP per capita is inching nearer to $2,000. That’s set to convey a few shift towards discretionary sectors similar to these associated to non-essential shopper items and companies, which have a tendency to extend as disposable incomes rise.
Prepared made clothes staff works in a clothes manufacturing unit in Dhaka on July 25, 2020.
Ahmed Salahuddin | NurPhoto | Getty Photographs
Although Bangladesh’s clothes export and remittance sector have been key drivers of its financial system over the past 30 to 40 years, that blend is altering, in accordance with Joshi. “The following leg of development goes to come back from the home consumption, the home engine of the financial system,” he added.
Within the report, HSBC additionally famous that Bangladesh is exhibiting indicators of diversifying away from clothes by establishing infrastructure to permit corporations similar to South Korean tech large Samsung and Japanese automaker Honda to construct manufacturing services. In the meantime, home pharmaceutical corporations and a few home-grown shopper manufacturers have began exporting to abroad markets.
The nation’s forex, the Bangladeshi taka, has been comparatively secure, Joshi stated. As of Tuesday afternoon, it modified palms at about 84.79 per greenback and has remained comparatively rangebound over the past 12 months.
Joshi stated that one cause for the steadiness is that there aren’t as many portfolio buyers available in the market, which shelters the taka from volatility.
“From the exterior place additionally, the nation’s steadiness sheet sounds robust, the exterior debt to GDP is kind of low — so the forex has been fairly secure,” he added.
The report additionally famous that an lively and deep two-way market within the dollar-taka commerce has but to develop.