Asia Frontier Capital’s fund manager Ruchir Desai expresses optimism about the Bangladesh stock market, citing attractive share prices, economic stabilization, and improving political conditions. He plans to increase investments after a significant decline in foreign portfolio holdings, while advocating for regulatory consistency to restore investor confidence. Desai believes the market is undervalued and sees long-term growth potential for individual companies.
Asia Frontier Capital (AFC) is showing optimism regarding the Bangladesh stock market, thanks to affordable prices of shares from well-managed companies, a stabilizing economy, and improving political conditions, according to fund manager Ruchir Desai. He indicated that the economy and stock market have likely bottomed out during an interview on his first visit to Dhaka since 2019.
Desai compared Bangladesh’s current situation to that of Sri Lanka and Pakistan in past crises, where rising dollar prices, inflation, and interest rates triggered significant economic reforms, leading to stock price recoveries. After his November 2022 visit to Sri Lanka, AFC saw a 40% rally in that market, followed by a 65% surge in 2024 after investing amid similar conditions.
His fund has been involved in Bangladeshi stocks since 2013 and plans to increase investments despite foreign portfolio investment in Bangladesh plummeting to approximately $1.2 billion, down two-thirds over six years. Previously, favorable demographics and strong macroeconomic indicators attracted foreign fund managers to Bangladesh.
Investor confidence was undermined by the pandemic-related market shutdown, imposed floor prices, and arbitrary regulations that persisted for years. Furthermore, the Ukraine conflict led to a foreign currency crunch and inflation, but Desai believes conditions are stabilizing due to measures implemented under the IMF loan agreement.
He noted the decline in the market P/E ratio to around 9.5 from 16-17 several years ago, highlighting undervalued stocks despite their earnings growth potential. While some investors maintain a pessimistic view on Bangladesh, Desai disagrees, pointing to recent improvements in inflation and the political climate.
He pointed out that while the Bangladeshi taka has weakened, a return to single-digit inflation and a recovering export sector alongside strong remittances serve as signs of economic recovery. Desai anticipates a gradual improvement in the overall outlook for Bangladesh, with more lucrative stock opportunities.
The fund currently allocates roughly 10% of its investments to Bangladesh, with potential to expand this to 20% over time. He emphasizes that not all positive changes will occur quickly and projects inflation to stabilize within the mid-single digits over the next several months.
AFC maintains a long-term buying strategy, focusing on established companies, having held investments in firms like Square Pharmaceuticals and BRAC Bank since the fund’s inception. Desai intends to re-engage with the Bangladeshi market, having met with executives from around 13-14 listed companies and added some to his watchlist, including City Bank and Walton.
He is optimistic that ongoing economic adjustments will set a stronger foundation for sustained growth, aiming to restore GDP growth to previous levels soon, yet acknowledges the need for regulatory consistency. Desai urges regulators to cultivate investor confidence through stable regulations and a competent regulatory body to foster a trustworthy environment for long-term investors.
He concluded with a broader observation that while all nations have inherent challenges, maintaining straightforward processes will be essential for Bangladesh to attract sustained foreign investment.
The article discusses the positive outlook for the Bangladesh stock market as indicated by Ruchir Desai, fund manager of Asia Frontier Capital, based on improved economic conditions and political stability. It touches upon the impacts of previous crises on similar markets and the importance of regulatory consistency to attract long-term foreign investments. Desai’s long-term investment strategy and specific stock picks in Bangladesh illustrate the potential in the market despite past challenges.
Ruchir Desai of Asia Frontier Capital sees potential in the Bangladesh stock market due to stabilizing economic conditions and undervalued stocks, proposing a gradual recovery to previous growth levels. His advocacy for regulatory reform aims to build investor confidence, highlighting a long-term commitment to investing in blue-chip companies. Desai’s insights suggest an optimistic outlook for Bangladeshi equities considering the current corrective economic measures.
Original Source: www.tbsnews.net
