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Tuesday, September 18, 2012

Bangladesh loses appeal among global firms for political unrest


FRONTIER MARKET SENTIMENT INDEX
Kayes Sohel

Bangladesh has lost its appeal as a frontier market to the multinational companies taking cue from the political front, according to a new study.
Corporate sentiment towards all three South Asian frontier markets—Sri Lanka, Bangladesh and Pakistan—were among 10 countries that experienced the steepest declines in corporate sentiment, said the latest WSJ/FSG Frontier Market Sentiment Index released recently.
“South Asia seems to be losing its appeal,” it said. 
Frontier markets are less advanced capital markets from the developing world and countries with investable stock markets that are less established than those in the emerging markets.
Based on a study of around 200 multinational companies, the index, created exclusively for Wall Street Journal (WSJ) Frontiers by Washington-based consultancy Frontier Strategy Group (FSG), tracks which frontier markets major European and American firms are focusing their attention on. 
Corporate sentiment is calculated as the percentage of companies that include a country on their watch-list. If 50 of the 200 companies are watching a particular country, the sentiment index score would be 25%.
The extensive damage caused by the ongoing political standoff has hit the country afresh on one year completion of controversial January 5 election which brought ruling Awami League into the helm with its arch rival BNP boycotting. 
 The country is also currently undergoing nationwide non-stop blockade called the opposition party demanding fresh national election.  
VIPB Asset Management Company Chief Executive Officer Shahidul Islam said the foreign multinationals, unlike the portfolio investors, make direct investments. 
“Their sentiment about Bangladesh is negative mostly because of the ongoing political uncertainties in the country,” he said.
Another reason might be that slow pace in implementation of infrastructure projects and lack of economic reforms might discourage them. “For the same reasons, domestic investments have also been low in the recent months.”
Portfolio investment is also negatively affected by the similar factors despite some rise in the last year, Islam noted. 
According to the Dhaka Stock Exchange, foreign investment in 2014 stood at Tk2,608 crore, a rise of over 34% from Tk1,943 crore in 2013.
However, due to the collapse of Bangladesh stock market in 2010 and 2011, the valuations of some of the listed stocks may have been attractive to some portfolio investors, according to CEO of VIPB.
“Therefore, inflow of portfolio investments has been pretty robust in the last few months.”
According to the Frontier Index, Nigeria has held the top spot since the index was launched in June 2014 despite having endured a rough ride for the past few months.
The trends in corporate attention illustrate starkly the impact lower oil prices are having on other oil-dependent frontier markets, said WSJ. 
The three worst performers in terms of change in sentiment in this quarter’s survey are all oil exporters: Angola, Saudi Arabia and Venezuela, according to the Index.
Sentiment declined toward 37 markets out of a total of 68 during the fourth quarter. In the preceding quarter 48 of the 68 markets experienced an increase in corporate attention.
Overall, though, the magnitude of the changes in corporate sentiment towards frontier markets was remarkably low, ranging from +2.62 percentage points to -2.78 percentage points. The previous quarter’s range was +8.68 percentage points to -7.45 percentage points.
Vietnam, with a gain of 1.98 percentage points, climbed to second place on the list. 
Vietnam is not the only market in the region to attract more interest. Cambodia, Myanmar and Laos were all in the top five of countries that saw the greatest improvement in sentiment.

Central and Eastern Europe’s frontier markets were also among the top gainers, a refreshing change for countries such as Serbia, Croatia and Bulgaria that had been some of the worst performers in previous surveys. 

The Dhaka Tribune, 25 January 2015