HSBC says Bangladesh shares maintain alternatives for fund managers trying to diversify their portfolios — and there might be “hidden gems” among the many public-listed firms there.
The South Asian nation has two inventory exchanges — Dhaka Inventory Alternate (DSE) and the Chittagong Inventory Alternate. The highest 30 listed firms 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 revealed 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 world macro and fairness themes than Vietnam and in addition receives far much less consideration from analysts, creating alternatives for fund managers in search of diversification and ‘hidden gems,'” HSBC analysts stated within the report.
Whereas the Bangladesh market is comparatively small, illiquid and never simple to entry, it has a market capitalization-to-GDP ratio of 14%, in accordance with HSBC. The ratio measures the whole 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 market is illiquid, however that is the place the chance is,” stated Devendra Joshi, ASEAN and frontier markets fairness strategist at HSBC stated Tuesday on CNBC’s “Squawk Box Asia.” He is among the co-authors of the report.
The Bangladesh inventory market has greater than 300 listed firms, 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 client and health-care firms is rising.
Bangladesh is among the fastest-growing economies on the earth. Previous to the pandemic, the nation registered an 8.2% progress fee in 2019, in accordance with the World Financial institution.
Joshi defined that the Bangladeshi financial system is bigger than Vietnam and in addition rising at a sooner tempo than the Southeast Asian nation. “They’ll want increasingly more funding to capital markets in the event that they had been to maintain the expansion,” he stated.
With a inhabitants of some 163 million folks, the nation’s GDP per capita is inching closer to $2,000. That’s set to convey a couple of shift towards discretionary sectors reminiscent of these associated to non-essential client 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 Photos
Although Bangladesh’s clothes export and remittance sector have been key drivers of its financial system during the last 30 to 40 years, that blend is altering, in accordance with Joshi. “The subsequent leg of progress goes to return from the home consumption, the home engine of the financial system,” he added.
Within the report, HSBC additionally famous that Bangladesh is displaying indicators of diversifying away from clothes by establishing infrastructure to permit firms reminiscent of South Korean tech large Samsung and Japanese automaker Honda to construct manufacturing amenities. In the meantime, home pharmaceutical firms and a few home-grown client manufacturers have began exporting to abroad markets.
The nation’s forex, the Bangladeshi taka, has been comparatively steady, Joshi stated. As of Tuesday afternoon, it modified fingers at about 84.79 per greenback and has remained comparatively rangebound during the last 12 months.
Joshi stated that one cause for the soundness is that there aren’t as many portfolio buyers out there, which shelters the taka from volatility.
“From the exterior place additionally, the nation’s steadiness sheet sounds robust, the exterior debt to GDP is sort of low — so the forex has been fairly steady,” he added.
The report additionally famous that an lively and deep two-way market within the dollar-taka commerce has but to develop.