Bangladesh Stocks Have Potential Similar to India, Vietnam

Investors from across the world should pay more attention to Bangladesh's stock market, according to HSBC Holdings Plc, as rising consumption and foreign investments enhance the chances of company profitability.

Analysts Herald van der Linde and Prerna Garg stated in a note released on Wednesday: "Like India two decades ago or Vietnam ten years ago, it offers prospects for significant long-term capital appreciation driven by earnings growth."

They expected earnings to rise by 20% during the next three years.

The need for companies to disclose their ESG practices has increased as environmental, social, and governance (ESG) factors gain recognition and importance on a worldwide scale.

The uncommonly positive assessment of the South Asian country by a foreign broker portends a possible turn of events for the frontier market.

According to HSBC, Bangladesh is also on course to overtake Vietnam and the Philippines in terms of the percentage of its population with a daily income of at least US$20 (RM93).

According to the International Monetary Fund, Bangladesh's economy would develop by an average of 7% over the next five years, making it one of the fastest-expanding countries in Asia.

Over the last ten years, the country's GDP has grown by an average of more than six percent, and lately, its GDP per capita surpassed India's.

Bangladesh recently allowed its currency to trade freely and adopted a unified exchange-rate regime, which allows for transparency and efficiency in foreign exchange transactions, benefitting businesses. It also secured a US$4.7 billion bailout from the IMF in January to fortify its economy.

To be sure, the country faces multiple risks including bad loans, price restrictions on stocks, a volatile currency, and potential political instability. The nation's equity market is also small - carrying less than 450 companies according to data compiled by Bloomberg - and illiquid. The Bangladesh Dhaka Stock Exchange Broad Index gained less than 1 percent this year after falling 8 percent in 2022.

Still, the country's banks should benefit from rising credit growth fuelled by high spending in infrastructure and factories, while its technology companies may gain from a push to make Bangladesh more digital, they added.