Dhaka mutual fund road show starts

Dubai: The Bangladeshi government has launched a road show in the UAE to promote the Bangladesh Fund, a 50 billion Bangladeshi taka (Dh2.3 billion) open-ended mutual fund backed largely by local banks and aimed at encouraging institutions and investors back into the stock market.

The move comes nearly 11 months after the biggest stock market crash in the country's 40-year history that wiped out more than 50 billion taka from the market — in which the majority of the 3.5 million retail investors have lost their life savings.

Non-resident Bangladeshis (NRBs) will be able to subscribe to the fund, at a face value of 100 taka per unit with a minimum subscription of market lots of 100 per investor.

The road show, which started in Dubai yesterday, will cover Abu Dhabi, Sharjah and Ras Al Khaimah, is part of a global campaign to attract investment from a pool of nearly eight million NRBs spread across the world.

"The main objective of the Fund is to help stabilise the capital market, provide liquidity in the market and declare attractive dividend to the unit holders," its prospectus says.

The mutual fund, to be managed by state-run Investment Corporation of Bangladesh (ICB), has already pumped around 15 billion taka into the stock market.

Aside from the ICB, cash was provided by four state-owned banks (Sonali, Rupali, Agrani and Janata), insurance companies Sadharan Bima and Jiban Bima, and Bangladesh Development Bank.

Dr S.M. Mahfuzur Rahman, ICB chairman, told Gulf News: "We have already invested part of the 15 billion taka into the market with selected stocks and this is performing well."

ICB, which manages a good number of funds, has been offering lucrative dividends, ranging from 32 per cent to 500 per cent depending on the market situation, he said.

Safe investment

"This is a safe investment with the possibilities of higher returns," he said. "As the biggest fund manager, ICB have a large pool of resources to invest in the forthcoming initial public offerings (IPOs) that usually guarantee larger returns.

"Also, the cumulative investment options mean that the dividends will automatically be converted into new certificates that will be invested further, unless the investor wants to cash in the dividends."

He said retail investors have so far invested 300 million taka — a much lower subscription than the total sum.

"We hope the NRBs will pick up the certificates in large numbers, especially the business community and the professional group that possess high disposable income and investable savings," he added.

An estimated 800,000 NRBs live and work in the UAE, mostly labourers. However, more than 10,000 of them own businesses and a further 15,000 professionals work in various government and private institutions.

The fund provides a safe investment option for NRBs, who will also benefit from a lower value of taka per US dollar and UAE dirham.

Cash-trapped Bangladesh is trying to find ways to boost its falling foreign currency reserves that are primarily being met by export earnings and remittances by the NRBs.

Bangladesh's foreign currency reserves have fallen to $9.6 billion from $11 billion in recent months, barely enough to support three months' imports.

As a result, the taka has been losing value against all major currencies and has been traded at nearly 80 per dollar and 22.20 against the UAE dirham.

Greater subscriptions of the Bangladesh Fund by NRBs will help rescue the foreign currency reserves, bankers and analysts say.

"The investments made by the NRBs will be channelled through the banks. Obviously, this will help the foreign currency reserves at the central bank and help the taka to stabilise," said S.M. Aminur Rahman, CEO and Managing Director of Janata Bank, one of the four nationalised commercial banks that have subscribed to the fund.

The fund certificates come with some incentives. The unit certificates of the fund will be freely transferable by way of inheritance/gift and/or by specific operation of the law while the unit holders could surrender their unit certificates during business hours as specified by the Asset Management Company.

The Asset Management Company will be liable to repurchase the units on behalf of the Fund.

"Income will be tax free up to a certain level, which is permitted as per the Finance Act.

Investment opportunity