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At the end of 2010 Bangladesh started doing that thing that frontier market investors dread. A long stock market rally ended so sharply that it sparked protests by angry investors outside the Dhaka stock exchange. The stock market reversal itself followed days of violent protests by Bangladeshi garment workers demanding promised higher wages.

Any hopes that the change in fortunes would be short-lived were dashed and investors saw 2011 wipe out all the gains the stock market had made in the previous year. But things could be about to get better for investors in Bangladesh, according to a report in Monday’s FTfmContinue reading »

By Ifty Islam of Asian Tiger Capital Partners

The macro uncertainties for 2012 remain daunting. The prospects for the next phase of the eurozone crisis still looms large, while an ongoing Chinese real estate crash (and a prospective banking crisis) and the sharp decline in the Indian Rupee suggest that Asia EM may not be the counterbalance growth optimists would hope for. US consumer confidence has been surprisingly resilient but fiscal reality and housing gloom is likely to re-assert itself.

So the balance of risks remains for the global economy to slow significantly more than consensus. Against this backdrop, investors may wish to consider increasing exposure in the less correlated frontier markets such as Bangladesh. Continue reading »

Bangladesh could be this decade’s great usurper if it manages to sidle into the low-value manufacturing gap China is leaving in its wake as it moves up the value-adding ladder. And if a report by McKinsey, the consultancy, is correct the ready made garment sector is one place where Bangladesh is ready to strike. Continue reading »

Manmohan Singh left Dhaka on Wednesday having had the shine firmly wiped off a visit that was meant to mark the beginning of strengthened bilateral ties between India and Bangladesh. The unexpected absence from the trip of Mamata Banerjee, chief minister of neighbouring West Bengal, made it a case of one step forward, two steps back for trade and business ties between the two countries. Continue reading »

By Ifty Islam of Asian Tiger Capital Partners

Asia emerged from the global economic crisis faster than the rest of the world and it is increasingly clear that the world’s centre of gravity is shifting from the Atlantic to the Pacific.

Within the Asian Century debate, there has been a great deal of focus and analysis on the opportunities in “Chindia”. However, another important global macro dynamic is the relocation of low-cost production from southern China to other countries in Asia. Continue reading »

You might think that India takes a close interest in Bangladesh – a fast-growing neighbour with bags of economic potential despite its periodic natural disasters and political upheavals.

But India’s relationship with the country which split from west Bengal to form East Pakistan in 1947 can be best described as one of ‘benign neglect’.

India is a bit player in the Bangaldeshi economy, ranking ninth in terms of FDI. To underscore the apathy, no Indian prime minister has visited Dhaka in 12 years.

However, Manmohan Singh now wants to change all that – with a visit next month that will prioritise business. Continue reading »

For months, the Bangladesh government has waged a bitter battle against Nobel peace prize-winning economist Mohammad Yunus – a course of action that many have warned would hurt Bangladesh’s international reputation.

As supporters of Yunus in the US congress issued fresh appeals on his behalf this week, is it possible Bangladesh authorities are finally waking up to the potential consequences of their campaign? Continue reading »

Mashrafe Mortaza, Bangaldesh pace bowler
Even die-hard fans of Manchester United or the New York Mets might be surprised to hear how seriously they take their sport in the town of Narail, Bangaldesh.

As Reuters reports, protesters in the home town of pace bowler Mashrafe Mortaza enforced a half-day general strike on Thursday following the former captain’s omission from the country’s final 15-man World Cup squad. Continue reading »

Whoever said emerging markets were no longer volatile? Shares in Bangladesh bounced back a dizzying 15 per cent on Tuesday after two days of losses so dramatic that the exchange temporarily shut itself down and protesting investors took to the streets. Continue reading »

By Ifty Islam of AT Capital

Regulators closed the Bangladesh stock market after only one hour of trading on Monday due to a second day of record share price declines, with the DGEN index falling more than 9 per cent.

This in turn led to angry demonstrations from retail investors in the streets of Dhaka demanding that the authorities address the market’s problems. But it is the unrealistic expectation that markets can be held above levels that are justified by fundamentals that is placing the Bangladesh authorities in an almost untenable situation. Continue reading »

By Ifty Islam of AT Capital

Bangladesh remains a paradox among frontier markets: its GDP growth trend is one of the most stable in the region, but it has high levels of asset price volatility. It proved to be one of the economies least affected by the global financial crisis, with GDP growth only slowing from 6.3 per cent in 2008 to 5.9 per cent in 2009 as the country benefited from the so-called “Walmart Effect” of increased demand for cut price garments in recession-hit economies.

While this was a source of some comfort and relief to policymakers, it also helped to inflate an asset price bubble. Managing this may be the biggest macro challenge for the country in 2011. Continue reading »

The Dhaka Stock Exchange had a roaring rally for much of this year, rising more than 90 per cent at its peak, fuelled by easy liquidity and a flood of new investors, with little experience – or expectation – of an equity market’s volatility.

But now Bangladeshi regulators must try to deal with a seriously overvalued market – the market is currently trading at price-to-earnings ratios of around 26 to 27 – and investors with no tolerance for any downward correction. Continue reading »

The success of microfinance sometimes appears simply a matter of a brilliant idea (lending small amounts to unbanked entrepreneurs) and a charismatic leader (Muhammad Yunus, now a Nobel prize winner).

But microfinance’s future growth may depend on governments and big investors. So it’s significant that, according to a new report out today, Peru has the world’s best business and policy environment for microfinance. Bangladesh, home of the Grameen Bank, doesn’t even make the top 30. Continue reading »

Across South Asia, affluent families have long hoarded gold, viewed as the safest asset in turbulent times – and the right gift on an auspicious occasion. Brides are sent off to their grooms decked in gold jewellery that serves both as decoration, and a future safety net. Gold, people think, is more likely to hold its value than mere cash.

Now Bangladesh, one of the region’s poorest countries, has bought gold from the IMF, to hedge against currency volatility. Continue reading »

With Chinese labour costs rising fast, international clothing companies like H&M, Wal-Mart Marks & Spencer, Gap and Zara have looked to up their sourcing from other, lower cost producers like Bangladesh.

The country has the lowest labour costs in the world, with a minimum wage of just $25 per month, a fact that has helped exports to surge to around $12bn, up from just $5bn eight years ago. But much like Chinese workers of late, Bangladesh’s estimated 2m garment industry workers are becoming highly restive, and they have gained an unlikely supporter: the prime minister. Continue reading »