Bangladesh economy at an inflection point: CAL Securities

Despite ongoing macroeconomic challenges, Bangladesh still has the potential to mimic the 1980-1990s growth story of Malaysia and Thailand, said analysts of CAL Securities, the first-ever foreign brokerage firm waiting for its debut in the Bangladesh capital market.

With the economy's potential, the country is set to attract more investments, while its capital market similarly has the potential to grow, said Ajith Fernando, chief executive officer of Sri Lanka's Capital Alliance Limited (CAL), who is the chairman of the firm's Bangladeshi entity's board.

CAL Securities, as the first foreign stockbroker in the country, wants to utilise the potential of the Bangladesh capital market, he said at a press meet in the Capital Market Journalist Forum's conference hall in Dhaka on Wednesday.

"Bangladesh's macroeconomy is in a 'rough tide' amid the global challenges," said the CAL report on the Bangladesh economy presented at the event.

The global supply chain disruption, energy supply shock and inflated commodity prices together are amplifying inflation, putting pressure on the country's balance of payment and the exchange rate.

CAL's short- and mid-term outlook is, that by the end of 2022, inflation in Bangladesh would soar to 8%, while the central bank is expected to raise the policy rate by 100 basis points to 6.75 for curbing inflation and liquidity absorption.

One year-Treasury bills' yield is expected to soar to 7.8% by the end of 2022, from 5.22% now and less than 2% a year ago.

Bangladesh's situation is much better than many of the developing and developed economies of the world in terms of inflation and rate hikes, CAL presented citing Brazil, India, Pakistan, and even the United Kingdom and the United States of America.

However, the official exchange rate of the taka is estimated to devalue by a further 6%-7% to be exchanged at over Tk93 for a US dollar seven months later.

A further deteriorating situation in the global oil, energy and commodity market might put further pressure on Bangladesh's balance of payment, exchange rate and GDP, CAL expressed its caution for the short- to mid-term.

However, the Bangladesh economy in the near long-term is likely to grow much bigger riding on domestic consumption and exports with several positive factors – including the improving connectivity, 100 economic zones, thriving young and female workforce, the booming SME, light engineering sectors alongside several large scale industries – are in the pipeline to fuel the growth.

Per-capita GDP which is estimated to grow to over $4,000 by the end of 2026 would make the country a bigger consumption house with a fast-growing middle-class population and national household income, the CAL report said.

CAL Securities would operate its investment services based on research, and it would apply the over two decades of frontier markets experience in the Bangladesh capital market, said Raihan Shamsi, local partner and a director of CAL Securities.

Cal Securities is set to begin operations in Bangladesh in June.

CAL Group acquired local merchant bank BetaOne Investments and is planning to rebrand it as the investment banking arm of CAL in Bangladesh.

Ajith Fernando said at the event, that due to the political stability, Bangladesh has a better business environment that offers comparatively higher profits against lower costs.