This guide is for intrepid investors who are wondering how to invest in Bangladesh and its capital markets. Curious about investing in other frontier markets? Check out a list of our guides here.
As frontier market investors looking for countries in the early stages of growth, we like looking at demographics and put a premium on population growth. Bangladesh, with the 8th largest population in the world and a GDP per capita of about $3500, is at first glance a prime candidate for potential investors. However, it is usually out-shadowed by India and Pakistan by both emerging and frontier market investors, since they have performed incredibly well of late. This guide is designed to help investors willing to look further into the frontier and want to invest in Bangladesh’s capital markets.
Dhaka Stock Exchange (DSE) Snapshot:
In operation since: 1954 (in Pakistan), 1976 (as Bangladesh)
Location: Motijheel, Dhaka, Bangladesh
Market hours: 10:30 to 14:30, Sunday to Thursday
Currency: Taka (BDT)
Market Capitalization (as of 4 Jan 2016): 4.399 billion BDT ($56.2 million USD)
Listed companies (as of 4 Jan 2016): 559
Taxes: No capital gains tax on individual investors, 25% dividends tax
Main Index: Dhaka Stock Exchange Broad Index (DSEX), an index of 245 stocks
Secondary Index: S&P DSE 30 Index (DS30), an index of 30 of the largest stocks on the exchange
Can foreigners invest in Bangladesh?
Yes! The usual restrictions apply to foreigners owning majority positions in select industries, but for most retail investors there are effectively no restrictions. Foreigners are also free to repatriate any gains accrued without restrictions or other taxes.
How to Invest in Bangladesh through the Dhaka Stock Exchange
Step 1: Find a local brokerage firm accustomed to dealing with foreigners
Finding a local brokerage firm to help you through all the following steps can be invaluable as they can offer local insights and help smooth out the whole process. The Dhaka Stock Exchange has licensed no fewer than 250 stock brokerage companies, which can be found here. This is simply too many to go through, so we did a quick search ourselves and found some firms that at least had pages to help foreign investors out:
- BRAC EPL Stock Brokerage Ltd
- LankaBangla Securities Ltd
- Mika Securities Limited
These are also some of the larger brokerage firms dealing on the DSE so are a good place to start.
Step 2: Find a Custodian Bank
You will need to find a custodian bank to assist in opening the various accounts required to begin trading on the DSE. Here is a list of the custodian banks available in Bangladesh:
- Standard Chartered
- Citi Bank
- BRAC Bank
- Dhaka Bank
- Southeast Bank
- Arab Bangladesh Bank
- Agrani Bank
Step 3: Open 4 Different Accounts
Foreigners will need to open 4 different accounts to begin trading. Each serves a different purpose, but thankfully your broker or custodian bank can help open all of them.
These are the accounts you need to open:
Account #1: Foreign Currency (F/C) Account
- This account is where you send money from abroad, and also where you eventually repatriate your money back out from
Account #2: NITA Account
- A Non-Resident Investment Taka Account (NITA) is a bank account for non-residents to convert foreign currencies into local currency (Taka)
- Earnings from investments such as dividends are also sent to this account
Account #3: BO Account
- A Beneficiary Owners (BO) account is where any purchased securities are actually held
Account #4: Trading Account
- A trading account is held with the broker and holds the funds used to buy and sell securities
- Passport photocopies
- Passport photos
- Bank statements
- Pay slip or tax return
- Brokerage and custodian forms
- Power of Attorney form
We wish you luck in your investments in Bangladesh!
For further reading, we found these links helpful:
- Introductory Startup Guide for Foreign Investors
- Introductory Startup Guide for NRB
- BRAC EPL Investment Process Summary
- Mika Securities Foreign Investors