Monday 10th January saw the second day of closure at the Dhaka Stock Exchange in Bangladesh.
The index plunged by 9.25% (BBC, 2011) within the first hour of trade and a call to close business for the day, were fulfilled. Accompanying the suspension of trade were riots, clashes with police and chanting investors, denouncing brokers and traders as corrupt and manipulative, influencing stock prices (Indianexpress, 2011.) Tuesday 11th January, however, saw the market bounce back just as easily as it deflated. With our Eurasia Food Processing BD ltd. company thriving in the heart of Dhaka and two other factories in Bangladesh, this was a news story that could not be ignored.
Bangladesh, hailed as the 48th largest economy in the world in 2009 and the 2nd best performer in the world in 2010,* (Wikipedia, 2010, MarketWatch, 2011) has seen a correction in its boom. Over valued shares attracted flocks of small, inexperienced retail or individual investors, making decisions based on “sentiment” rather than market experience (Speidell, 2011.) Measures were taken to cool the market late last year and subsequently, large investors withdrew leaving panic in their wake. The market was over hyped and a mass sell, has seen millions removed from the country.
With the Bangladeshi market recovering, up by 15% at closing on Tuesday 11th January, (MarketWatch, 2011) after this seemingly colossal exodus of investors, the unstable nature of the economy inevitably raises questions about the benefits of conducting business in the area.
“There is a-lot of crying in Bangladesh…” explains our Managing Director, Shelim Hussain MBE, “There are no jobs for youngsters; parents are giving them amounts of money to start their lives and they invest, the value spirals upwards at an unbelievable pace.” The demand for shares is far outweighing the supply.
EuroFoods has three factories in Bangladesh; Eurasia in Dhaka, Saidowla Enterprise in Sylhet and Rosemco Foods in Khulna. From these factories, we farm fresh prawns and fish from natural lakes and source exotic, or local species of fruit and vegetables, which are grown under a perfect climate. Through importing fresh and unusual produce to the UK, the options for Asian food businesses are extensive. Our choice to source from Bangladesh is founded upon the quality of produce.
Most importantly, all of the sites in Bangladesh, create jobs and subsequently, provide the Bangladeshi community with an opportunity to start a career. With regular training and BRC approval, our employees are given skills and a regular wage, to build a future outside of a chance investment. Within our factories, we generate our own electricity in attempt to save money and time, keeping money and effort within the business.
What is the future for the Bangladesh economy? “The Bangladeshi market in itself,” says Shelim “is three times the population of the UK. It has seven sister states in India, with a population in excess of 150 million people, Bangladesh will push itself forward. In eight to nine years the market will grow by 6%, so much of the industry is in shadow, however, it could be as high as 10%. Bangladesh, has so much potential and should the bureaucratic issues be rectified, the country would grow between 12%-13% each year.” It is speculated that Bangladesh will be the 30th largest world economy by 2030 (Bangladesheconomy.wordpress, 2010)
Bangladesh is a frontier market and falls victim to an overhyped stock market. In its illiquid state, there is industry growth and progression, however only minor turbulence can cause catastrophic consequences for the small investors of Bangladesh. EuroFoods has a continued commitment to the Bangladeshi community, with an incentive to employ, train and fund career development.
Documents of Interest
*“Bangladesh was up 40% in 2009 and 38% in 2010, so it’s not surprising there is a ‘correction,’” said Lawrence Speidell, chief investment officer at U.S.-based Frontier Market Asset Management, referring to the gains in the S&P Frontier Broad Market Index for Bangladesh. - www.marketwatch.com/story/stocks-in-bangladesh-rise-after-tumble-2011-01-11 -
http://prudentinvestornewsletters.blogspot.com/2011/01/bangladesh-stock-market-crash-evidence.html – interesting website, following and reflecting upon the stock market.
http://www.bbc.co.uk/news/world-south-asia-12156514 – a video report following the crash in Bangladesh
http://www.brc.org.uk/ – the official body that approves the EuroFoods training programme.