Dawn Global has recently launched the Asian Growth Cubs ETF which may be one of the most significant events in the Capital market history of Bangladesh. The ETF which is listed on NYSE (New York Stock Exchange) is focused on five large, fast-growing yet historically difficult to access markets – Bangladesh, Indonesia, Pakistan, Philippines & Vietnam. The fund has initially invested 16.7% of its fund in Bangladeshi companies. In this article, we will take a deep dive into why the launch of this ETF might be a significant moment for Bangladeshi companies.
Greater Access to Capital
Although Bangladesh has been growing over 6% annually for decades access to foreign capital has been limited. According to the Dhaka Stock Exchange, the total transaction of the foreign portfolio investors was Tk 10,388 crore in 2020, which was 7.7% of the total transaction of the exchange. 7.7% of the total transaction seems low because Bangladesh was one of the few countries which had positive GDP growth in 2020.
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The ETF which can be invested by both public and institutional investors can have a domino effect in the Bangladeshi market. Although investing in listed companies doesn’t necessarily help that company financially but the more foreign investment might mean that local companies can raise larger funds for expansion.
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Cheaper Capital
Growing companies in Bangladesh may have cheaper capital to grow if more funds are available for investment. The companies can also have access to long-term investment since most of the companies rely on Bank loans for expansion which gives short-term loans. Companies like Marico Bangladesh, Olympic, GP, and more will only be benefitted if more quality foreign investors start investing in Bangladeshi Capital Market.
More Venture Capital/Private Equity Investment
One of the most common ways for VC firms to exit from their investment is by listing the companies in the stock market. Till now few companies like Runner, ADN Telecom have given their investors successful exit by listing into Dhaka Stock Exchange. More investment in the stock market will mean a higher probability for VC and Private Equity firms to exit by enlisting the companies. This will be huge for the Startup scene as more Startups will be able to get institutional and hopefully foreign investment for its growth.
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