bdinvest.org

Vietnam vs Bangladesh – some perspectives

talam — Fri, 07 Mar 2008 12:11:21 +0000

[An email discussion among some of the members of bdinvest mailing list - excerpted here]

Having had a day of meetings here in Ho Chi Minh City with mostlyfund managers and brokerages, I have to say that this market, down46% from peak on March 17, 2007, is probably considerably moreinteresting over the next 12-18 months than Bangladesh. One of themain reasons, without a doubt, is that the Ministry of Finance justusurped authority from the central bank yesterday and has made thestability and continued growth of the capital markets apriority. I wonder if it’ll take a similar type of crash for Bangladesh to takeauthority away from the skeletons at the SEC. - Rahat

Securitization in Bangladesh

talam — Sat, 01 Mar 2008 02:40:38 +0000

What? Securitization? You mean creating those @#$@#% structured securities that are causing so much pain all around the world currently? I mean – look, AIG just took an $8B (pre-tax, post is $5.3B) loss – that’s about 10% of Bangladesh’s GDP! Imagine if 10% of Bangladesh’s annual production just went zoom zoom … [sorry - this week, indeed many recent weeks, were not kind to ppl in capital markets .... just letting off steam...]

Agreed now may not be the most opportune time to bring up securitization in polite conversation, at least not on Wall St or the City. But it used to, and will again in the future (no, I don’t think I am being naively optimistic here) serve a useful purpose in channeling funds, providing liquidity, and providing (appropriate levels of) leverage where needed.

Infrastructure development is an area where securitization techniques can and should be applied – and it seems like at least the Jamuna bridge securitization effort is ongoing (see recent Daily Star article for example). Also – note all the recent talk by Bangladesh Bank trying to get the banks to reduce the spread between deposit and lending rates (now ~6%) – clearly, alternate and cheaper funding sources can help industry as well.

A quick google search revealed Asset Securitization in Bangladesh: Practices and Impediments – a paper by three academics in Bangladesh. Quite a good summary of securitization in general, for those wishing an introduction. The paper, published early 2006, lists two securitizations done in BD till then – (1) Industrial Promotion and Development Company (IPDC) securitized Tk 359m of their debt receivables in Nov 04 and (2) IDLC securitized Tk 190m of their lease receivables in Feb 05. Both deals were done by ICB (quasi government investment company – see a description here), were in the form of zero coupon bonds (curious why – tax benefit?). The paper lists various impediments against the future development of securitizations (e.g. lack of legal framework, tax framework etc.). Paper also notes the lack of a developed government bond market – so no reliable yield curve for pricing structures.

If this Jamuna bridge securitization happens – whether it ends up being Tk 500cr (=Tk 5B) or Tk 200cr (=Tk 2B) – will completely dominate the size of the IDLC/IPDC deals noted above.

I know of at least two other securitizations of microfinance loans done in recent years. So – securitization has happened in BD and may represent an attractive opportunity in the future.

Look – we can at least go to all those unfortunate to have invested in sub-prime in recent years and say “I have a bridge I would like to sell you …..”

PE/VC activity in Bangladesh

talam — Thu, 28 Feb 2008 18:15:55 +0000

Here are the two companies that I know about in the PE/VC space already in Bangladesh, and recently started by NRBs:

I know of other similar activities that are ongoing that started only recently – yet another sign of increasing optimism about the country’s economic future.I will start a section on the Links page to list PE/VC companies in Bangladesh.

Brand Bangladesh

talam — Thu, 28 Feb 2008 18:14:52 +0000

Activity around the topic of what to project as Bangladesh’s image in the world – “branding” Bangladesh:

Recently held “Bangladesh Brand Forum” (see news report)

CPD article (CPD=Center for Policy Dialogue in Dhaka)

Most recently, article by Ifty Islam of AT-Capital in Daily Star.

NRB community is a huge resource that hasn’t been leveraged directly yet in projecting a brand for Bangladesh. As (and if) these branding initiatives gain momentum, we should look to see how we can reach out to worldwide NRBs to contribute.

Deutsche Bank synthetic equity platform to access DSE

talam — Wed, 27 Feb 2008 05:24:58 +0000

An institutional platform that provides equity investors with synthetic access to the Dhaka Stock Exchange (DSE) via participatory notes or total return swaps.

A total return swap typically allows an investor exposure to the returns of an underlying asset without directly needing to own/trade it. For investors without direct access to DSE, this provides an alternative to having to go through a local broker/dealer. Overall – this lowers the barrier to entry.

South Korean Firm to build World’s Biggest Factory in Chittagong

Rasheq — Mon, 25 Feb 2008 20:05:03 +0000

Interesting points:

YoungOne Corp

- Also has operations in Vietnam and China with more than 800 million in sales.

- Owns Bangladesh’s first private export processing zone which can accomodate 500 factories.

Bangladesh:

- Exported US $76million worth of footwear in the first year of FY 2008, up 18.6 year on year.

Read the full article here.

JPMorgan Commits $750 Million to Asia Private Equity

talam — Tue, 19 Feb 2008 11:34:49 +0000

Bloomberg
Reuters

Industry focus is predictable:

“it wanted to invest in ventures with existing corporate clients in several areas, including the consumer, retail, industrial, health care and natural resources sectors”

A thesis that came up during the 24 Jan NYC investment panel on Bangladesh was that BD (=Bangladesh) may actually benefit from the global credit crunch as investor wish for diversification redirects funds. The Reuters article suggests this as one of JPMorgan’s motivations:

“ratcheting up their investments in the fast-growing Indian and Chinese markets as a global credit crunch hampers big buyouts in Europe and the United States”

But private equity in Asia may look different from what it is in US/Europe:

“But in a region where full-scale buyouts are often frowned upon and are difficult because families are still the main players in business, funds have had to settle mostly for taking minority stakes.”

Will that model work in Bangladesh? Time will tell…

A different type of RMG business from Bangladesh – “fair-trade apparel”

talam — Mon, 18 Feb 2008 17:13:55 +0000

A New York Times review of Fair Trade Apparel by Counter Sourcing

Foreign portfolio flows into DSE for 2007

talam — Sun, 17 Feb 2008 03:57:20 +0000

Financial Express news report re foreign portfolio flows into DSE for 2007: Net inflows=Tk 8.9B