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Asset Performance in Bangladesh: 2023 Review and 2024 Predictions

By Asif Khan, CFA

Chairman

EDGE AMC Limited

Posted on: 14 Feb, 2024

How have various assets performed in Bangladesh in the year 2023?

1. Gold - Gold was the best performer on my list with a return of 26% in 2023 (ignoring transaction costs). Gold benefited from an increase in international gold prices (in USD terms) and additional currency depreciation of BDT versus USD.

2. USD - USD is in the second position with a return of 13% in BDT terms. It's worth mentioning that I used the official exchange rate for consistency. If we used kerb market rates the return % would have been higher most likely.

3. Land and flats - Unfortunately I don't have reliable data on these two groups. However, anecdotally we know that prices surely didn't fall. Flats have benefited from rises in construction material prices. Land also saw price appreciation, mostly in locations away from core Dhaka. My guess is land was number 3 in performance.

4. Stocks - Using DSEX (broad market index) and assuming a dividend yield of 2% we get to a total return of 3.1% for stocks. Stocks were stuck in the floor price for pretty much the entire year of 2023.

5. Government Bills and Bonds - For bonds we used the EDGE Government Security Index which is a market value-weighted index of government securities. This category performed worse than equities with a return of 1.9%. As interest rates increased sharply, bonds and bills saw price declines.

What are my predictions for 2024?

Almost all predictions tend to fail. Yet it is a fun exercise to go for.

Rank 1: I think long-duration government bonds will outperform all categories in 2024. Since outstanding government securities duration is around 3.2 years the EDGE Government Security Index can also perform fairly well.

Rank 2: In number two we have two wildcards which can have unpredictable outcomes. It's a tie between Gold and Stocks. For gold, the main upside potential would come from international price appreciation (if it happens). For stocks, we need interest rates to cool in the latter part of the year for a movement. Since equity valuations are cheap, rate easing could be a strong catalyst.

Rank 3: USD is number 3. My contrarian take on currency is that USD will not appreciate a lot against BDT in 2024. However, I am considering kerb rates and not official rates. The latter (~110) still needs to catch up to kerb rates. (~124). USD is not available to purchase at official rates and hence it's better to think using kerb rates here.

Rank 4: I think 2024 will be the year that the land market finally sees some cracks. A slowing economy and higher interest rates should lead to weakness in prices and lower transaction volumes. Slowing credit growth and asset quality issues in the banking sector are also negatives for land prices.