Bangladesh Banking & Financial Services Q2 2019
Financial market volatility has subsided since late December, but at current levels volatility remains high compared withprevious periods, which could continue to weigh on business and consumer confidence, and/or be signalling that another bout ofrisk-off is around the corner. The risks to global growth remain to the downside with a potential hit on FDI and remittance inflowsthat help sustain the Bangladeshi economy. At the same time, asset quality is deteriorating while liquidity is under pressure due tolow interest rates, which have encouraged borrowing but prompted savers to look elsewhere for higher yields. If banks startrebuilding their loan loss provisions to prevent systemic crisis, they will face a significant reduction in profitability that will bereflected in the value of banking stocks, which are the biggest single sector on the Dhaka Stock Exchange. The sector is so fragilethat any significant event, such as major political unrest or a severe global economic slowdown, could send the banking sector intoa dangerous tailspin.
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