Politics, liquidity top investor worries as survey reveals cautious optimism for 2026 market

Political uncertainty and liquidity stress have emerged as the biggest challenges facing Bangladesh’s capital market in 2026, according to a comprehensive sentiment survey conducted by LankaBangla Securities, highlighting a cautious yet hopeful outlook among investors and market participants.

The survey was conducted from 1 January 2026 to 25 February 2026, with 101 respondents from diverse backgrounds participating.

The survey found that nearly 40% of respondents identified political instability as the most pressing concern for the year ahead, while liquidity crunch ranked as the second major challenge, cited by 22.8% of participants.

Concerns over weak corporate governance, declining foreign participation, and a lack of innovative financial products also featured prominently, though to a lesser extent.

Despite these concerns, the survey suggests that market participants are not entirely pessimistic. A significant portion of respondents acknowledged the effectiveness of regulatory policies in 2025, with 45.5% rating them as effective and nearly 10% considering them highly effective.

However, a sizeable group remained critical, indicating that confidence in regulatory oversight is still evolving.

The policy, regulatory, and tax environment was identified as the most influential factor shaping the market in 2025, followed closely by financial sector health and liquidity conditions. This underscores the central role of policy direction and macroeconomic stability in determining market performance, particularly in a period marked by global uncertainty and domestic economic pressures.

Political developments continue to dominate expectations for the future. More than half of the respondents believe political stability will be the single most important driver of market performance in 2026.

Foreign investor participation remains a key concern, with political risks identified as the primary deterrent. Weak governance in listed companies and fears of currency depreciation were also cited as significant barriers, indicating that structural reforms are needed to attract international capital.

In terms of market outlook, investors appear moderately optimistic. Most respondents expect the benchmark index to close between 5,500 and 6,500 by the end of 2026, while daily turnover is projected to remain within a modest range, suggesting a gradual recovery rather than a sharp rebound.

The banking sector is expected to lead market growth, followed by pharmaceuticals and insurance, the survey finds.

Investment strategies are also shifting, with more than half of participants favouring medium-term investments, reflecting a balanced approach amid ongoing volatility. Equities are expected to outperform other asset classes, though gold remains a strong alternative for risk-averse investors.

The survey also highlights persistent structural challenges, particularly in the bond market, where nearly half of the respondents expressed dissatisfaction with its development. At the same time, most participants emphasised the need to eliminate double taxation on dividends and reduce capital gains taxes to stimulate investment.

Encouragingly, over 60% of respondents believe that the integrity of Bangladesh’s financial markets will improve in 2026, although concerns over fraud, manipulation, and weak enforcement remain significant. Calls for enhanced transparency, stricter regulatory enforcement, and better corporate governance practices were identified as critical to restoring trust.