Bangladesh – a surprise outperformer in 2026?

Who remembers when Argentina was downgraded to "standalone" status in 2021? The country was so down-and-out that it was no longer even classified as an emerging market. That moment of maximum pessimism turned out to be the best possible entry point. Argentina's equity market subsequently delivered three consecutive years of returns close to 50% p.a. in US dollar terms, even as the MSCI Emerging Markets Index posted negative returns over the same period.

More recently, investors who ventured into Pakistan and Sri Lanka ahead of their pivotal elections in 2024 also did exceptionally well.

Could Bangladesh be the next such dark horse among frontier and emerging markets?

Back in 2021, Undervalued-Shares.com blew the horn for investing in Argentina. In search of the next comparable outlier, I have tapped into the site's extensive network to investigate Bangladesh – a populous but little-followed country to the west of India.

Changing circumstances

Bangladesh's most remarkable feature is its population – or rather, its population density. Around 175m people live on a landmass roughly the same size of Austria (a country of 9m) or the state of New York (19m). It ranks among the most densely populated countries in the world.

Image by Pervez Robin / Shutterstock.com.

Bangladesh rarely makes international headlines. When it does, it is often in connection with extreme flooding. The country's geography – particularly the funnel-shaped northern end of the Bay of Bengal – amplifies storm surges from tropical cyclones. Some of the deadliest natural disasters in recorded history occurred here, including the 1970 cyclone that killed an estimated 500,000 people, and another in 1990 that claimed 138,000 lives.

After decades as a non-contiguous part of Pakistan, Bangladesh gained independence in 1971. The new nation – literally "the land of the Bengalis" – started from an extremely low base. Initially, over 80% of the population lived below the poverty line.

For many years, Bangladesh was also synonymous with corruption. During the 15-year rule of Sheikh Hasina, an estimated USD 234bn was reportedly siphoned from state coffers – roughly 50% of today's GDP. Some argue this figure is inflated for political reasons, but few dispute that the theft of state-owned assets occurred on an industrial scale.

Much has changed since then, and these perceptions are now badly outdated.

Since 2007, no cyclone has claimed more than 200 lives, despite multiple severe storms. Growing affluence allowed the country to invest in early-warning systems and large-scale evacuation infrastructure.

Poverty has also declined sharply. Following economic liberalisation in the early 1990s, Bangladesh has grown at an average rate of 5.7% p.a. over the past 20 years, according to World Bank data. The share of the population living below the poverty line has fallen from 44% in 1991 to around 15% today. While the economy remains heavily agricultural, Bangladesh is now the world's second-largest textile exporter and has built a surprisingly strong pharmaceutical sector.

Politically, the landscape shifted decisively in 2024, when Sheikh Hasina fled the country after mass protests. She now lives in exile in India and has been sentenced (in absentia) to death for crimes against humanity. Efforts to recover some of the stolen funds are ongoing.

Source: Financial Times, 22 May 2025.

Sheikh Hasina's overthrow led to the installation of an interim government under Muhammad Yunus, a name well known in finance. Yunus pioneered modern microfinance and received the Nobel Peace Prize in 2006. Much like Nelson Mandela in South Africa, he was meant to serve as a unifying figure ahead of democratic elections.

That long-delayed election is now scheduled for 12 February 2026.

Catalysts for a re-rating

A full macro analysis of Bangladesh would go beyond the scope of this article, and there will undoubtedly be setbacks along the way – including recent episodes of mob violence. Despite these headlines, several highly experienced investors within the Undervalued-Shares.com community believe now is the time to look at Bangladesh.

Their core thesis boils down to the following:

• Once a new, elected government is in place, investor focus will shift to (hopefully: constructive) measures taken by the new leader.
• Inflation, which peaked at 12% p.a. recently, has fallen into the high single digits, paving the way for interest rate cuts over the coming year.

Source: BRAC EPL, 8 December 2025 Macro Economic Update.

• Bangladesh's stock market is trading near multi-year lows, both in absolute terms and on valuation metrics.

The set-up is reminiscent of Pakistan and Sri Lanka just two years ago – markets widely viewed as uninvestible until elections triggered powerful re-ratings.

Does Bangladesh have what it takes to be the next outperformer among frontier markets?

Judge for yourself by considering the following three ideas that provide exposure to Bangladesh.

Idea #1: BRAC Bank

Investing in frontier markets only makes sense if the additional complications – such as limited market access and lower liquidity – are compensated by outsized upside and/or an exceptional risk/reward profile. Some investors are also attracted by the fact that frontier markets can be relatively uncorrelated with global markets.

A single metric illustrates why BRAC Bank (ISIN BD0138BRACB9, DSE:BRACBANK) deserves closer attention right now.

Bangladesh has nearly caught up with India in terms of GDP per capita. Yet, when measured as a percentage of GDP, the market cap of Indian banks is 20 times higher than that of Bangladeshi banks.

This is, of course, only one metric and comes with its own imperfections. It does not capture the high level of non-performing loans (NPLs) at many Bangladeshi banks, nor the weaker governance standards that plague parts of the sector. Still, it gives a useful indication of where Bangladesh currently sits in the cycle, and how much upside could exist. After all, the goal is to invest BEFORE things improve, not once the improvement is fully priced in.

One family office that is an Undervalued-Shares.com Member recently shared a detailed analysis of BRAC Bank, based on 12 years of following the stock.

BRAC Bank focuses primarily on small and medium-sized enterprises and retail clients, which sets it apart from banks that concentrated on lending to large state-owned enterprises and are now burdened with high NPLs. In fact, BRAC Bank benefited from a flight to safety, which resulted in deposit growth of 34% in 2024 and 29% in the first half of 2025.

As an illustration of how carefully but consistently management has grown the business: revenue increased from USD 236m in 2015 to ≈USD 600m in 2025, while the number of shares outstanding actually declined from 1.975m to 1.769m. Since 2015, the stock is up five-fold – a reminder that growth stocks bought at value prices can perform very well over time, even if short-term circumstances are occasionally a bit wobbly. Had sector multiples not compressed by half over that period, the stock might well have delivered a 10x return.

BRAC Bank.

What could turn BRAC Bank into an outright rocket stock is its mobile financial services subsidiary, bKash.

Think peer-to-peer payments in a country where the majority of people still do not have a bank account. Similar to Kaspi (ISIN US48581R2058, Nasdaq:KSPI) in Kazakhstan or M-Pesa owned by Kenya's Safaricom (ISIN KE1000001402, NSE:SCOM), bKash has captured an astonishing 80% market share in mobile financial services. In a country of 175m people, it has 80m customers and 40m monthly active users. To "bKash" someone money has become a verb in Bangladesh, an indication of just how dominant the platform is.

BRAC Bank controls 51% of the voting shares in bKash and holds a 33% economic interest. Other shareholders include Ant Group (an affiliate of Alibaba), SoftBank Vision Fund 2, the Gates Foundation, and the IFC.

The family office summarised the opportunity as follows:

"The interesting thing is that M-Pesa has generated this 7b value in Kenya, a country of 56 million people, whereas Bangladesh is 3.1x larger at 175 million people. Back of the envelope, we can say that if BKash achieves in Bangladesh what M-Pesa achieved in Kenya, Bkash will be worth 6.8b times 3.1x which is 21 billion USD. Brac's 33% economic stake in Bkash alone would then be worth many multiples of Brac's current market cap of 1.1b (ignoring the fact that Brac also has the best bank in the country)."

On consolidated earnings, BRAC Bank trades at a price/earnings ratio of ≈6.5x, compared with an average and median P/E of 13x between 2009-2024. In effect, the potential of bKash is currently thrown in for free when buying into Bangladesh's strongest bank at a low valuation.

Bangladesh remains vastly underbanked, and BRAC Bank's current market share of 3.4% leaves ample room for expansion. In most banking systems, leading players eventually command far higher shares. In short, investors today can buy into BRAC Bank for its low valuation and Bangladesh's catch-up potential – and get bKash as a free bonus. It is hard to believe the market will permanently ignore bKash's value.

I have added the full analysis provided by my reader to the "Reader Ideas" section on Undervalued-Shares.com (for Members only), together with additional background research on Bangladesh.

BRAC Bank may one day be viewed as one of those frontier-market stocks investors look back on and wonder why they failed to spot the obvious set-up – before the stock rose five- to ten-fold and became widely known as one of THE proxies for a secular growth market.

Another case worth keeping an eye on is...

Idea #2: Beximco Pharmaceuticals

Bangladeshi stocks are generally difficult to access for foreign investors. Beximco Pharmaceuticals (ISIN US088579206, UK:BXP), however, trades in the form of GDRs on the London Stock Exchange, which makes it considerably easier to invest in.

Undervalued-Shares.com readers may recognise the name from the Weird Shit Investing Manual 2025, as the company was presented at the Hong Kong edition of the conference.

Source: Asia Frontier Capital @ Weird Shit Investing Hong Kong 2025.

Beximco Pharmaceuticals is the third-largest pharmaceutical company in Bangladesh by market share. Over the past five years, both its revenue and net profit growth have comfortably outpaced those of its two main domestic competitors. Despite this, the stock continues to trade at a valuation discount, not only to regional peers but even to local ones – despite its solid fundamentals.

Per-capita healthcare expenditure in Bangladesh remains extremely low compared with regional emerging markets and developed countries, providing Beximco Pharmaceuticals with a strong runway for growth. The company operates with low leverage, generates stable operating cash flow, and reports gross margins and returns on equity that are broadly in line with both local and regional peers.

For investors looking for a simpler way to get exposure to the macro-situation, Beximco Pharmaceuticals represents a relatively straightforward option.

There is, however, one caveat. Investing directly in Bangladeshi stocks can involve complex capital gains tax issues, and gaining access to the Dhaka or Chittagong exchanges is difficult. Beximco Pharmaceuticals' GDR structure avoids many of these complications: there is no capital gains tax, dividends are paid in GBP, and the shares can be traded through virtually any broker with access to the London market.

The stock currently trades at a P/E ratio of 6x, around half its long-term average, and is down 70% from its pre-Covid high.

Beximco Pharmaceuticals.

One short-term issue investors need to deal with is the temporary suspension of trading in the London-listed GDRs. Beximco Pharmaceuticals found itself in an unfortunate situation: it had to appoint several new directors, but the relevant court in Bangladesh entered a combined recess and restructuring phase. Without the formal registration of the new directors, the company cannot sign off its latest accounts, which in turn triggered the suspension under London Stock Exchange rules. With a bit of luck, trading could resume within a month – although it may take longer.

It's precisely these kinds of practical frictions that cause some investors choose to prefer outsourcing the legwork to a specialist manager. Which brings us to...

Idea #3: AFC Asia Frontier Fund

Long-standing Undervalued-Shares.com readers will be familiar with Thomas Hugger's Asia Frontier Capital, particularly from earlier coverage of Iraq: in 2021, I suggested an ultra-contrarian investment in the AFC Iraq Fund. Since then, the fund has been a stellar performer, delivering returns of over 200% in US dollar terms, from a market that remains largely uncorrelated with the Western world.

It was Ruchir Desai, portfolio manager at Asia Frontier Capital, who presented Beximco Pharmaceuticals at the Weird Shit Investing conference. Ruchir focuses on identifying multi-bagger opportunities using a disciplined blend of value and growth, supported by extensive "on the ground" research. His approach typically takes a three- to five-year view, rather than reacting to short-term noise.

Ahead of the 2024 elections, the AFC Asia Frontier Fund invested heavily in Pakistan and Sri Lanka – a move that has since paid off handsomely. Over the past three years, the fund has doubled in value.

Source: Asia Frontier Capital, AFC Asia Frontier Fund.

So what is Ruchir's front-runner for 2026?

Bangladesh!

As he told me over the holiday season:

"We just released the AFC Asia Frontier Fund's 2025 Review and Outlook for 2026 and actually Bangladesh is our key call for 2026 – the key reason being that macroeconomic indicators like foreign exchange reserves, current account, inflation, and the currency have all stabilised. However, valuations are at multi-year lows across the board with the MSCI Bangladesh Index trading just above a P/E of 9.0x. > > The stock market and the economy have not performed for the last 5-6 years but now the catalysts are in place in the form of (1) benchmark interest rates declining most likely in the first half of 2026 and (2) most importantly, parliamentary elections are scheduled for 12th February 2026 and I believe that once these elections are through, greater political stability can be a driver of a strong re-rating for the stock market similar to what we saw in Pakistan and Sri Lanka post their parliamentary elections in 2024."

The fund's current allocation to Bangladesh is 10%. This doesn't make it a pure-play exposure, but it does provide a relatively easy way to participate in the opportunity. In addition, the broader region appears set for strong earnings growth.

Source: Asia Frontier Capital, AFC Asia Frontier Fund.

The fund is accessible from USD 25,000, and Ruchir welcomes enquiries from Undervalued-Shares.com readers.

Bangladesh's date with destiny

Of course, success isn't guaranteed for Bangladesh – not politically, not economically, and not for its stock market either.

The bear case is that the country has a long track record of hard-left politics, combined with governments applying short-term, populist fixes to appease the public rather than addressing structural issues.

One example is Bangladesh's decision to prevent its otherwise strong pharmaceutical sector from raising prices in line with inflation, as part of a populist attempt to control headline inflation. Measures like this rarely work beyond a few months. Over time, state intervention tends to lead to distortions and, eventually, some form of crisis. In the shorter term, it discourages foreign investors and reinforces doubts about whether they should ever put a single penny into such an interventionist country.

That leaves some obvious open questions. Will the election lead to a smooth transition of power? Will the new government then start to implement more constructive policies? And how will markets react if the first 6-12 months involve "tough love", with long-standing Band-Aids being pulled off?

A more cautious strategy would be to wait until the first tangible results become visible. If Bangladesh really does turn the corner, the improvement is likely to unfold over several years (as it did in Iraq, Pakistan, and Sri Lanka). One school of thought is therefore to observe developments for a while and only step in a clear trend has emerged. As Warren Buffett once put it: "If you wait for the robins, spring will be over."

You be the judge.

For larger investors among my readers, additional insight into Bangladesh can be gained by speaking to Auerbach Grayson, widely regarded as THE emerging-market brokerage firm that provides Western institutional investors and (U)HNWIs with global trading and custody alongside a network of ~1,800 local analysts producing research on 100+ markets. Bangladesh falls squarely within the firm's coverage universe, and they can connect you for calls with their local analysts and the local management teams. In fact, if you'd like to meet BRAC Bank or Beximco Pharmaceuticals, both will be at Auerbach Grayson's Frontier Asia Conference in Sri Lanka from 9-10 February 2026. You can also contact Alex Vitkalov from Auerbach Grayson if you're interested to join that event or learn more about how they can help you with global trading and custody.

Another firm worth highlighting is BRAC EPL, a subsidiary of BRAC Bank which facilitates account openings for foreigners and even has a dedicated contact specifically for international clients.

The network of well-informed readers subscribed to Undervalued-Shares.com continues to grow in depth and quality rather than sheer numbers. As a result, I certainly won't be short of ideas to report on in the future. Miss out on this incredible resource for idea origination at your peril.

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