Government panel to submit report on capital market

- Rajesh Khanal, Kathmandu

Dec 17, 2018-

The task force formed by the Ministry of Finance to study the current status of the capital market is expected to recommend policy to discourage listed companies from issuing further public offerings (FPO).

One of the panel members said that based on a number of cases observed in past years, listed companies were found manipulating the FPO prices. “The task force has come to a conclusion that those companies wishing to raise their capital base should use the cash dividend amount rather than expanding their capital requirement by issuing FPOs,” the member said in condition of anonymity.

The government panel has identified a number of factors for the slump in the stock market including the ongoing liquidity crunch with the banks—all of them related to flaws in government policies.

Last week, the ministry formed the panel led by the Nepal Rastra Bank deputy governor to study the current status of the money market and capital market after commercial banks started competing on higher interest rates on deposit. The move comes at a time when the Nepal Stock Exchange (Nepse) is in free fall. The ministry raised its concern after a number of commercial banks increased the interest rate on fixed deposit as high as 13 percent, which led to heavy losses in Nepse subsequently.

The task force has almost finalised its report and will submit it to the ministry this week. The panel member told the Post that they are likely to recommend the government to revise the credit to core capital cum deposit (CCD) ratio which is currently maintained at 80 percent by the central bank.

“Citing the ratio as a major factor for the existing shortfall of loanable fund, the panel has come up with the conclusion.”

The panel was set to submit the report on Sunday. However, it has been delayed after the ministry asked to include inputs from agitating stock market investors. Since last week, a group of investors have been organising a hunger strike at the gate of Nepse office in Bhadrakali, demanding the government to address the problems seen in the stock market.

As per the source, the panel members also reached a consensus on the need for the implementation of margin lending by stockbrokers. The sector’s regulator is mulling a provision where stockbrokers can offer loans, up to two times their paid up capitals. “Provided the provision comes online, an estimated Rs10 billion is likely to be released into the market that could help raise demand at the stock market.”

Revising the threshold for considering the risk rating while banks issue loan against shares, restructuring of Nepse and increasing the ceiling of loan in shares from existing 25 percent of the core capital of the bank will be among the suggestions to be forwarded by the panel.

Nepse gains 18.89 points

KATHMANDU: The Nepal Stock Exchange (Nepse) index on Sunday, surged by 18.89 points after the government expressed concern regarding the slump in the stock market. Except manufacturing, the rest of trading groups posted gain in their indices. Mirmire Laghubitta Bittiya Sanstha added up the highest of 10 percent in its shares’ price. 

Published: 17-12-2018 09:04

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