Stock investors plead for govt intervention

- POST REPORT, Kathmandu

Sep 8, 2014-

Investors asked the government on Monday to ensure that Nepal Rastra Bank (NRB) became responsible towards the capital market after stocks dived following the central bank’s  ban on institutional investment by banks and financial institutions (BFIs) in shares.

Presenting a seven point-reform agenda in the capital market, they asked the Finance Ministry to give the necessary instructions to the central bank to be responsible.  Although NRB later clarified that its directive on capping investment in shares was limited to speculative investment for short-term gain (held-for-trading securities), the stock market came down significantly since the directive was issued three weeks ago with investors fearing that BFIs could pull out their investment instantly. The central bank has asked BFIs to bring down their held-for-trading securities to 1 percent of their core capital.

The stock market has been on a downward spiral for the last one month for two reason. One, due to stockbrokers’ failure to clear all their transactions on time and two, due to the central bank’s directive. The market has plunged more than 200 points over the last one month. On Sunday too, the market witnessed a sharp drop of 46.13 points and dipped below 900 points in the last three months.

Meanwhile, the Nepal Investors’ Forum (NIF) on Monday advised the government to make efforts to bring more companies into the secondary stock market. Sensing that the domination of the financial sector in the capital market posed a great risk to investors, the NIF asked the government to urge cement factories, hydropower companies, telecommunication companies, goods and beverage companies and schools and colleges, among others, to come into the secondary market. Of the 240 companies listed on the Nepal Stock Exchange (Nepse), 184 are BFIs, 22 are insurance companies and the rest are related with the real sector. The NIF has also urged proper coordination among the regulatory bodies and to avoid conflict with each other’s policies.

Narendra Raj Sijapati, president of Nepal Stockbrokers’ Association, said there should be consistency in the policies issued by the regulatory body including NRB. “Investors are greatly alarmed with the central bank issuing and amending its directives multiple times within a few days,” he said.

Similarly, the forum has urged the concerned authorities to promote institutional investors like mutual funds in the secondary market. It has also advised the authorities to bring CDS and Clearing into full-fledged operation to facilitate complete automation of stock trading.

Speaking at a programme, Aatma Ram Ghimire, coordinator of the NIF’s advisory committee, urged investors not to panic over the present situation. “Investors have to invest cautiously in the market by looking after the fundamentals of financial management including the net profit, reserve fund, paid-up capital and revenue of the companies,” he said. The forum has also recommended bringing non-resident Nepalis to the country’s stock market as soon as possible and urged regulatory bodies to avoid overlapping jurisdiction.

Published: 09-09-2014 09:25

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