Print Edition - 2014-12-02 | MONEY
Stock market under a tight bear hug
Dec 1, 2014-
The capital market, caught in a downward spiral for the last few months, has started witnessing a steep fall in the transaction amount from this week. The average daily transaction, which hovered around Rs 200-300 million over the last few weeks, dropped to Rs 139.6 million on Monday. The figure was at Rs 115.6 million on Sunday. On July 21, the market had witnessed the highest-ever single-day transaction of Rs 1.2 billion.
“The fall in transaction volume is unnatural as there is no reason for such a slump,” said Sitaram Thapaliya, general manager of Nepse. “We were not much worried about fall in the index as the turnover was on the higher side. But the massive decline in turnover is worrying.”
He said the exchange has asked the stockbrokers to hold a meeting and submit necessary suggestions to improve the situation. The Securities Board of Nepal also recently told the investors not to panic.
On Monday, the Nepse index closed at 851.43 points, down from 1083.55 points on July 21, the highest over the last six years. What is more surprising is the fall comes at a time when banks and financial institutions and insurance companies are announcing bonus shares. Usually, the market shoots up during dividend announcements.
On Sunday, Finance Minister Ram Sharan Mahat said a few players were manipulating the market. At a press meet here, Mahat said there is no reason for the downfall as blue chips are making good profits, macro-economic indicators are positive and the labour problem has almost ended.
A few brokers say the confusion among investors over dematerialisation of share certificates of commercial banks catalysed the market downfall, but the Nepal Rastra Bank has allowed investors to get loans against the collateral of electronic share certificates.
Thapaliya said some stockbroker complained him about the difficulty in getting BT loans, but others said it was not an issue.
BT loan is a type of credit investors take from banks against stockbrokers’ guarantee during the process of ownership transfer of shares purchased.
Banks and financial institutions, which are facing excess liquidity situation, have also been liberal in providing share purchase loans.
Former President of Nepal Stockbrokers’ Association Anjan Raj Poudel said regular investors were facing margin-call problems.
“When the market comes down, they should face margin call from lenders which has affected the market,” he said.
BFIs issue a margin call to borrowers when the price of pledged shares declines, asking them to pay the price difference to maintain the loan amount at up to 50 percent of the market price.
Published: 02-12-2014 09:59