Nepse dips 106.36 pts in first half this fiscal

- RAJESH KHANAL, Kathmandu
Nepse dips 106.36 pts in first half this fiscal

Jan 16, 2015-

Nepal Stock Exchange (Nepse) lost 106.36 points in the first half of the fiscal year. The market, which opened at 1,045.89 points on July 17 amid the presentation of a reform-oriented budget, closed at 939.53 points on January 14.

The benchmark index hit the year’s high of 1081.51 points on July 23, and plunged to the lowest of 844.06 points on November 18.

Political uncertainty, policies adopted by the regulatory bodies like Nepal Rastra Bank (NRB) and Insurance Board, and confusion about paperless share transaction contributed to the market fluctuation.

The fall, which started with stockbrokers’ failure to timely clear transactions, was further fuelled by the central bank’s directive to cap speculative share investment by banks and financial institutions, and confusion among investors over dematerialisation of share certificates.

However, continued excess liquidity in the banking system, which allowed investors to get loans at cheaper rates, prevented a market crash.

Anjan Raj Paudel, managing director of Thrive Brokerage House, said with cheap loans available, the market stayed at relatively higher levels despite other adversities. He said banks have lowered the interest rates to 7-8 percent from 14-15 percent.

As the benchmark index started to fall following brokers failure to timely clear transactions since the first week of this fiscal year, the exchange took action against a few stockbrokers to support the market.

Later, the Nepal Rastra Bank (NRB) also clarified its directive to BFIs to limit their investments in held-for-trading securities to 1 percent of their core capital was not for other types of shareholding.

Held-for-trading securities are shares or bonds bought with the sole purpose of selling them at a profit in a short period.

Nepse formally started demat transaction on the purchase of shares of commercial banks on October 9. The move was confusing to both the banks and the investors, brokers say. “In the beginning, the banks themselves were not clear on how to do paperless transaction,” said Paudel. “The lack of provisions on providing loans against electronic share certificates was another factor.”

Narendra Raj Sijapati, president of Nepal Stockbrokers Association, attributed the fluctuation to the current political situation.  “Doubts on whether the parties would reach a consensus on the constitution affected the market,” Sijapati said. He, however, said the market would not collapse over political situation.

Hydropower companies (down 789.05 points) were the biggest losers in the review period, followed by insurance companies and banks—down 262.42 points and 140.89 points, respectively.

The m arket transaction too saw heavy fluctuation. The daily turnover, which was at Rs 350-400 million on an average initially, plunged to Rs 70-100 million by November-end. The market capitalisation has reached to Rs 963.41 billion.

 

Published: 17-01-2015 09:49

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