Local polls, monetary policy review fail to lift investors sentiment

Published On: February 25, 2017 12:30 AM NPT By: Republica  | @RepublicaNepal

Nepse plunges 32 points

KATHMANDU, Feb 25: Nepal Stock Exchange (Nepse) index plunged 31.89 points this week to close at 1,337.46 points on Thursday -- the last trading day of the week.

The stock market, which showed some recovery last week, took a downward path again this week. Though the announcement of local level polls was expected to lift the hope of investors, the government decision to hold such polls on May 14 failed to bring any such outcomes. The mid-term review of monetary policy also failed in this front.

        A major factor that is causing the bear run in the secondary market is the tightening of loans by bank and financial institutions (BFIs) to the stock market investors in the wake of shortage of lendable fund. While the central bank has introduced some measures that can ease up lendable fund shortage, it has also cautioned BFIs from lending money into unproductive sector like the stock market. Margin calls to investors, who have borrowed from BFIs is increasing, as prices of stocks are falling, sending stocks further down as investors have to either pledge more stocks as collateral or deposit more cash. “

"The stock market did not respond positively to the decision to hold election and the mid-term review of the monetary policy. There is uncertainty over the polls as Madhes-based parties have hinted that they would boycott the electi”n," a stockbroker sai“. "However, that did not mean that there were no buyers at all. While sellers were trying to get higher prices, buyers were looking to get those shares at lower price. It was like tight negotiation is going ”n," he added.

All trading groups ended in the red zone this week. Insurance group was the biggest loser as its sub-index nosedived 250.48 points to close at 5,855.35 points.

A total of 6.23 million units of shares of 161 companies worth Rs 2.74 billion were traded in the market this week through 28,068 transactions. The turnover is 6.43 percent higher compared to last week.

Banking, the heavyweight trading group, ended 33.32 points lower at 1,273.45 points. Finance and Hydropower groups also fell 20.83 points and 20.06 points, respectively, to settle at 615.78 points and 1,558.39 points. The Sub-indices of Development Bank and Hotels went down 13.75 points and 11.3 points to close at 1,447.4 points and 1,705.81 points, respectively.  'Others' group also closed 9.54 points lower at 699.91 points. Manufacturing and Processing group also shed 2.49 points to finish at 2,139.22 points. Trading sub-index remained unchanged at 206.16 points.

Nepse initiates process to add three clearing banks

Nepal Stock Exchange (Nepse) has said that its subsidiary, CDS and Clearing Ltd, was initiating the process of licensing clearing banks.

Issuing a statement, the stock exchange company said that CDS and Clearing Ltd started the process, following the amendment to Securities Transactions Clearing and Settlement Bylaws which has incorporated provisions to add more clearing banks.

Three more banks will be added to work as a settlement bank through a competitive process, Nepse said in the statement.

Currently, only Global IME Bank Ltd is providing clearing services to securities transactions. Though the Securities Board of Nepal (Sebon) - the capital market regulator -- has been repeatedly instructing the Nepse to add more clearing banks, the stock exchange company was showing reluctance to expedite the process of adding clearing banks stating that the bylaws should be amended first.

Nepse has set paid-up capital, depository participant license, experience of handling government transactions, and branch network, among others, as the criteria for selection of clearing banks.


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