KATHMANDU, July 16: Nepal Stock Exchange (Nepse) index shed 4.38 points this week to close at 1,718.15 points on Thursday -- the last trading day of the week.
Last week also, the benchmark index had dropped 3.48 points, putting a brake on gaining streak that stretched for many weeks. Nepse shed value after many investors chose to book profit, according to stock brokers.
“Investors were on a wait and watch mode, awaiting monetary policy for the new fiscal year. As the stock market is largely dominated by the bank and financial institutions (BFIs), the policy taken by the central bank affects investors,” a stock broker said. “Also, they were keenly watching whether or not the central bank tightens flow of funds to the stock market which has been rallying for the past few months mainly due to cheaper financing from BFIs which have been awash in cash.”
On the last trading day, when the central bank was unveiling its monetary policy, the stock market had gone up by 27.72 points, signaling that the investors were expecting market-friendly policies. However, the market was already closed when the central bank announced the policy to tighten margin lending. The central bank decided to reduce the maximum loans a financial institution can float on the valuation of shares. While BFIs could float loans of up to 60 percent of the valuation in the past, they can now float loans of up to 50 percent of valuation of shares.
While investors were getting hold of shares of microfinance institutions with a hope that the central bank would raise paid-up capital requirement, which was driving up their share prices, the central bank did not take any such decision. Instead, it imposed seven percent spread on the cost of the fund of these institutions which is likely to clip their profits and dividend.
Insurance group suffered the highest loss this week, as its sub-index tanked 366.87 points to close at 8,722.4 points. The sub-indices of Development Bank and Finance groups also shed 35.37 points and 20.72 points, respectively, to close the week at 1,772.75 points and 837.82 points. Hotels group also shed 11.59 points to close at 2,030.71 points. Hydropower group ended 9.96 points lower at 2,690.18 points. Manufacturing and Processing group, however, gained 124.16 points to close the week at 2,581.52 points. 'Others' and Banking sub-indices also posted gains of 35.29 points and 8.62 points, respectively, to end the week at 848.26 points and 1,573.71 points. Trading group remained unchanged at 202.79 points.