Nepal Stock Exchange (Nepse), which opened at 492.84 points on Sunday, fell 6.56 points, or 1.33 percent, to 486.28 points on Thursday, the last trading day of the week, as slew of reasons triggered selling pressure or kept investors away from the bourse.[break]
“One of the reasons that is discomforting investors is introduction of the regulation that allows conversion of additional 19 percent promoter shares of banking institutions into public shares through stockbrokers. It is feared this provision would flood the stock market with shares and cause stock prices to drop,” Stockbroker Anjan Poudel told Republica.
Although Securities Board of Nepal (Sebon), the securities regulatory body, has refuted such claims, investors cite the amendment has paved the way for promoters to sell their shares directly through stockbrokers and few would take advantage of the latest legal provision.
“In such case, share prices of some banks and financial institutions will take a beating,” Poudel said.
Another reason for fall in the benchmark index, according to Poudel, is reduction in extension of margin loans -- credit extended on guarantee of stocks -- by financial institutions.
“Development banks and finance companies that were previously extending margin loans are not interested in extension of such credit these days due to liquidity shortage and fears of further fall in share prices,” Poudel said.
At the same time, fears of hike in lending rates due to liquidity crunch in the banking sector are also dampening investor confidence, Poudel added.
Expensive credit rates puts pressure on investors as many resort to loans for stock investment. Along with that lending rate hike is usually accompanied by rise in deposit rates, which tends to make investment in bank deposits lucrative than stock investment.
“These reasons, coupled with latest political instability, are turning off investors,” Poudel said.
This week the biggest loser was the insurance sector. The insurance sub-index witnessed a drop of 2.51 percent to 787.47 points by Thursday, as shares of leading insurance companies took a beating.
Share price of Nepal Life Insurance Company dropped by Rs 45 over the week to close at Rs 1,120 on Thursday. Share price of Life Insurance Company also retreated by moderate Rs 2 to end at Rs 968 on Thursday. Similarly, shares of National Life Insurance fell to Rs 532 on Thursday from Sunday´s opening of Rs 534, while stocks of Prime Life Insurance plunged to Rs 258 on Thursday from Rs 316 on Sunday.
Share prices of commercial banks also fell over the week.
Stock price of Nabil Bank fell by Rs 85 over the week to end at Rs 1,685 on Thursday, while shares of Standard Chartered Bank Nepal ended the week at Rs 1,760, down from Rs 1,800 recorded on Sunday. Similarly, stock price of Everest Bank dropped to Rs 1,519 on Thursday from Sunday´s Rs 1,526, while shares of Himalayan Bank closed at Rs 695 on Thursday from weekly opening price of Rs 720.
Share price of Nepal Bank Limited, meanwhile, was adjusted to Rs 145 on Thursday from Sunday´s opening of Rs 564 in view of impending rights share issuance at the rate of 1:9.5.
Share prices of hydro companies, development banks and finance companies also fell over the week.
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