Market reverses course on news reports of finance ministry white paper

KATHMANDU, March 28: After falling by over 4.25 percent on Monday, Nepal Stock Exchange (Nepse) index rebounded 39.16 points, or 3.35 percent, on Tuesday amid speculations that the government was bringing a white paper on country's economic situation soon. 

The benchmark index had plunged 51.89 points on Monday after media reports quoted Minister for Finance, Yuba Raj Khatiwada, as saying there is no reason why the stock market should not fall. 

The stock market crash on Monday, which also triggered circuit breaker, had wiped out paper value worth Rs 60.8 billion as the market capitalization fell to Rs 1,368.94 billion.

The statement caused the stock rout as panicked investors scrambled to offload their shares. However, the stocks started rebounding in the latter half of Tuesday's trading session on account of news reports carried by online news portals which said that the government was preparing to issue a white paper and address the concerns of stock investors in the document.

Investors also seemed to be gaining confidence as they found opposition parliamentarians as their allies to raise the concern of stock market rout in the upper house of the parliament.

Though the Ministry of Finance officials are said to be preparing the white paper since Khatiwada assumed office, the plan has been put on the backburner in recent days. The recent report about white paper could not be verified from the ministry. 

Speaking at the meeting of National Assembly on Tuesday, Radheshyam Adhikari, a lawmaker from Nepali Congress, said that the government should make its position clear about the stock market. “Here, there is a perception that only richer people buy shares.

However, small investors have been buying shares and small fund is being invested in the capital market,” said Adhikari. “The capital market is on a downward trend. It has been more than a month and the market is also taking a dive ever since. The reason for the fall has been attributed to the speeches of the finance minister. The finance minister should clarify whether it is true or not.”

Drawing attention of the finance minister toward the stock market slump, Adhikari also asked the government to clarify whether it considers share market as an unproductive sector.

The positive viewpoints of a member of the upper house coupled with news reports about the white paper helped in reversing the direction of stocks. 

Though leaders of stock investors blame Finance Minister Khatiwada for the stock market turmoil, analysts say that the major factor behind the stock slump is the hike in interest rates by banks and financial institutions (BFIs). As fund-starved BFIs have raised the fixed deposit rates to 11 percent, many investors have now found bank deposits less risky and more profitable investment opportunity.

“The rising rates and increasing margin calls from bank and financial institutions in the wake of stocks correction are the culprits behind the stock market slump,” said a merchant bank's CEO. 

 
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