"Stock prices have come down artificially in the market without any reason. The situation was similar three years ago when the prices had gone through the roof without any strong reason. Stock market has been showing such volatility because the government has failed to effectively intervene," Mahat said at an interaction on the situation of the capital market, organized by Nepal Investors Forum, on Monday. [break]
Nepal Stock Exchange (Nepse) index, which is also regarded as the barometer of investors´ confidence in the stock market, had shot up to all-time high of 1175.38 points on August 31, 2008, while the benchmark Nepse dropped over seven-year low to below 300 points last week.
"We saw a very sad situation over the last three years, when the confidence of investors in the stock market eroded as the government and the Nepal Rastra Bank failed to play the role of market maker, said Mahat. He stressed on the need to relax the provisions for loan against collateral of shares, which according to him can encourage new and existing investors in the capital market.
"The government has to review its policy on margin lending and relax the capital gains tax (CGT) through upcoming budget so as to restore the trust of investors," he added.
Niraj Giri, officiating executive director of Securities Board of Nepal (Sebon), said Nepal´s only capital market is more prone to crisis due to over dominance of a single sector in trading. "Banking and financial sector makes for over 70 percent of total trading and investment. If there is any crisis in this sector, the stock market would be badly affected," said Giri.
Stressing on the need to invite more investments from the real sector into the stock market, Giri informed that Sebon — the security market regulator — was conducting a study on how to remove the hurdles in increasing investment from the real sector which is also crucial for the economy.
Speaking on the occasion, former chairman of Sebon Dr Chiranjibi Nepal said the capital market saw unprecedented slowdown because of a weak monitoring and supervision by the regulators — the central bank and the Sebon. "We have no option but to bring in new investors to rejuvenate the stock market. But, the government policies are not conducive to creating investment-friendly environment," added Nepal.
Rebat Bahadur Karki, former general manager of Nepal Stock Exchange, criticized the frequently-changing government policies on the capital market, which created confusion among investors.
On the occasion, Investors Forum presented an 11-point remedy including creation of special fund to improve the capital market, provision of authority to bank and financial institutions to fix the limit of loan against collateral of shares, to revive the slowing stock market.
Nepse gains double digit for second straight day
Nepal Stock Exchange (Nepse) rose for the second consecutive day on Monday gaining 11.78 points to 330.77 points with almost all trading groups moving to green territory. During the trading, sub-indices of Banking, Development Bank, and Hydropower sectors went up by 17.96 points, 5.49 points and 33.24 points respectively. Similarly, Finance, Insurance and Manufacturing groups also gained by 2.15 points, 6.85 points and 9.41 points respectively. However, Others group — the sole loser — suffered by 2.35 points. Total Turnover stood at Rs 39.19 million through 1,176 transactions in 158,268 units of shares. Total market capitalization touched Rs 294.39 billion.
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