KATHMANDU, March 5: Stocks rout continued on Monday as Nepal Stock Exchange (Nepse) index plunged 16.69 points, or 1.23 percent, to close at a 13-month low of 1,287.74 points.
Earlier on Sunday, the benchmark index shed a whopping 42 points, or 3.09 percent. The decline on Monday -- the second trading day of the week -- was less steep.
The last time the stock market remained at this low was on February 6 last year when the benchmark index closed at 1,252.5 points.
The stock market, which was on a correction mode for the past few months amid rise in interest rate of bank and financial institutions (BFIs), went into a bearish trend as investors saw the victory of the 'left-alliance' in the recent elections as an anathema to the development of the bourse.
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At a time when the stock market was already on a downward trend, a statement of the newly appointed Minister for Finance, Yubaraj Khatiwada, on the problem of liquidity shortage, in an interview with BBC Nepali Service, sent jitters among the investors. While he did not say much about the stock market, his indirect opposition of the flow of fund toward stock market was enough to trigger panic sell-off in the market. Some investors blame the technocrat finance minister for the recent freefall of stocks. However, there are others who think that the downfall was inevitable as stocks were already on a higher side without support of strong market fundamentals.
Asked about the current liquidity problem, he had told the BBC that the government can bring capital from international market to address liquidity problem while cautioning that there was no point of mobilizing the capital if the fund again goes back to the real estate, share market and auto sectors. The stocks started to tank at a rapid pace from the next day.
“There were some factors which were sending stocks downward. The interview of the new finance minister further deteriorated the downfall,” Nawaraj Ghimire, a stock analyst who is also an investor, told Republica. “Investors were panicked with the statement also because it came from the finance minister whose regulation as the Governor of Nepal Rastra Bank was the culprit of the market crash last time,” he added.
Finance Minister Khatiwada, who was the NRB Governor from 2010 to 2015, had introduced a regulation that set the ceiling of loans and investment for BFIs for real estate and stock market as a move to reduce exposure of banking industry to unproductive sector.
The regulation is attributed as a major factor behind the stocks slump to the lowest level of 292 points on June 15, 2011.
