Margin lending fails to boost Nepse

KATHMANDU Aug,11:

The freshly started margin lending on brokers’ guarantee has failed to bring the anticipated impact in the stock market.

Though some brokers along with a few financial institutions had started margin financing on brokers’ guarantee about two weeks back, market has not reacted as anticipated. After much struggle, investors had convinced the capital market regulator — Securities Board of Nepal (Sebon) —and banking regulator — Nepal Rastra Bank — to allow margin lending based on brokers’ guarantee even during blank transfer.

Manjushree Financial Institution had started providing margin-type finance on brokers’ guarantee immediately after the regulators’ announcement and a few other financial institutions have also started lending for share purchase through brokers up to a certain margin. United Finance, Sagarmatha Merchant Banking and Finance, and Nepal Express Finance have started providing such loans against shares on selective basis.

However, according to Nepse’s daily transaction statistics of the last two weeks, the average transaction volume has remained about Rs 50 million which is not an exciting number. The last fiscal year’s average transaction volume stood at Rs 44 million per day as the market was moving under a bearish shadow most of the year. Average was pushed up especially due to a surge in transaction volume in the last two days.

Likewise, the Nepse index has not shown any surge in the last one month and has kept hovering over 400 points. “At present there is an involvement of a few brokers and a small number of financial institutions so the impact of margin finance is not massive,” said president of Stock Brokers’ Association of Nepal (SBAN) Anjan Raj Paudyal.

So far financial institutions have lent about half a billion rupees for the purpose. According to new provisions, brokers have to guarantee that share purchase has been made by an investor who can later acquire a loan from a financial institution.

Earlier, banks provided loans only if the investor could furnish a share certificate making loan purchase possible if the investor had made full payment for share and had got it transferred.

Sebon has asked the brokers to act only as a

facilitator between financial institutions and investors who want to acquire share purchase loan. The decision regarding margin and interest rate falls under the financial institutions’ prerogative.

Brokerage firm suspended

KATHMANDU: Nepal Stock Exchange (Nepse) suspended brokerage firm, Creative Solutions, from holding any transaction on Wednesday

as it was found to have goofed up with share certificate issuance. “The firm has mixed up names while issuing share certificates so we have taken action,” said managing director of Nepse Shankar Man Singh.

Source: THT