Nepse rebounds on signs of rethink by NRB

KATHMANDU, AUG 22 -

The Nepal Stock Exchange (Nepse) made a quick recovery on Thursday gaining 2.42 points after having slipped below the 1,000 mark on Wednesday on signs from the Finance Ministry that the central bank’s cap on share trading by banks would be revised.

On Wednesday, Nepal Rastra Bank (NRB) had issued a directive limiting investment by banks and financial institutions in held-for-trading securities to 1 percent of their core capital. Soon after the directive came out, the Nepse sank below 1,000 points on investor fears that share prices might drop further.

The Nepse broke through the 1,000-point mark and reached a six-year high on July 8.

After the Nepse shed 17.91 points in one day on Wednesday following the central bank’s orders spreading alarm throughout the financial industry, the Finance Ministry invited investors and stockbrokers for a discussion on Thursday.

“There is a high possibility that the central bank will revise the directive regarding the limit on investments by banks in the secondary market,” said Narendra Raj Sijapati, president of the Nepal Stockbrokers’ Association.

The market bounced back after the news to close at 998.13 points on Thursday. Similarly, the commercial banks index rose 18.81 points. The group’s index had plunged below 18.6 points on Wednesday.

According to Sijapati, NRB is likely to keep the 1 percent limit on short-term share investments only.

“Under the new provision, banks are likely to be allowed to invest more than 1 percent of their core capital if they invest in insurance and hydropower shares,” he said. He added that banks may be permitted to invest more if it is for more than a year.

The effect of NRB’s directive was seen during the early trading hours. According to stockbrokers, the index had plunged 24 points early on Thursday before rebounding later in the day.

Anjan Raj Paudel, managing director of Thrive Brokerage House, said the market fell on Wednesday mainly due to the chaos produced by NRB’s orders.

“However, it was corrected on Thursday after a number of big investors started buying shares at low prices,” he said.

According to Paudel, the selling pressure eased after the banking index stabilized due to the possibility of the central bank’s move.

Source: The Kathmandu Post