Share market continues to look southwards
KATHMANDU,JAN 20:
The stock market spent the first half of the current fiscal year under the bearish shadow despite the policy measures to encourage the investors.
The benchmark index — Nepse index — shed 39.92 points six months into the fiscal year 2011-12. The trading floor debuted for this fiscal year at 362.52 points but as the six months ended the index has plunged to 322.16 points losing 11 per cent along the way.
Last fiscal year, the stock market index had gone down by 111.88 points. The market capitalisation is also down by 7.5 per cent in the six months despite growing number of shares in the market. The market capitalisation that stood at Rs 323 billion in mid-July 2011 has gone down to Rs 299 billion thanks to falling share prices. All of the subgroup’s indices have gone down in the last six months.
The fiscal policy had slashed the capital gain tax on share income by half which was believed to infuse the new life in the ailing market but the enthusiasm seemed to have lost just in few days as the market continued its journey south since then.
Likewise, the central bank’s decision of to relax the ceiling for loan against shares completely also failed to do wonders for the stock market unlike the expectation. The regulation was brought in few days before the current fiscal year started.
Two primary factors that had contributed in the current bearish run of the market -high interest rate and over supply of shares are still at large making the encouraging measures from the regulators ineffective to bring the cheer back in the once booming securities market.
“Until and unless interest rates go down, the capital market will not be salvaged in spite of all the policy measures,” points out Anjan Raj Poudel, president of Stock Brokers Association of Nepal (SBAN).
The escalated interest rate in the banks has turned the investors away from the stock market to deposit. Market being in the low phase, the yield in shares has come down to less than five per cent in spite of dividends while the interest rate is not less than eight per cent. “Moreover, the high interest rate has made buying shares by borrowing from banks a loss making affair.”
The number of listed companies has reached 214 that stood at 209 at the beginning of the current fiscal year. The first six months witnessed 9.4 million units of ordinary shares getting listed. Into the six months there were about 22 million units of bonus and right shares got listed while government bonds worth Rs 50 million was listed in the market.
The additional securities has pushed the number of shares listed in the capital market to grow by almost 80 million unit shares just into the six months of the fiscal year. There were 1.03 billion unit shares listed in the stock market that have gone up to 1.13 billion units by mid-January.
Source: THT
