Share market gloom continues
KATHMANDU,JAN 1:
The capital market could not shake off its bearish trend the whole year as the excessive supply of securities along with soaring interest rates bugged the market down.
The benchmark index — Nepse index — has gone down by almost 100 points over the period of a year as the fundamentals influencing the securities market did not change. This year in June, the index reached five-year low to -292.32 points following the cases of financial institutions running into trouble. Since then the market had reached 378.41 points in mid-August but the journey afterwards went only south.
Despite the policy measures forwarded by the regulators — Securities Board of Nepal (Sebon) — and the central bank — both primary and secondary market has considerably cooled down. The basic problems — that have primarily contributed in bringing the market down — excessive supply and high interest rate are still at large bugging the investors. Each passing week, hundreds of thousands of securities get listed in the market already weighed down by excessive supply while demand for shares has contracted due to dismal performance of the market. The imbalance between demand and supply has resulted in pulling the share prices and the market capitalisation, both down.
In 2011, the number of shares listed in Nepse has increased by 87.5 per cent. Likewise, listed companies have also increased to 214 from 190 — an increment of 11.21 per cent. However with the declining share prices, market capitalisation of the stock market has gone down by 32 per cent in a year. By December 2010, Nepse’s market capitalisation stood at Rs 338.1 billion have gone down to Rs 228.6 billion by December 2011. The oversupply of shares is supposed to be countered by entry of institutional investor -especially Mutual Funds.
The finance ministry and other concerned bodies have asked institutional savers like Employee’s Provident Fund, Citizen Investment Trust and Rastriya Beema Sansthan to make large scale investment so that the balance can be achieved between supply and demand of shares until Mutual Funds start operation.
The soaring interest rate that is turning the investors away from the share market. Market being in the low phase, the yield in shares has come down to less than five per cent in spite of dividends. But, banks and financial institutions offered more than eight per cent interest on savings and 12 per cent for fixed deposit.
Source: THT
