Share market losing steam in recent years
KATHMANDU:
The secondary market shed 111.88 points in a fiscal year as the market spent all year under the bearish shadow.
The escalating interest rates coupled with oversupply of shares in the share market contributed in pulling the market down to abysmally low point of 290 points this fiscal year. The ongoing political uncertainty did nothing but terrified the investors more losing their confidence on market. The fiscal year that opened at 477.73 points closed at 365.85 points losing more than 100 points in a year. The stock index went down by 23.41 per cent in a year’s transaction.
Since the beginning of the fiscal year, Nepse kept on gradually sliding down. The secondary market touched 400 points on September 9, 2010. It could not rise above the psychological 400 points since December 2010. The share amrket reached 292 points — six years low — on June 15. Since then, it has started to move up giving hope to the investors. The high interest rates in the money market is blamed for the dry run in the secondary market as the return on share investment is low compared to the interest rate offered by a financial institution for fixed deposits.
“Unless the liquidity situation in financial sector is eased to pull the interest rate down, the share market can not be salvaged,” said president of Stock Brokers Association of Nepal Anjan Poudyal.
“The high interest rates on deposits compared to return on shares have turned the share investors towards bank deposits,” he added.
Among the subgroups, financial intermediaries — commercial banks, development banks, finance companies and insurance companies did not do well throughout the year. The hydropower companies, trading companies and other subgroup also lost heavily this fiscal year. Only the hotels and manufacturing subgroups were among the few that gained in the secondary market in last one year. The number of listed firms has reached 207 from last fiscal year’s 176. Along the added shares of these 36 companies, the additional right shares and bonus shares issued by the old listed companies also flooded the secondary market with more shares.
The financial sector dominated secondary market was much affected by the troubles that dogged the financial institutions all year long.
Moreover, the share market cycle that had inflated the stock values abnormally two years ago has gone into self corrective mode that is deflating the prices of those overvalued stocks bringing down the market.
However, there are signs that next fiscal years might not be as dismal as this one. It is expected that, hopefully, institutional investors like Mutual Funds, Employee’s Provident Fund and Citizen Investment Trust will enter the market stabilising the demand and supply factors.
Central Depository System (CDS) is also supposed to start its operation dematerialising the securities transaction making the trading more transparent and manipulation free.
Moreover, the central bank has left the ceiling for loan against shares to be sanctioned at the discretion of banks and financial institutions as requested by the stakeholders. Likewise, the budget slashing capital gain tax by half could also supposed to boost the market, though Poudel is not very much hopeful as the market has touched rock bottom already.
Source: THT
The secondary market shed 111.88 points in a fiscal year as the market spent all year under the bearish shadow.
The escalating interest rates coupled with oversupply of shares in the share market contributed in pulling the market down to abysmally low point of 290 points this fiscal year. The ongoing political uncertainty did nothing but terrified the investors more losing their confidence on market. The fiscal year that opened at 477.73 points closed at 365.85 points losing more than 100 points in a year. The stock index went down by 23.41 per cent in a year’s transaction.
Since the beginning of the fiscal year, Nepse kept on gradually sliding down. The secondary market touched 400 points on September 9, 2010. It could not rise above the psychological 400 points since December 2010. The share amrket reached 292 points — six years low — on June 15. Since then, it has started to move up giving hope to the investors. The high interest rates in the money market is blamed for the dry run in the secondary market as the return on share investment is low compared to the interest rate offered by a financial institution for fixed deposits.
“Unless the liquidity situation in financial sector is eased to pull the interest rate down, the share market can not be salvaged,” said president of Stock Brokers Association of Nepal Anjan Poudyal.
“The high interest rates on deposits compared to return on shares have turned the share investors towards bank deposits,” he added.
Among the subgroups, financial intermediaries — commercial banks, development banks, finance companies and insurance companies did not do well throughout the year. The hydropower companies, trading companies and other subgroup also lost heavily this fiscal year. Only the hotels and manufacturing subgroups were among the few that gained in the secondary market in last one year. The number of listed firms has reached 207 from last fiscal year’s 176. Along the added shares of these 36 companies, the additional right shares and bonus shares issued by the old listed companies also flooded the secondary market with more shares.
The financial sector dominated secondary market was much affected by the troubles that dogged the financial institutions all year long.
Moreover, the share market cycle that had inflated the stock values abnormally two years ago has gone into self corrective mode that is deflating the prices of those overvalued stocks bringing down the market.
However, there are signs that next fiscal years might not be as dismal as this one. It is expected that, hopefully, institutional investors like Mutual Funds, Employee’s Provident Fund and Citizen Investment Trust will enter the market stabilising the demand and supply factors.
Central Depository System (CDS) is also supposed to start its operation dematerialising the securities transaction making the trading more transparent and manipulation free.
Moreover, the central bank has left the ceiling for loan against shares to be sanctioned at the discretion of banks and financial institutions as requested by the stakeholders. Likewise, the budget slashing capital gain tax by half could also supposed to boost the market, though Poudel is not very much hopeful as the market has touched rock bottom already.
Source: THT
