Stock investors circumspect after CA dissolution sans statute

KATHMANDU, MAY 29 -

The dissolution of the Constituent Assembly has raised questions about the future course of the Nepal Stock Exchange (Nepse). Investors, who were bullish after the deal on the integration of former Maoist combatants, are now fairly circumspect.

Unlike developed markets, where political changes make a direct impact on the stock market, Nepal’s experience has been a mixed one. At times, the market’s reaction to major political development has surprised many. Against all expectations, the stock market had reacted positively when former king Gyanendra Shah took over absolute control of the government on February 1, 2005.

In the last one and half months, Nepse swung with political developments. The benchmark index has gained 76 points since parties finalised disputed issues on former Maoist combatant integration.

Stock analysts say it is natural for the market to react to major political changes as they have a long-term impact on the economy. “Since the market is regaining its momentum after a prolonged slackness, I hope the downfall will not be huge,” said Anjan Raj Poudyal, president of the Stock Brokers’ Association of Nepal.

Poudyal predicts that the Nepse index might slide below the 400-point mark, but the fall will not be huge. “Sunday’s development has hit investor confidence and a few investors may panic,” added Poudyal.

According to stock analyst Rabindra Bhattarai also predicted some decline in the market. “Investors were excited expecting a new constitution,” said Bhattarai. “But as it didn’t happen, their confidence will take a beating.” Political instability also brings policy instability, which is not good for investment, Bhattari added.

Investors increased their investment hoping that there will be a new constitution in place. “Now, with the Constituent Assembly dead, any new political development a will have a negative impact on the market,” said Rajan Sharma, who recently bought shares worth Rs 200,000.

Other, however, say the market will stabilise after a few days of fall. “How far can the market go down,” said Sitaram Thapaliya, chairman of Nepal Investors’ Forum. “The government is also aiming to make the Nepse index stable at 350-point mark.”

According to Thapaliya, since the government is working on reviving the capital market with measures such as central depositary system and mutual funds, investors still have faith in the market. “Of late, people are making investments after analysing the financial status of companies, so there may not be panic selling,” said Thapaliya.

Source: The Kathmandu Post