Stock investors rattled by falling profits of BFIs
KATHMANDU, FEB 25 -
A decline in the profits of banks and financial institutions in the first two quarters has rattled stock investors. With 90 percent of the companies listed on the Nepal Stock Exchange (Nepse) belonging to the financial sector, the share market is highly sensitive to fluctuations in its health.
Nepal Rastra Bank (NRB) governor Yubaraj Khatiwada shared similar concerns at an interaction on the stock market held at the Finance Ministry.
“The declining profits of banks and financial institutions (BFIs) of late have clearly affected the stock market,” said the governor. The profits of commercial banks decreased by around Rs 270 million in the first quarter of the current fiscal year, and most of the commercial banks reported a decline in their profits in the second quarter too compared to the same period in the previous year. Some banks recorded a decline in profits of more than 90 percent in the second quarter.
The governor, however, said that the adequate liquidity with banks would help to reduce the interest rate which would create a favourable environment for investment in the stock market.
BFIs, on the one hand, provide loans to purchasing shares, and on the other hand, their interest rate also determines whether invertors go for investment in stocks or depositing money in BFIs.
Real sectors such as manufacturing and hydropower have little presence in the stock market compared to the financial sector. The government through its immediate action plan for economic development and prosperity has planned to attract the real sector to the secondary market.
Major business houses have not floated shares of their blue chip companies to the public to raise capital for their expansion drives.
The government has also sought to increase the stock index to 350 points within the current fiscal year from the current level which is close to 300 points.
During the interaction, investors sought measures that would enable a better environment to get loans from banks to purchase stocks. “There should be an environment where banks provide loans of up to 75 percent of the total investment,” said Jeevan Basnet, an investor.
There is also concern about a possible glut of shares in the market with several financial institutions going for an initial pubic offering shortly. Baburam Shrestha, chairman of the Securities Board of Nepal (Sebon), said companies should issue cash dividends instead of bonus shares to attract investments in the capital market. The capital market has failed to attract manufacturing companies, added the Sebon chairman.
Nepse Chairman Jiba Nath Dhital stressed promoting institutional investors, automation technology for online trading, implementing the central depository system (CDS) and increasing supervision for the enhancement of the stock trading. He also urged increasing investor awareness and conducting financial literacy programmes across the country.
Finance Secretary Krishna Hari Baskota said the government would facilitate the entry of companies from different sectors in the capital market to bring vibrancy into it.
Source: Kantipur
