E-Kantipur

KATHMANDU, SEP 21 -

Despite several measures taken by the government, Securities Board of Nepal and Nepal Rastra Bank to revive the stock market, the market’s continued bearish run has disappointed investors.

Their disappointment has resulted in decline in market turnover to below 20 million mark in recent days and the market index has come down to 320.08 points on September 20 from 331.81 points on September 6.

The market turnover slowed to Rs 17.08 million on September 20 from 23.20 million on September 6. “Investors are assuming that the share market will continue to go down,” said Kedar Ghimire,” a stock investor. “As the number of investors

who follow others instead of taking decision on their own is more, the market could not grow.”

Nepal Stockbrokers’ Association President Anjan Poudel shared a similar view. “Returns offered by some commercial banks has disappointed investors,” said Poudel. According to him, investors do not see major outcome from banks and financial institutions in the upcoming few months which has contributed to the market slump.

Earlier, it was expected that the government move to reduce the capital gain tax to 5 percent from 10 percent, give freedom to BFIs to decide on margin loan limit and offer incentives to institutional investors would give much needed boost to the stock market, but to no avail.

Some latest positive developments such new brokers’ entry into the market, market’s expanded outside the Capital, formation of a central depository system (CDS) body, credit rating agencies and mutual fund also failed to energise the market that has been on a downward spiral since September 2008.

Investors had been saying that liquidity crunch in the banking system hit them hard as BFIs did not provide margin loans and those who provided charged high interest. But now, the liquidity crunch has almost been settled with banks having abundant liquidity.

NMB Bank CEO Upendra Poudel said as investors do not see profit in stock market investment, they deposit their funds in BFIs which are still providing good interest. However, considering skyrocketing share prices two years ago, the current prices are largely corrected values.

The average price-to-earning (P/E) ratio of commercial banks came down to 14.99 in the last fiscal year from a too high level. PE ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share.

As a PE ratio between 10-15 percent is considered good in Nepal’s context, stock analysts term the recent level of share prices as correction.

“Share prices two months ago were at the actual level,” said stock analyst Rabindra Bhattarai. “Now, the prices have actually come down.” He said political instability and discouraging economic environment have discouraged investors to invest in the stock market.

Posted on: 2011-09-21 09:33

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