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Politics, cash crunch mar NEPSE index showing
KATHMANDU, JUN 12 -
Political uncertainty and liquidity crunch have severely hit the country’s only secondary market. Nepal Stock Exchange (NEPSE)’s market turnover is projected to decline by 44.39 percent in the current fiscal year.
In its 28th annual general meeting on Friday, NEPSE projected its turnover to reach Rs 12 billion by the end of the current fiscal — a decline of a whopping Rs 9.58 billion from last year. NEPSE had recorded a turnover of Rs 21.58 and Rs 22.82 billion in the fiscal year 2008/9 and 2007/8 respectively. Political uncertainty, increasing interest rates of banks and financial institutions amid liquidity crunch has hit the secondary market this year. The NEPSE index has declined by 251.05 points in the last 11 months. The benchmark index that was at 735.87 points at the start of this fiscal year now stands at 484.84 points.
Tanka Paneru, the NEPSE chairman, attributes the declining turnover to the current economic situation. “The decline in NEPSE’s turnover is the reflection of the current economic situation,” Paneru said.
The direct impact of the decreasing market turnover could be seen in the collection of capital gain tax. With the drop in the turnover, collection of capital gain tax has also gone down. Capital gain tax from NEPSE is projected to decline by 70.32 percent this fiscal.
According to NEPSE, collection of the tax will reach only Rs 270 million by the end of this fiscal. Most of the capital gain tax is collected from new companies listed with NEPSE, according to Paneru. NEPSE had collected Rs. 910 million and Rs 930 million as capital gain tax in 2008/09 and 2007/08 respectively.
Market analysts see little hope of market recovery in the current fiscal. Paneru echoed the analysts. “We are not seeing recovery in the market soon,” he said. “The secondary market could recover after the implementation of the Central Depository System (CDS). The CDS is expected to be implemented within the next six months.
The only silver-lining at NEPSE was increment in the number of listed companies and shares. This year, 12 more companies were listed with it.
The general meeting unanimously endorsed a proposal to increase its capital structure. NEPSE has planned to increase its authorised capital
and issued capital to Rs 300 million and Rs 200 million.
Posted on: 2010-06-13 09:00
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