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Bear ruled FY ’09-10 roost
KATHMANDU, JUL 17 -
In the secondary market, the last fiscal year failed to bring any cheer. The Nepal Stock Exchange (NEPSE) went down by 35.07 percent in last fiscal year, losing a whopping 258.14 points.
The benchmark index that was at 735.87 points on July 16, 2009 (the start of the last fiscal year) ended at 477.73 points on July 15 (the last trading day of 2009-10).
Deteriorating investor confidence, oversupply of shares due to higher interest rates, liquidity crunch in the banking system, less returns in the stock market compared to bank interest rates pushed the secondary market down the last fiscal year.
Stock analyst Rabindra Bhattarai said the secondary market suffered from new regulations brought by Nepal Rastra Bank (NRB), apart from the weak economy coupled with political instability.
The NRB introduced measures like disclosure of sources in transactions exceeding Rs. 1 million, necessity to get Permanent Account Number (PAN) for investors investing more than Rs. 1 million and it also tightened its grip on margin lending. This last was loosened to some extent after investors protested.
Though the government lowered the rate of capital gain tax the last fiscal year, it failed to hearten investors. Alarmed at the continuous decline, investors went for agitation protesting the government’s apathy towards reviving the failing market. They also closed the stock market for more than a week. It was the first time, investors protested against the government’s apathy towards the stock market that nosedived over the year.
According to stock analyst Jagadish Agrawal, the fluid political situation was responsible for the downturn in the secondary market. The cold war between the Ministry of Finance and Securities Board of Nepal (SEBON) also worsened the situation. Bad blood between the two sides heightened when SEBON Chairman Surbir Poudel refused to resign despite pressure from Finance Minister Surendra Pandey. Poudel was appointed by the previous Maoist-led government.
From daily average transactions, total turnover and market capitalization, all declined in the last fiscal year. The total turnover declined by 45.80 percent to Rs 11.75 billion from Rs 21.68 billion. Average daily transaction also dropped to Rs 42.2 million in 2009-10 against Rs 92.6 million in 2008-09. The same was the case with market capitalisation that declined to Rs 376 billion last year from Rs 512 billion the previous year.
Despite the gloom, there were some positive developments also. The NEPSE started work on installation of Central Depository System (CDS) with Indian assistance.
The installation is expected to boost the secondary market as it will reduce paperwork, time and cost of transactions besides helping investors from outside the valley to engage in stock trading easily.
The expansion of brokerage firms outside Kathmandu Valley was another highlight of last fiscal year, giving a much-needed opportunity to investors from outside the Valley to be part of the country’s secondary market.
As of now, the stock brokers have established their branches in five cities — Pokhara, Biratnagar, Birgunj, Butwal and Narayangadh. However, on an average, the firms are yet to capitalise on the expansion.
With 18 new companies listed with the NEPSE in 2009-10, the total number of companies reached 176. In 2008-09, 17 new companies were listed.
Stock market in 2009-10
Particulars Year 2009-10Year Year 2008-09
Total turnover Rs. 11.75 billion Rs. 21.68 billion
Avg daily transaction Rs. 42.2 million Rs. 92.6 million
Market Capitalisation Rs. 376 billion Rs. 512 billion
New companies at NEPSE 18 17
Posted on: 2010-07-18 08:41
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