Despite measures, investors lose Rs 21.67b in Q1
With the capital market continuing its bearish run, investors lost Rs 21.67 billion in the first quarter of the fiscal year 2011-12. This has happened despite measures taken by the government to boost the market.
In the last four-five months, the government has reduced capital gain tax to five percent from the earlier 10 percent, given freedom to banks and financial institutions (BFIs) to decide on margin lending limit and offered incentives to institutional investors to enter the capital market. However, the measures have not brought about a cheer in the market.
The fact that the benchmark index declined by 31.16 points in the last two-and-a-half months shows that the government’s action has failed to lift the market.
The Nepse index plunged to 331.36 points on October 2, from the 362.52 points on July 14, the last trading day of the last fiscal year. Ditto is the case with market capitalisation which is total value of the stocks traded in the stock market. The market capitalisation of listed companies at the Nepal Stock Exchange (Nepse) plunged to Rs 301.81 billion on October 2, from the Rs 323.48 billion on July 14.
The market plunged to the lowest to 317.37 points on September19 this year and started to rise again. Currently, the market is more or less stable. Stock analysts say the ongoing liquidity crunch, high interest rate, political instability and sluggishness in the economy are some of the key factors affecting the stock market.
The market’s performance in the first quarter is very important as it is a strong indicator of the market’s behaviour for the rest of the year and investors absorb it keenly.
Stock analyst Rabindra Bhattarai said that the first three months of the current fiscal year did not go up because the investors were unable to get returns as expected. “Barring aside a few, none of the companies made handsome dividend declarations. At least the return from the market should be higher than the prevailing interest rate,” said Bhattarai. “Therefore, listed companies’ return will not motivate investors to make investment in the stock market.”
Analyst pointed out that the banks’ interest rate in the market will be a major determining factor for the stock market’s performance. They said that the increase in remittance flow due to stronger dollar will ease the liquidity position of the market. “If the lending rate of the banks and financial institutions goes down due to excess liquidity, the investment in the capital market can go up,” Bhattarai said. “If BFIs are reluctant to reduce the lending rate, it will do no good to the capital market.”
Bankers, on other hand, say that the increased remittance is likely to go for further consumption rather than saving and investment, while they doubted whether it will support the financial system by easing BFIs’ liquidity position.
“It is too early to say that the present surge in remittance will support our liquidity for medium terms,” said NIC Bank CEO Sashin Joshi. “It will take at least a month or two to make an impact on the interest rate.” He further said that the government spending will determine the liquidity position in the long run.
Nepse Index
July 14 362.85 points
Oct 02 331.36 points
Market Capitalisation
July 14 323.48 billion
Oct 02 301.81 billion
Banking Sub-index
July 14 328.71 points
Oct 02 290.12 points
Development Bank Sub-index
July 14 294.15 points
Oct 02 280.84 points
Finance Companies Sub-index
July 14 302.29 points
Oct 02 276.10 points
Upcoming AGMs
Names of Institutions Proposal Date Venue
Shree Investment and Finance Granting right to board of
director to form merger
committee for possible merger November 6, 2011 Amritbhog, Kathmandu
Global Bank Amendment of bank’s
memorandum of article October 18, 2011 Hotel Vishwa, Birgunj
Ace Capital Limited Amendment of memorandum
of article October 17, 2011 Ace Capital, Laldurbar, Kathmandu
Bright Development Bank Discussion on Annual Report October 15, 2011 Banepa Party Palace, Banepa
Nepal Consumer Dev Bank Discussion on Annual Report October 14, 2011 Hotel Prince Fewa, Pokhara
Nepal Life Insurance Company Discussion on Annual Report October 16, 2011 Nepal Tourism Board, Kathmandu
Growmore Merchant Banker Discussion on Annual Report October 15, 2011 Hotel Annapurna, Kathmandu
Proposed Cash Dividend and Bonus Shares
Institutions Cash Dividend Bonus Share
Nabil Bank 30 percent
Stan Chat Bank 50 percent
Unilever Nepal Limited Rs 500 per share
Bank of Kathmandu 16.75 percent 18 percent
Business Development Bank 10 percent
Shikhar Insurance 12.63 percent
Posted on: 2011-10-09 08:35
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