Nepal | October 01, 2020

Are election results dampening share investors’ sentiment?

Sabin Mishra
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  • Market analysts and brokers opine that the market is falling primarily due to excess supply of shares rather than dampened sentiment of left-led government

Kathmandu, December 12

The capital market has been splattered in red as it has become increasingly clear that the Left Alliance-led government will be at the helm of the new government.

The Nepal Stock Exchange (Nepse) index has been continuously falling since Sunday against the general assumption of market analysts and investors that the election results would boost investor sentiment and result in bull run of the country’s sole secondary market.

Consequently, the local bourse has dropped by 26.33 points in the last three days. The benchmark index had opened at 1,536.54 points on Sunday and slipped to 1,530.49 points by the end of the day. Nepse shed 2.74 points on Monday to rest at 1,527.75 points. The market index today plunged by 17.54 points or 1.15 per cent to 1,510.21 points.

The Nepse index had dipped by mere 1.13 points or 0.07 per cent in the previous trading week, which was just before the second phase of parliamentary and provincial elections. By contrast, Nepse index had surged by 44.38 points or 2.97 per cent and closed at 1,537.67 points on November 30.

Market analysts and brokers, however, opine that the market is falling primarily due to excess supply of shares rather than dampened sentiment of left-led government. Bhism Raj Chalise, chief executive officer at Kathmandu Capital Market, pointed out that the market is in downtrend because of its own fundamentals and not political reasons.

“I don’t think that the market is declining because of fear of communist government to be formed in the country. The fact is that there is still excess supply of shares in the secondary market, which is aiding to declining of the index,” Chalise stated. “Investors have already secured their profit and they know that only few listed companies will be able to give huge dividend. So they want to exit from the market and the current situation seems to be the best opportunity for them.”

Chalise also said investors have already factored in the probable candidate for prime minister and they are not anxious about the next leader or party that will lead the government.

Similarly, Anjan Paudel, former chairman of Stock Brokers’ Association of Nepal, backed Chalise’s views that the fear of political instability has been erased with the possibility of formation of a stable government in the country after a long time.

“Investors were quite undecided before the elections, but with the election results pointing at the possibility of a stable government in the country, we can expect investors to flock to the secondary market. Even though the market has been southbound for the last few days, we expect correction in the next few days,” Paudel stated.

He also pointed out that the current period offers no real charm to investors as most of the companies have already declared their dividends and investors have secured profit from the market.

Earlier, when the secondary market had dropped by 62.08 points or 4.08 per cent to 1,460.73 points in the week between November 5 to 9, leader of Left Alliance and Chairman of CPN-UML KP Sharma Oli had clarified that there was no logical reason for the secondary market to decline and that investors did not have to fear the
communist government.

“Those who do not understand the economy are trying to spook the investors by instilling fear of Left-led government,” Oli had stated during an election campaign programme in Jhapa.

Meanwhile, a source at the Ministry of Finance informed that the ministry has directed the officials of Nepse to submit the reasons for declining secondary market after the election results started being unveiled. The financial sector management division of the ministry has directed Nepse to submit the reasons for massive
volatility seen in the secondary market in writing within two days.

 


A version of this article appears in print on December 13, 2017 of The Himalayan Times.


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