Nepal | July 20, 2019

Monetary Policy fails to lift investors’ sentiment

Himalayan News Service

Courtesy: Nepse

Kathmandu, July 12

The bearish trend in the stock market continued today as the Monetary Policy 2018-19 unveiled on Wednesday was unable to lift the mood of investors. Consequently, the benchmark index slipped by 13.66 points or 1.13 per cent to close at 1,191.98 points today.

The general expectation was that of a market rally as the Monetary Policy has provisioned that banks and financial institutions cannot make a margin call till the price of stocks (taken as collateral) plunges by up to 20 per cent, against 10 per cent earlier. Analysts had expected the policy to attract fresh investment in the stock market, but the Nepal Stock Exchange (Nepse) index remained southbound, continuing the downward spiral witnessed since the last two years after hitting a record high of 1,881.45 points on July 27, 2016.

According to investors, though the Monetary Policy has raised the threshold of margin call, it has also curtailed the opportunity for margin lending. Banks and financial institutions are no longer allowed to lend more than 25 per cent of their core capital against the collateral of stocks, which was up to 40 per cent of the stocks earlier.
“The Monetary Policy 2018-19 has aimed to prevent the situation of forced selling by raising the margin call threshold,” said Prakash Rajaure, stock market analyst.

Still, investors are in a wait-and-watch mode to see how the government will sort out the capital gains tax (CGT) calculation of bonus and rights shares. The study panel led by joint secretary of Ministry of Finance will submit its report to the finance minister soon. The government had formed a study panel following a two-day strike by investors protesting the move and complete shutdown of the country’s sole secondary market for an entire day a few weeks ago.

In tandem with the benchmark index, the sensitive index also dropped by 2.93 points or 1.15 per cent to 251.05 points and the float index fell by 1.03 points or 1.19 per cent to 85.54 points.

All the sub-indices recorded losses today, except for manufacturing and trading.

The banking subgroup, which has the highest weightage in the benchmark index, dropped by 1.01 per cent or 10.31 points to rest at 1,009.66 points.

The hotels subgroup dipped by 2.08 per cent or 37.65 points to land at 1,773.77 points. Likewise, insurance and hydropower sub-indices dropped by 1.76 per cent or 107.58 points to 6,008.94 points and 1.49 per cent or 21.7 points to 1,437.12 points.

Development banks went down by 1.33 per cent or 18.83 points to 1,401.86 points and finance by 0.64 per cent or 3.87 points to land at 604.36 points. Similarly, others and microfinance subgroups lost 0.07 per cent or 0.51 point to 708.66 points and 2.22 per cent or 36.06 points to rest at 1,587.91 points.

However, the manufacturing subgroups rose by 0.13 per cent or 2.8 points to rest at 2,222.25 points. Trading, meanwhile, remained steady at 195 points.

Altogether, 4,941 transactions of 1.62 million shares of 163 firms worth Rs 454.41 million were undertaken today.


A version of this article appears in print on July 13, 2018 of The Himalayan Times.


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