Nepse reacts to NRB directives

Kathmandu, October 8:

Nepse reacted strongly today to new directives from Nepal Rastra Bank (NRB), the central bank, as it has to suspend twice due to fall in its index — first by 20 points and later by 25 points — for the first time in the 14-year history.

It lost 25.46 points or 2.83 per cent to 873.92 points at the closing of the day today from the opening 899.38 points. Banking sub-index also lost 36.67 points to 964.18 points.

The central bank has directed the commercial banks, yesterday to curtail margin lending to 50 per cent — which is said to be fuelling the price hike — from at around 70 to 75 per cent currently.

Rewat Bahadur Karki, managing director of the Nepse says that share price was scaling high due to short supply of shares also. “Now with the new directives, no permission is needed to sell promoters shares that will create a good supply,” he says adding that margin lending in the secondary market was yet another reason for ‘unnatural’ price hike.

The market will cool down, market experts predict adding that it will also expand and stabilise as promoters can now sell their shares in the secondary market. According to the central bank’s directive, to buy the promoters’ shares one should not be black-listed and no-permission from the NRB needed, like before.

The NRB has also directed to sell cross holding shares by 2065 Asad in the secondary market.

The central bank has also raised the cap to 50 per cent from earlier 25 per cent on investment in hydro power projects.