Weekly Share Update : Investors’ education need of hour

Kathmandu, September 29:

Rising barometer of (Nepal Stock Exchange) Nepse, the sole secondary market, has send the cold wave to experts. Nepse index gained 30.49 points this week to post 878.35 points at the close of the week. In the recent months, the index has posted almost 400 points growth, which has no rationale as national economy has not expanded. The investors have been excited due to the bonus shares and right shares the banks are distributing to increase their paid up capital.

The experts stressed on the need of investors’ education for stability and sustained growth of capital market. Short term gain and ‘whims’ have propelled stock market to the dangerous zone, they claimed. “Stock market is the fast track of capitalism,” Dr Chiranjibi Nepal, chairman of Securities Board of Nepal (SEBON), said speaking at a workshop on ‘Trend and Issues of Capital Market,’ organised by Nepal Rastra Bank (NRB), Bankers’ Training Centre (BTC), here.

“But it must also follow the market norms. There is nothing to be encouraged about the current growth,” the chief of regulatory body said adding that capital market crash will have severe impact on total national economy.

The world over, stock is considered very sensitive as they immediately react to political, social and economical change. However, Nepali stock seems to have no effect at all. “Nepali stock is showing irrational behaviour,” Radhesh Pant, president of Nepal Bankers’ Association said. “On the day Maoists pulled out of the government, share prices touched the historic high,” he said adding that such trend is dangerous.

Similarly, shares of banks are gaining. The commercial banks group gained 23.23 points to post 984.86 points at the weekly closing. But real sector has no role in this growth, which is yet another signal of ‘dubidious’ growth. Investors might find themselves on road overnight as they are not going by the books and lured by the rumours.

“Stock price is directly related to the growth of bank,” Pant said adding that investors are not calculating growth prospectus of banks in next couple of years. “Due to cut-throat competition the banks are operating on very thin margin and they could not continue giving cash dividends as they have to increase their paid-up capital,” he added.

Since there is no more investment opportunity, alternative opportunities like bonds and mutual fund is need of the hour. “Mutual fund could be safer for the small investors,” said Upendar Kumar Poudel, vice-president of Finance Companies’ Association.

“Corrective measures are necessary and real sector must be encouraged to come to stock for sustained growth of capital market,” he said adding that its high time banks become cautious over margin lending on the secondary market.

Nabaraj Pokhrel, president of Nepal Brokers’ Association, on the occasion, said that open market sets its trend itself.

Bir Bikram Rayamajhi, deputy governor of NRB and Arjun Adhikari, director of BTC also showed concern over unnatural stock growth. for the stability of the market, Nepse has also brought some more rules. It is believed to help stop stock market crash.