Nepal Stock Exchange Limited has granted permission to one more stock brokers from today for trading.
Nepal Stock Exchange Limited has granted permission to one more stock brokers from today for trading.
The stock market inched a little upwards following the renewed interest of regulators to promote the ailing securities market, as the Nepal Stock Exchange (Nepse) index gained 3.53 points on the first week of year 2012 -January 1 to 6.
Recently, High Level Financial Sector Coordination Committee has directed to start the operation of Central Depository System by mid-January. Likewise, the committee has decided to pursue full automation of Nepal Stock Exchange in order to stimulate the stock market.
Likewise, the committee is also going to impose measures to reduce the cost of trading in Nepse within next few months. Moreover, the government has also decided to increase the ceiling for source disclosure while trading in the share market from the current Rs 1 million to Rs 10 million.
These measures are expected to improve the performance of the market and attract investors in the coming days.
On Sunday morning the stock market opened at 312.94 points that went up to 318.74 points by the end of trading. Next two days saw the market go up to 324.15 points following the finance minister’s visit to stock exchange. However, the benchmark index could not sustain the ascent so that it slumped to 318.99 points on Wednesday. The index rested for the week at 319.55 points.
Nepse saw trading of 486,233 unit shares of 116 companies on 5788 transactions in five trading days, this week. This is 38.33 per cent decline in trading volume as compared to that of last week.
Among the total transactions, the trading of blue chip stocks of class ‘A’ companies consisted of 70.18 per cent amounting to Rs 87.8 million.
The sensitive index that measures the Class-A companies’ performance went up by 1.12 points reaching 79.32 points at the end of the week. The float index that measures the performance of actual shares traded also increased by 0.16 points to 25.43 points.
This week, hydropower, insurance, development banks and finance companies ended up in red.
Thanks to Nepal Telecom Others subgroup earned 15.27 points. Commercial banks went up by 3.78 points followed closely by manufacturing companies that earned 3.51 points.
Hydropower and insurance companies lost 5.74 and 5.04 points, respectively. Likewise, finance companies and development banks went down by 0.89 points and 1.2 points,
Everest Bank was forerunner both in terms of transaction amount and number of shares traded with the trading of 44,115 shares worth Rs 30 million. Gurans Life Insurance was fore runner in number of transaction with 589 transactions.
The top five performers of the week are Everest Bank (Rs 30.2 million), Bank of Kathmandu (Rs 16.26 million), Chilime Hydropower Company (Rs 9.30 million), Standard Chartered Bank (Rs 6.60 million) and Nabil Bank (Rs 4.50 million).
NRB Governor Yubaraj Khatiwada has said that the central bank has decided to handover its stakes in Nepal Stock Exchange (NEPSE) to a strategic partner. At the function to handover CDS software, Khatiwada said the NRB plans to divest its shares in NEPSE to privatise the capital market. The central bank currently holds 35 percent shares in NEPSE. Securities Board of Nepal Chairman Surbir Poudel said the capital market would take new direction if NEPSE is privatised. “As all of us are well aware of the government’s conservative approach while running a business, it is necessary to bring in a private sector to run the capital market,” said Poudel.
The capital market has been continuously dropping points since Sunday, the first trading day of the week. The market went down by 4.67 points, 7.31 points and 6.65 points, respectively, in the first three trading days of the week.
Positive political and policy-level developments such as appointment of a new prime minister, introduction of mutual fund regulations, moderation of margin lending provision and
introduction of Central Depository System (CDS) regulation have so far failed to revive the capital market.
In a bid to attract investors from across the country, the Securities Board of Nepal (SEBON), the stock market regulator, introduced CDS, which allows online trading and settlement of share transaction, but to no avail.
Investors say their confidence is shaking. “About 75 percent of investors are seeking to sell their shares. We can hardly find people who are willing to buy,” said Nanda Kishor Mundada, President of Nepal Stockbrokers’ Association.
Investors say economic factors are mainly responsible for the shaky investors’ confidence. “The capital market is the barometer of a country’s economy. Therefore, we cannot separate it from the current economic situation,” said Sunanda Bahadur Shrestha, general secretary of Investors’ Forum Nepal. “The gloomy economic scenario, including liquidity crunch in the banking system, power outages and sluggish
trading activities are responsible for the weakening investors’ confidence.”
Given the capital market heavily represented by the banking and financial institutions, liquidity crunch in the banking system will certainly affected it. Identifying the margin lending as a risky area, banks themselves are discouraging such lending. “Even if investors get loans, they will have to pay high interest rates beyond their expected return,” said Mundada. Recent episodes in the banking sector such as declaration of Gurkha Development Bank as crisis-ridden have also dented investor’s confidence, according to analysts.
The proposal of amendment to the proposed Bank and Financial Institution Act (BAFIA), which seeks to limit promoters’ shares in banks and financial institutions at 5 percent from the current 15 percent, also contributed to the downfall of the stock market. “Fear of oversupply of shares in the market dented investors’ confidence, bringing down the market index,” said Shrestha of Investors’ Forum.
Aditi Shrestha, research and operation chief of BEED Invest, said the participation of institutional investors such mutual fund companies, Citizen Investment Trust, Employees’ Provident Fund and insurance companies could boost the NEPSE. Shrestha, however, stressed that the government should offer tax incentives for capital-based financing to bring in such investors and non-resident Nepalis.
The Securities Board of Nepal (SEBON) has formed a steering committee and six advisory groups under the coordination of its chairman Surbir Poudel to create policies to formulate a five-year master plan to develop the Nepali securities market. There will be nine members in the steering committee. Apart from Poudel, the steering committee contains six conveners from each advisory group and Mahendra Man Gurung, joint secretary at the economic affairs and policy analysis division (EAPAD) at the Ministry of Finance. Nabaraj Adhikari, planning and development department-head at SEBON, is member secretary of the steering committee.
The Nepali securities market regulator SEBON is set to develop a roadmap for the development of the domestic securities market with the technical assistance of the World Bank. Adhikari said that Richard Pratt, an international stock market expert from the World Bank, had already prepared a market assessment report. The steering committee will review it and make suggestions to Pratt considering the Nepali securities market’s fundamentals. Pratt is in Nepal on his second mission in connection with the five-year master plan. “Apart from the steering committee, each advisory group will work on the individual topics assigned,” said Adhikari.
Among the six advisory groups, Kedar Poudel, joint secretary at the Ministry of Law and Justice, will head the Legal Advisory Group. There are two other members in the group, a manager from the Nepal Stock Exchange (NEPSE) and the deputy director of SEBON. Similarly, the Securities Registration, Listing and Merchant Banking Business Advisory Group will be led by Pradeep Jung Pandey, vice president of the FNCCI.
The NEPSE established the company on its own after its earlier attempt to establish the subsidiary company along with other stakeholders failed.
Earlier, the NEPSE along with 17 commercial banks and Citizen Investment Trust had registered Nepal Central Depository and Clearing Limited (NCDC). However, it failed to make any headway due to the dispute between the stakeholders regarding the issue of capital infusion.
The NEPSE was trying to include Indian grant of around Rs 150 million as its stake in NCDC, however, other stakeholders, stating that the grant being meant for the country, had argued that NEPSE should put in its own money. With a paid-up capital of Rs 500 million, NCDC had aimed at starting the trial phase of CDS within the first month of 2011. The Indian grant was meant for software development of CDS.
The six-member CDS board is chaired by Tanka Paneru, who is also the chairman of NEPSE. Bijaya Gurung, manager of NEPSE, was appointed as a chief operating officer of CDS. Further, the company
will choose one stock market expert as a board member.
The board of directors of CDS and Clearing Limited include Shankar Man Singh, general manager of NEPSE, Trilochan Pangeni, executive director
of Nepal Rastra Bank, and Pramod Kumar Bhattarai, acting deputy general manager of NEPSE. After the company’s
establishment, NEPSE has started the process of setting up an office, acquiring funds for capital and procuring necessary hardware. NEPSE is also speeding up the process to prepare necessary bylaws to run the CDS, said a press release issued by NEPSE. CDS is expected to come into operation in mid-April.
After the installation of CDS, clearance and settlement of securities transactions will be executed electronically. CDS keeps electronic records of shares, debentures, treasury bills and treasury bonds,
stocks and other securities, replacing
physical certificates of securities. The paid-up capital of the CDS and Clearing Limited will be Rs 300 million.
Gloom marked the domestic capital market throughout 2010, but a number of policy measures that have been implemented recently may give it a boost in 2011.
Investor confidence sank to the lowest ebb in the year gone by amid political uncertainty. And despite the introduction of regulations governing mutual funds and the central depository service (CDS), the stock market did not rebound as was expected.
The Nepal Stock Exchange (NEPSE) index has been hovering around 400 points presently compared to a high of 1175.38 on Aug. 31, 2008. The NEPSE had plunged to a low of 390.88 points on Dec. 19. “Until the political environment improves, the policy measures taken to improve the capital market will not yield any fruit,” said Surbir Poudel, chairman of the Securities Board of Nepal (SEBON), the regulator of the capital market.
Political differences are widening instead of narrowing, and whether the Constituent Assembly will be able to bring out the constitution by May 28 is uncertain. Investors are concerned what will happen if the constitution is not written by the deadline.
At the same time, the performance of the financial industry in 2011 will be crucial to the revival of the stock market as it accounts for more than 80 percent of the shares listed on NEPSE. Banks and financial institutions were forced to stop credit to investors in shares amid a liquidity crisis, and that also affected the performance of the stock market in 2010. “Investors are also not seeing any benefits in putting money in stock by borrowing at the currently high interest rates,” said Nanda Kishore Mundada, president of the Nepal Stockbrokers Association. “If the liquidity problem in the banking sector eases resulting in a decrease in interest rates, it will give a boost to the capital market,” he added.
SEBON has introduced some essential policy measures including mutual funds and CDS regulations and portfolio management guidelines that have paved the way for non-resident Nepalis (NRNs) to invest in the stock market. The budget for the current fiscal year has vowed to allow NRNs to invest in Nepal. Likewise, the process of establishing the CDS is advancing despite various hassles. NEPSE has recently opened a subsidiary company to run the CDS after attempts to establish a company in partnership with banks and financial institutions failed amid differences over the paid-up capital.
With work progressing to start operation of the CDS and a number of companies initiating homework to establish companies to run mutual funds, an increase in the number of investors can be expected. The CDS will eliminate physical share certificates and manual clearance and settlement thereby speeding stock trading. The dematerialized account in the CDS works as a virtual bank of listed stocks facilitating online transfer of share ownership which will enable investors outside the Valley too to participate in trading.
Poudel said that mutual funds would intervene in the market to correct untoward fluctuations as institutional investors.
Suman Rayamajhi, chief executive officer of Beed Invest, a portfolio management company, said there was an urgent need for additional investors to create demand as there was a glut of shares in the market.