Backed by positive political developments, optimism is back in the capital market. This is what the first half of the current fiscal year has illustrated.
With investors on a buying spree, the Nepal Stock Exchange (Nepse) gained 277.98 points in the first six months. What is more interesting is there has been a sharp surge in the capital market after the successful Constituent Assembly (CA) election. In a two-month period (Nov 19, 2013-Jan 14, 2014) after CA election, the benchmark Nepse index shot up by almost 200 points.
Over the review period, the Nepse index also crossed the 800-point mark for the first time in the last five years. Nepse started the fiscal year at 509.36 points on July 16, the first day of the fiscal 2013-14, and went up to 806.82 points on December 18, before settling down to 787.34 points on January 14, the last trading day of the first half of the current fiscal. Market capitalisation too more than doubled to Rs 799.76 billion from Rs 347.74 billion.
The bullish trend in the market is a result factors such as including positive political developments, good profits by banks and financial institutions (BFIs) and liberal policy adopted by BFIs on margin lending amid higher liquidity situation.
Analysts say positive political developments helped uplift investors sentiment, prompting them to invest. “The successful CA election gave the much-needed boost to investors, who believed it would pave the way for much0needed political stability,” said Anjan Raj Paudel, past president of Nepal Stockbrokers’ Association.
Good election performance of the parties said to be pro-market—Nepali Congress and CPN (UML)—also sent a positive message in the market. And its impact was instant: The index shot up 33.88 points when trading was opened after the CA election.
Another factor that propelled the market was excess liquidity in BFIs. As BFIs struggled to lend amid slow credit demand, they remained liberal in margin lending, making it easier for investors to get money to investment in the stocks. Some BFIs even took out advertisement of margin loans.
“The combination of two factors—excess liquidity and slow credit demand—helped investors get financing from BFIs easily,” said Narendra Raj Sijapati, president of Nepal Stockbrokers’ Association.
Poudel also gave another reason for the rise: Fall in the interest rate on margin loans. “With increasing liquidity, bank interest rate has fallen to 9-10 percent from 15-16 percent,” he said.
As investors remained buoyant, the average daily turnover at Nepse also increased significantly. In the post-CA election period, Nepse has been recording an average daily turnover of Rs 234.03 million. Paudel says large transaction volume is a sign of market stability. “An average turnover of Rs 340-400 million per day symbolises the market is heading towards stability,” he said. Stockbrokers have hoped for a steady growth in the next half of this fiscal too. But how strong will be the growth will depend on how the political negotiations will unfold, they say. “The growth will depend on the formation of a new government and second quarterly financial report of companies, mainly the BFIs,” Poudel said.
source: the kathmandu post,16 jan 2014
LINK
With investors on a buying spree, the Nepal Stock Exchange (Nepse) gained 277.98 points in the first six months. What is more interesting is there has been a sharp surge in the capital market after the successful Constituent Assembly (CA) election. In a two-month period (Nov 19, 2013-Jan 14, 2014) after CA election, the benchmark Nepse index shot up by almost 200 points.
Over the review period, the Nepse index also crossed the 800-point mark for the first time in the last five years. Nepse started the fiscal year at 509.36 points on July 16, the first day of the fiscal 2013-14, and went up to 806.82 points on December 18, before settling down to 787.34 points on January 14, the last trading day of the first half of the current fiscal. Market capitalisation too more than doubled to Rs 799.76 billion from Rs 347.74 billion.
The bullish trend in the market is a result factors such as including positive political developments, good profits by banks and financial institutions (BFIs) and liberal policy adopted by BFIs on margin lending amid higher liquidity situation.
Analysts say positive political developments helped uplift investors sentiment, prompting them to invest. “The successful CA election gave the much-needed boost to investors, who believed it would pave the way for much0needed political stability,” said Anjan Raj Paudel, past president of Nepal Stockbrokers’ Association.
Good election performance of the parties said to be pro-market—Nepali Congress and CPN (UML)—also sent a positive message in the market. And its impact was instant: The index shot up 33.88 points when trading was opened after the CA election.
Another factor that propelled the market was excess liquidity in BFIs. As BFIs struggled to lend amid slow credit demand, they remained liberal in margin lending, making it easier for investors to get money to investment in the stocks. Some BFIs even took out advertisement of margin loans.
“The combination of two factors—excess liquidity and slow credit demand—helped investors get financing from BFIs easily,” said Narendra Raj Sijapati, president of Nepal Stockbrokers’ Association.
Poudel also gave another reason for the rise: Fall in the interest rate on margin loans. “With increasing liquidity, bank interest rate has fallen to 9-10 percent from 15-16 percent,” he said.
As investors remained buoyant, the average daily turnover at Nepse also increased significantly. In the post-CA election period, Nepse has been recording an average daily turnover of Rs 234.03 million. Paudel says large transaction volume is a sign of market stability. “An average turnover of Rs 340-400 million per day symbolises the market is heading towards stability,” he said. Stockbrokers have hoped for a steady growth in the next half of this fiscal too. But how strong will be the growth will depend on how the political negotiations will unfold, they say. “The growth will depend on the formation of a new government and second quarterly financial report of companies, mainly the BFIs,” Poudel said.
source: the kathmandu post,16 jan 2014
LINK
Comments
Post a Comment