Though Nepal Stock Exchange (Nepse) index is fluctuating, average daily
turnover in the stock market, however, is continuously plunging over the
first six months of the current fiscal year.
Nepse´s data shows daily turnover in the secondary market, which stood at Rs 600.42 million in the first month (mid-July-mid-August) of 2014/15 came down by 22.94 percent to Rs 462.28 million in the second month. Average daily turnover fell to Rs 289.18 million in the third month and Rs 198.9 million in the fourth month.
Daily turnover observed some recovery in the sixth month ending mid-January. The average daily transaction amount stood at Rs 243.54 million in the sixth month, according to Nepse´s data.
Stock market analysts attribute the decline in turnover in recent months to confusions related to implementation of Central Depository System (CDS). “Liquidity surplus in the market, which has been seen in the banking system for the past few months, was giving leverage to market mobility to a large extent," Priya Raj Regmi, president of Stock Brokers Association of Nepal (SBAN), said. "However, with CDS and Clearing Ltd (CDSCL) enforcing dematerialized share trading of ´Banking´ group, banks and financial institutions (BFIs) are not floating loans against dematerialized shares for last few weeks which has blocked the money coming into the market.”
CDSCL enforced implementation of dematerialized form of shares trading for the ´banking´ from October 8 last year. This means buyers of the shares of any commercial bank will only receive the ownership of such shares in the dematerialized form. Stating that it will create problems while freezing the trading and auctioning of the shares pledged by the borrower if defaulted, BFIs are not floating loans against such shares.
“Since the banking group dominates the share market, BFIs´ refusal to extend loans has contributed to the drop in daily transactions," Regmi added.
CDSCL is likely to introduce a new working procedure that will address the concern of the BFIs within few days.
The market also witnessed festive effect in the third and fourth months as most of the investors opt to sell their scrip or hold the decision of investment to arrange money for the festive celebration, according to investors.
Investors say that rise and fall of turnover largely depends on the movement of benchmark index. “The fall in the turnover is mainly due to the heavy correction in the market in recent months,” Dipendra Agrawal of Nepal Investors Forum, a lobby group of investors, told Republica.
The benchmark index climbed to a six-year high of 1083.55 points on July 21. Nepse recorded all time high daily turnover of Rs 1.2 billion on the following day. However, the market was on a correction mode until last month.
“The psychology of investors, mostly the new ones, is determined by the Nepse graph. If the market is on a bullish trend, they think it´s the time to buy to book profit. They refrain from making investment if the market is on a correction mode," Regmi added.
With the market rebounding in recent days and CDSCL preparing to introduce working procedures for issuance of loans against dematerialized shares soon, analysts say daily turnover will increase in the coming days. The full-fledged implementation of CDS after some months is expected to give a big boost to daily turnover.
source: republica,2 feb 2015
LINK
Nepse´s data shows daily turnover in the secondary market, which stood at Rs 600.42 million in the first month (mid-July-mid-August) of 2014/15 came down by 22.94 percent to Rs 462.28 million in the second month. Average daily turnover fell to Rs 289.18 million in the third month and Rs 198.9 million in the fourth month.
Daily turnover observed some recovery in the sixth month ending mid-January. The average daily transaction amount stood at Rs 243.54 million in the sixth month, according to Nepse´s data.
Stock market analysts attribute the decline in turnover in recent months to confusions related to implementation of Central Depository System (CDS). “Liquidity surplus in the market, which has been seen in the banking system for the past few months, was giving leverage to market mobility to a large extent," Priya Raj Regmi, president of Stock Brokers Association of Nepal (SBAN), said. "However, with CDS and Clearing Ltd (CDSCL) enforcing dematerialized share trading of ´Banking´ group, banks and financial institutions (BFIs) are not floating loans against dematerialized shares for last few weeks which has blocked the money coming into the market.”
CDSCL enforced implementation of dematerialized form of shares trading for the ´banking´ from October 8 last year. This means buyers of the shares of any commercial bank will only receive the ownership of such shares in the dematerialized form. Stating that it will create problems while freezing the trading and auctioning of the shares pledged by the borrower if defaulted, BFIs are not floating loans against such shares.
“Since the banking group dominates the share market, BFIs´ refusal to extend loans has contributed to the drop in daily transactions," Regmi added.
CDSCL is likely to introduce a new working procedure that will address the concern of the BFIs within few days.
The market also witnessed festive effect in the third and fourth months as most of the investors opt to sell their scrip or hold the decision of investment to arrange money for the festive celebration, according to investors.
Investors say that rise and fall of turnover largely depends on the movement of benchmark index. “The fall in the turnover is mainly due to the heavy correction in the market in recent months,” Dipendra Agrawal of Nepal Investors Forum, a lobby group of investors, told Republica.
The benchmark index climbed to a six-year high of 1083.55 points on July 21. Nepse recorded all time high daily turnover of Rs 1.2 billion on the following day. However, the market was on a correction mode until last month.
“The psychology of investors, mostly the new ones, is determined by the Nepse graph. If the market is on a bullish trend, they think it´s the time to buy to book profit. They refrain from making investment if the market is on a correction mode," Regmi added.
With the market rebounding in recent days and CDSCL preparing to introduce working procedures for issuance of loans against dematerialized shares soon, analysts say daily turnover will increase in the coming days. The full-fledged implementation of CDS after some months is expected to give a big boost to daily turnover.
source: republica,2 feb 2015
LINK
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