Currently, daily turnover at Nepal Stock Exchange (Nepse) stand at less than Rs 20 million, far lower than the daily average of Rs 40 million last year, when the market was not performing well.[break]
Stock analysts had anticipated the market to pick up, particularly after Nepal Rastra Bank (NRB) relaxed provision on margin-type lending and allowed banks to decide on margin call. The government had also promised large scale investment from public sector entities.
“Sadly, returning to the days market recorded turnover of as much as Rs 120 million a day seems impossible now,” said Rabindra Bhattarai, a share analyst.
Nepse index has consistently hovered between 300-400 points over the last three months.
Although NRB this week liberalized the margin lending regime further, allowing banks to renew loans issued against the collateral of shares, analysts still rule out the possibility of market regaining confidence.
“What market needs at this juncture is huge investment. Unless the government comes up with the ways to ensure that, we don´t expect the market to revive,” Bhattarai added.
Though investors welcomed the central bank´s latest relaxation of renewal of margin lending, they said the market simply lacked positive outlook to lure new investment. They say dividends announced by leading banks and financial institutions -- major players and milking cow in the stock market -- were lower than the last year.
“Investors feel that the rate of return on share investment has dipped than the past, whereas interest rate on margin lending (investment) has gone up,” said Bhattarai.
Currently, banks are offering interest return of 8 percent to 12 percent on deposits, whereas they are slapping interest rate of up to 16 percent on margin lending. The stock market, on the other hand, is presently plagued by low rate of return compared to other sectors.
Records show even the best performing banks like Nabil Bank have announced only 30 percent dividend, which is far lower from 70 percent announced last year. This disappointed investors, who were expecting attractive dividend after suffering huge loss in share prices over the year.
“Low dividend announcement has dampened investors´ confidence. No wonder the stock market is fast losing new investment,” said Nanda Kishore Mundada, immediate past president of Stock Brokers´ Association Nepal (SBAN).
Talking to Republica, Mundada also viewed the NRB´s latest relaxation of margin lending would not rejuvenate the stock market as big investors - the major players - have already sold out their large number of shares.
“Margin lending relaxation came very late. Major investors have already sold their large share holding amid scarcity of loans,” added Mundada.
Given the situation, Mundada says the government should immediately enact Central Depository Service (CDS) Regulations and facilitate entry of investment of Non-Resident Nepalis (NRNs) to give new impetus to the market.
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