Central bank’s new rule of calculating the spread rate decimates stock marketStocks analysts said the latest circular by Nepal Rastra Bank failed to boost the market and instead battered investor confidence.
Nepal Stock Exchange plunged 25.28 points to close at 1,238.56 points last week after a circular floated by the central bank regarding the new rule of calculating the spread rate left investors with more questions than answers.
Despite a fall in the market index, the average daily turnover rose to Rs438.28 million last week from Rs417.24 million in the previous week as investors rushed to offload shares.
The market which opened at Rs1,263.84 points on Sunday fell 4.2 points to close at Rs1,259.64 points. The secondary market continued to slide on Monday and Tuesday, dropping 4.54 points and 9.37 points respectively. It was followed by a slight uptick of 2.76 points on Wednesday before plunging 9.93 points on Thursday.
The secondary market for the past few weeks has been reeling in the row of confusion over the complexity in calculating the amount of capital gains enforced by the tax authority. The sector’s regulator, Securities Board of Nepal, has not made any moves saying that it is not authorised to make a decision on the tax issue. However, the Ministry of Finance has sought the intervention of the board to settle the capital gains issue.
Stocks analysts said the latest circular by Nepal Rastra Bank failed to boost the market and instead battered investor confidence. “The banks have expressed dissatisfaction on the central bank’s new rule of calculating the spread rate, stating that the new provision will hurt their bottomline. This has further deteriorated the confidence of investors,” said Tulsi Ram Dhakal, vice-president of Nepal Investors’ Forum.
The sensitive index that measures the performance of Group A companies also declined 4.52 points to close at 268.01 points.
Last week, investors lost Rs6.86 billion in the book value of their investment portfolio, after the market capitalisation declined to Rs1,567.42 billion from Rs1,574.28 billion.
Except for the sub-index of trading, indices of the remaining 10 groups plunged during the review period. Non-life Insurance posted the biggest loss, dropping 115.43 points to close at 4,958.1 points. Most of the other losers shed double digits points in their share prices.
The index of ‘others’ was down by 9.02 points to close at 709.37 points. Trading, the only gainer during the review period, gained 3.23 points.
Regarding individual companies, Agriculture Development Bank recorded the largest transaction volume of shares in the segment worth Rs174.06 million.
Nepal Bank Limited, Rasuwagadhi Hydropower Company, Nepal Credit and Commerce Bank and Prabhu Bank were also among the top five companies with the largest amount of shares transactions.
Last week, stocks worth Rs2.19 billion were traded which was 5.28 percent more than the amount in the previous week. The total number of traded shares however shrank to 7,438,850 units from 7,481,450 units.
During the review period, Nepal Stock Exchange listed 61,578,900 units of initial public offerings of Rasuwagadhi Hydropower Company and 32,850,000 units of Sanjen Jalavidhyut Company.