NEPSE's daily transaction amount drops below Rs 200 million for third straight dayA crunch in loanable funds, government indifference and festive season spending have adversely affected the secondary market.
Daily turnover at the secondary market fell below Rs200 million for the third straight day this week as investor confidence continues to wane.
During Tuesday trading, the country’s only stock exchange carried out transactions worth Rs165.29 million while the market inched up 2.4 points. On the first two days this week, the turnover amount had stood at mere Rs113.35 million and Rs164.34 million respectively.
Earlier, the Nepal Stock Exchange hit its life-time high of 1,881.45 points on July 27, 2016. In that year, the market capitalisation surged to a record Rs1,981 billion while daily transaction also posted a record high Rs2.75 billion.
Along with the bearish trend which has gripped the market in the past few months, the secondary market saw its index sink to 1,134 points on Tuesday, with the market capitalisation also shrinking to Rs1,441.82 billion.
Stockbrokers attributed the slump in the market to big investors not investing as much due to uncertainty caused by the government’s indifference in implementing policies that favour the stock exchange market. “After the leftist government with two-third majority took over, big investors, in particular, have shifted their investment away from the stock market, choosing to grow their businesses instead,” said a stockbroker on condition of anonymity.
Over the past two and a half years since the current government was formed, the market index has dropped by around 200 points, according to records at the Nepal Stock Exchange. Back then, the average daily turnover stood at Rs687 million.
Bharat Ranabhat, president of Stockbrokers’ Association of Nepal, also admitted that only small investors were actively investing in the stock market. Ranabhat, however, added that the low market transaction at present is mainly due to the growing fear among investors that bank interest rates could spike anytime soon.
“Banks have now been complaining about the crunch of loanable funds due to excessive lending compared to the sluggish deposit collection,” said Ranabhat. In the first quarter of the current fiscal year, banks only collected deposits worth Rs59 billion while they issued Rs118 billion in loans, shows the records of Nepal Rastra Bank.
Ranabhat added that the market could also have been affected by the ongoing festive season, a period when investors choose to buy goods instead of shares.