The domestic share market was witnessed a free fall as the Nepal Stock Exchange (Nepse) index plunged by 65.44 points or 4.76 per cent to close at 1,309.70 points, nearly a 10-month low.
The share analysts attribute the current selling pressure to the impressive rates on fixed deposits being offered by the commercial banks due to credit crunch from supply side that has tightened margin type lending coupled with a recent statement by Beema Samiti chairman Chiranjibi Chapagain, who is said to have indicated that there would not be a mention of paid-up capital in the new insurance act for the panic sell off in the share market.
"The tightening of margin type lending by banks and financial institutions (BFIs) and rapid rise in interest rates in recent days has sent a jitters among investors, causing a panic sell off in the share market," according to spokesperson of Stock Brokers Association of Nepal (SBAN) Tanka Gautam.
The brokers said that investors wary of liquidity problem faced by the BFIs that have been intensifying their margin calls to borrowers who had taken loans upon stock pledges to buy shares during the stock market boom.
The central bank has said that ‘credit excesses in risky areas could divert bank credit from productive sectors. "Therefore, BFIs are required to exhibit prudent and cautious lending behaviour,” the central bank report reads.
BFIs’ margin type loans have jumped to Rs 38.34 billion in mid-December of the current fiscal year 2016-17 from Rs 26.75 billion during the same period of the last fiscal year.
“It was a gradual fall of stocks until today when there was a steep, unexpected and sudden decline in share prices," brokers said, adding that most of the investors panicked by various negative factors affecting the market seemed to be in rush to offload their shares.
Opening at 1,375.14 points, the Nepse index steadily moved on the downward trajectory throughout the day. Today’s was the second-biggest daily drop of the local share market. The largest slump was recorded on August 8, 2016, when Nepse had plummeted by 88.81 points on a day's trading.
The biggest loser of the day was Insurance sub group. Insurance saw the biggest dive of 546.55 points or 8.7 per cent to close at 5,737.24 points, followed by hotels sub group that slumped by 128.48 points or 7.24 per cent to settle at 1,646.84 points. Finance sub group was down by 35.92 points or 5.48 per cent to close at 619.30 points. Likewise, manufacturing and trading subgroups, which did not record any transactions, held steady at 2,145.43 points and 206.16 points, respectively.
Banking – that dominates the share market – plunged by 60.55 points or 4.63 per cent to land at 1,247.99 points. Hydropower sub group dropped by 73.09 points or 4.51 per cent to close at 1,547.83 points. The development banks sub group was down by 48.99 points or 3.41 per cent to settle at 1,389.57 points. The Others sub group lost 15.04 points or 2.14 per cent to close at 688.63 points.
Likewise, the sensitive index – that is the barometer of class ‘A’ shares – dropped by 14.41 points or 4.83 per cent to rest at 284.07 points, whereas the float index that measures the performance of shares actually traded also fell by 4.82 points or 4.74 per cent to close at 96.91 points.
Altogether nearly 1.13 million shares of 123 companies that amounted to around Rs 536.63 million changed hands through 5,649 transactions during today.
Despite the drop in the market some of the companies including Arun Finance, Oriental Hotels, Rastriya Beema Company, Reliance Finance and Excel Development Bank were the top gainers, whereas Prudential Insurance, Muktinath Bikas Bank, Himalayan General Insurance, Soaltee Hotel and Sagarmatha Insurance were the top losers today.
The share analysts attribute the current selling pressure to the impressive rates on fixed deposits being offered by the commercial banks due to credit crunch from supply side that has tightened margin type lending coupled with a recent statement by Beema Samiti chairman Chiranjibi Chapagain, who is said to have indicated that there would not be a mention of paid-up capital in the new insurance act for the panic sell off in the share market.
"The tightening of margin type lending by banks and financial institutions (BFIs) and rapid rise in interest rates in recent days has sent a jitters among investors, causing a panic sell off in the share market," according to spokesperson of Stock Brokers Association of Nepal (SBAN) Tanka Gautam.
The brokers said that investors wary of liquidity problem faced by the BFIs that have been intensifying their margin calls to borrowers who had taken loans upon stock pledges to buy shares during the stock market boom.
The central bank has said that ‘credit excesses in risky areas could divert bank credit from productive sectors. "Therefore, BFIs are required to exhibit prudent and cautious lending behaviour,” the central bank report reads.
BFIs’ margin type loans have jumped to Rs 38.34 billion in mid-December of the current fiscal year 2016-17 from Rs 26.75 billion during the same period of the last fiscal year.
“It was a gradual fall of stocks until today when there was a steep, unexpected and sudden decline in share prices," brokers said, adding that most of the investors panicked by various negative factors affecting the market seemed to be in rush to offload their shares.
Opening at 1,375.14 points, the Nepse index steadily moved on the downward trajectory throughout the day. Today’s was the second-biggest daily drop of the local share market. The largest slump was recorded on August 8, 2016, when Nepse had plummeted by 88.81 points on a day's trading.
The biggest loser of the day was Insurance sub group. Insurance saw the biggest dive of 546.55 points or 8.7 per cent to close at 5,737.24 points, followed by hotels sub group that slumped by 128.48 points or 7.24 per cent to settle at 1,646.84 points. Finance sub group was down by 35.92 points or 5.48 per cent to close at 619.30 points. Likewise, manufacturing and trading subgroups, which did not record any transactions, held steady at 2,145.43 points and 206.16 points, respectively.
Banking – that dominates the share market – plunged by 60.55 points or 4.63 per cent to land at 1,247.99 points. Hydropower sub group dropped by 73.09 points or 4.51 per cent to close at 1,547.83 points. The development banks sub group was down by 48.99 points or 3.41 per cent to settle at 1,389.57 points. The Others sub group lost 15.04 points or 2.14 per cent to close at 688.63 points.
Likewise, the sensitive index – that is the barometer of class ‘A’ shares – dropped by 14.41 points or 4.83 per cent to rest at 284.07 points, whereas the float index that measures the performance of shares actually traded also fell by 4.82 points or 4.74 per cent to close at 96.91 points.
Altogether nearly 1.13 million shares of 123 companies that amounted to around Rs 536.63 million changed hands through 5,649 transactions during today.
Despite the drop in the market some of the companies including Arun Finance, Oriental Hotels, Rastriya Beema Company, Reliance Finance and Excel Development Bank were the top gainers, whereas Prudential Insurance, Muktinath Bikas Bank, Himalayan General Insurance, Soaltee Hotel and Sagarmatha Insurance were the top losers today.
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