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Market Analysis
R.K.RegmeeNEPSE: Hope for swift era

By R.K.Regmee

The stock market demonstrated its sensitivity to contemporary crisis facing Nepali economy in a remarkable fall and rise in the past week. It climbed down sharply for the first three days from 372.00 points to 358.04 as top entrepreneurs prepared to hand over their industry-key to Prime Minister Jhala Nath Khanal in protest against the stoppage launched by dissatisfied factions for opposing the three Trade Unions- management deal.

Finance Secretary Rameshwar Khanal's abrupt resignation and the heated debate it generated in politics and civil service also motivated the NEPSE decline, say analysts. Finance Minister Bharat Mohan Adhikari is under pressure to explain convincingly the sudden exit of a highly experienced top civil servant known for his strict move against VAT-evading trends. The event has its own impact on the mindset of opposition politicians, ruling parties and investors.

A contrasting phenomenon emerged later in the week. As news of materializing the Central Depository System in Nepal Stock Exchange got disseminated through mass media, the secondary market began to show positive indicators with hope that it would be instrumental in making the share business professionally efficient and smart in operation. The Index went up by 359.11 points on the fourth day improving further to 365.25 points on Thursday the last trading day of the week.

The System, a much-awaited mechanism, holds prospects for bringing about revolutionary change in stock trade in the country. It promises quick transaction and motivates investors to sense the gain in value for their money almost instantly and in visible manner. This strength is considered crucial in stock trade.

Although NEPSE had nothing special to enjoy in its share- transaction-floor which continued to be bearish despite Nepal Rastra Bank's liberal approach to margin lending and home loan provisions, it heard during the period some juicy talks - linked with it closely or remotely. PM Khanal assured the industry business community convincingly while rejecting their keys in a decent note. It could be interpreted as Nepal Government's positive signal for investors.

Another indicator supporting the investors came from top politicos of the country. The ruling party Maoist leader Prachanda, and opposition party Nepali Congress leader Sushil Koirala shared a forum in Kathmandu with the Prime Minister to assure people about completion of peace process and constitution by May 28 for expediting economic development. The process is key to political certainty which is a must for investment in economy and growth of stock market. They qualified their optimism by adding the oft-mentioned phrase "if political parties work out consensus and care to nourish political will."

Former Finance Ministers including Maoist Vice-Chairman Dr. Baburam Bhattarai also joined the discourse on investment to highlight the role of private sector entrepreneurs in Nepali economy. Dr. Bhattarai made it clear that the Maoist party is not against the private sector in Nepali economy. The observation could be taken as highly significant in view of the recent approach taken by the party to replace economic liberalization with mixed economy in the context of amending an Act.

Dr. Ram Sharan Mahat of Nepali Congress and Dr. Prakash Chandra Lohani of Janashakti Party reiterated their emphasis on private sector and investment friendly atmosphere and said that any move against economic liberalization would not be acceptable.

If the assurance and talks on investment, mentioned above, get translated into action Nepal's investment sector might feel vibrant. The CDS to be operated in the secondary market would be instrumental in building on that resulting in the ultimate growth of NEPSE.

Weekly phenomenon

NEPSE floor witnessed one gainer - Hydro power - in the past week when the sub-sector recorded 13.40 points rise. The rest like hotels, manufacturing and processing companies, commercial banks, development banks and others had a disappointing fall during the period. The turnover went up to Rs.173.31 million through business of 662,776 shares in the week.

The writer can be reached at [email protected]. Nepalnews.com April 3, 2011

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