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Market Analysis
NEPSE falls as MKN quits

By R.K.Regmee

R.K.RegmeeNepal Stock Exchange fell by 0.85 % on the last week of Madhav Kumar Nepal-led coalition rule. The decline could be taken as symbolic of the way stock market had to function during the 20-month-period when then Finance Minister Surendra Pandey, despite a number of pledges, could not really address the problems facing investors.

As the country waited for long expected exit of MKN team and entry of Maoist-backed Jhalanath Khanal dispensation in Singha Durbar, NEPSE closed at 406.82 points, a fall by 3.75 in a week. Analysts say the fresh climate under new government might boost transactions in the yard of the secondary market. "It would, at least, restore the latest trend of uptrend that had marked NEPSE just until its staff began agitating to press for their demands."

Reopening on Monday after days of stoppage NEPSE maintained stability at 410.56 points on the first trading day of the week. On the second day it closed at 410.48 points. One day later it dived to the figure of 407.96 as investors watched carefully how the confusing prime-ministerial poll in parliament would unfold. The fall continued on the following day, too, to 406.82 points. Investors did not have time to adjust in response to the politically unexpected prompt parliamentary decisiveness on picking another leader of the same CPN (UML) as the new Head of Government.

The past week's decline in the NEPSE is the result of losing value by Commercial Banks and Others, the groups that dominate the listed shares in the secondary market. Others suffered most in the week recording loss of 11.75 points. Commercial Banks and Development Banks followed the decline by losing 4.43 points and 1.18 points respectively.

Those which gained value in the week included trading companies. Their value growth of 9.94 points could not, however, push NEPSE Index to the positive pasture. The marginal gain made by sectors such as Hydropower, Finance, Insurance and Hotels during the period could also not be enough to avoid the red zone for NEPSE.

As for the turnover it stood at 127.5 million rupees because of business of 605, 560 shares in 5,359 deals.

Ray of hope

What difference will Khanal-government bring about in the stock market?

The question is not easy to answer. Yet there is reason to be optimistic because the new government will at least do away with the lack of direction in economic policy felt during the tenure of caretaker government for nearly eight months.

With the fear generated by continuous fight for power among political leaders gone, some sort of stability in Singha Durbar, and in law and order status could be expected. The same might shower some confidence for investors in the economy. Investment sector will also find a room, not prominence, in the economic policy that the new government will follow. The same might facilitate, to some extent, the stock trade.

But NEPSE will fail to get as much attention as is needed for the secondary market in an economy because of the composition of the new government. nepalnews.com Feb 06, 2011.

The writer can be reached at dpal@columnist.com.

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