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Market Analysis
Snag in government dims NEPSE

By R.K.Regmee

R.K.RegmeeEconomist Bharat Mohan Adhikari, the new Deputy Prime Minister in Khanal-cabinet, may have felt not happy over stock market's cold response to his come-back to Finance Ministry as its fresh in-charge. Investors could not display enthusiasm in his opening week when NEPSE Index crashed from 413.75 to 405.03 points with all sub-indices not making any gain.

The stock market appears to be highly sensitive to political change. Analysts have to basically take consideration of factors related to politics; the ones attached to finance, currency circulation and trade do not require analysis because they rarely find space and time to impact the secondary market. This, in itself, is an indicator of how the prolonged Interim Period of Nepal has been victimizing one crucial component of the economy.

The phenomenon of excited growth - an upward climb of 6.92 points - on Sunday in NEPSE yard was the result of hope in Khanal's assuming Office of Prime Minister with cooperation from UCPN (Maoist), the largest single party in the Legislature Parliament. The spirit soon dampened with Prachanda disagreeing with Khanal over non-allocation of Home Ministry to his party.

As relations between the top duo soured, varied differences among the CPN (UML) and UCPN (Maoist) surfaced over the seven point non-transparent deal to shock investors leading the market to continuous fall to 408.47 points on the second trading day. The decline continued to 406.94 points, 405.44 and 405.03 on the following third, fourth and fifth days respectively.

The poor performance of NEPSE in the past week could be termed as symbolic brief for both PM Khanal and FM Adhikari about how vulnerable the reading of investment pulse of Nepali economy is at the moment. They may have got disheartened not to be able to shape the cabinet at the outset to at least skeleton structure with distinct portfolio distribution.

Bumps ahead!

But, analysts say, "they cannot afford to show frustration because of the public positions they have been elevated to; they have to work out a quick and smart confidence building scheme for the economy as soon as possible if they mean to do something other than occupying high posts." The new comers in Singha Durbar have also to avert another financial crisis: getting the ordinance budget endorsed by parliament by Tuesday. Failure to do so would disable government financially for it would have no authority to spend even one rupee.

Sandwiched between political pressure from Maoists and the country's economic crisis, Adhikari faces numerous hurdles while coping with problems in Finance Ministry. Pressing among them are: restoring investors' confidence in secondary market - NEPSE, finalizing second Interim Three Year Plan, smarting scheme to respond to donors' plan to support Nepal Peace and Development Strategy 2010-15 announced recently, tackling inflation, encountering unemployement and taking care of declining export and rising import.

"It is", observers feel, "really testing time for BMA's maturity, wisdom and skill in the Ministry handled by his own non-economist young colleague Surendra Pandey for the past 20 months."

The loss sub-groups of NEPSE suffered in the past week may not present a comfortable indicator for BMA. All key sub-indices particularly those of hydropower, commercial banks, manufacturing, processing, insurance and others were negative. They were followed by other losers such as hotels, development banks and finance companies.

One consolation, however, is visible: NEPSE saw rise in turnover over the week. It stood at Rs. 145.1 million, a gain of 13.86 % over that of previous week. Altogether 121 companies engaged in business of 710,048 shares during the period. nepalnews.com

The writer can be reached at [email protected]

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