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Market Analysis

Marginal climb in NEPSE

By R.K.Regmee

R.K.RegmeeThe stock market reversed the falling trend of previous fortnight to record a marginal climb in Nepal Stock Exchange Index in the past week when it closed at 408.19 points, marking a nominal increase of 0.77 %. The figure could not be termed as the result of any recent financial measures pursued in investment sector. Neither does it indicate restoration of investors' full confidence in the secondary market.

Analysts see in it some sort of comfort feeling among stock dealers over the hurdle-free parliamentary endorsement of the ordinance - budget for the fiscal 2010-11. They had a sense of fear: the political obstacle disrupting expansion of cabinet would also infect the passage of budget and choke it mid-way.

"This did not happen to their relief resulting in the reverse of declining trend."

Political cooperation witnessed in parliament for providing go-ahead to the budget should not be mistaken as a politicos' gesture for special consideration for the country's worsening state of economy. It is just a tactical compulsion for political parties to appear cooperative for clearing formality for the financial document that has already been implemented for over seven months. "The document carried little juice for those who have either entered or are expecting to go into Singha Durbar and it had lost value for those who had just exited from the same."

Had they prioritized the economy, they would not have allowed politics to adversely impact economic policies and processes, analysts opine. The passage for running the economy has been actually disturbed for over two years: two budgets of two fiscal years have been injured in varied ways; the second Interim Three Year Plan is being postponed at the cost of economy; donors' request for appropriate response to their offer is being ignored.

Moreover, political instability has so disabled the government that it cannot spend well the amount allocated for development works. Stock market is suffering from a worrying gap between demand and supply. Commodity-market and bank-deposits are getting more lucrative and they have been effective in stealing investors from NEPSE. The Mutual Fund Company that could have been instrumental in breaking the trend is no more than a story in media.

Market -turnover of NEPSE in the past week, however, could not follow the ascent. It fell by 27.33 % to Rs. 5.5 million as against the previous week's Rs. 145.1 million. Sub-indices of Hydropower, Insurance, Others, and Commercial Banks recorded gain during the past week when Finance, and Development Bank witnessed decline.

Non-response

NEPSE did not show any sign of response to Nepal Rastra Bank's financial policy initiatives such as offer for BFIs looking forward to merge and actions against some financial institutions. The process adopted by Citizen Investment Trust to double its paid up capital also failed to impact stock market.

Had investors in the secondary market not limited themselves to the role of speculation, they could have found some solid reason to be indirectly motivated to some extent by the measures.

When translated into reality, the measures could have pushed the cause of investment forward. In normal stock market situation enjoying investment friendly atmosphere such indirect measures are bound to create impact, say experts.

In the meanwhile if Finance Minister Bharat Mohan Adhikari cannot manage the conflict between the issue of supplementary budget, the demand of Maoists, and the issue of having a full budget for next fiscal year in two month as per the wish of PM Khanal well in time, NEPSE might further suffer setback in days to come. nepalnews.com Feb 20, 2011

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