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| Kathmandu, Tuesday February 04, 2003 Magh 21, 2059. |
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Cease-fire revives stock
market
Index rises over 9 points in a single day
Post Report
KATHMANDU, Feb 3 : After a long spell of bearish
trading in the country’s only secondary market for securities transaction, the market
confidence today rebounded, which is reflected by a substantial rise in the stock index, a
barometer to investors’ confidence.
The Nepal Stock Exchange (Nepse) index today
climbed by 9.76 points. This is the second time in over three years that the stock index
went up by over nine points. Against the index of 213.30 today, the index at the end of
weekly trading last Friday stood at 203.54.
With today’s gain in the stock exchange,
the market capitalization of stock, which measures the cumulative wealth of investors,
rose by 4.77 per cent. Against the stock capitalization of Rs 33.02 billion at the end of
trading Friday, the capitalization today touched Rs 34.6 billion.
Stock prices of all commercial banks increased
today (see Nepse share trading list). The rise in prices of shares of commercial banks,
which command a lion’s share in the total stock trading at the Nepse floor, directly
explains the rise in the Nepse index.
Experts thank the last week’s cease-fire
announced by the government and the Maoist for a rebound in market confidence. However,
they also point out that anticipation of dividends as the accounts of many banks approach
closing is another reason for such gain in stock performance.
"The revitalization in the stock market
trading is mainly due to the latest cease-fire ending the spate of violence," Mukunda
Dhungel, General Manager of Nepse said, talking to The Kathmandu Post. "Confidence of
investors have certainly gone up following such assurance from the government and the
Maoist for peace," he added.
Likewise, Bishnu Chapagain, President of Nepal
Brokers’ Association, and Jagdish Agrawal, former president, also attest that the
rise in stock prices and index is a result of an anticipation of a more peaceful future
and better business conditions.
Said Agrawal, "The rise in the index can be
attributed to a chance that investors got to invest their capital, which had been lying
idle." Only peace and security can help boost economic activities, which in turn
helps increase returns. Investor’s confidence bears a direct relation with a
conducive environment to conducting business, he added.
He elaborated that a sudden single-day increment
in the index is mainly due to the rush of investors to the stock market for ‘buying’.
A substantial amount of cash must have been lying in the hands of investors, especially
because of the fact that even commercial banks are providing low rate of return lately.
Chapagain stated that the rise in the index
today is primarily caused by the cease-fire. However, he added that the fact that accounts
of many banks are now approaching for closure date has also played a role in pulling up
the stock prices and the index.
Officials denied speculating stock price
movement over the rest of the week. Nonetheless, they added, "The general mentality
of the investors would only be clear by studying the market trend for a few more
days."
However, independent experts anticipate a
further gain in stock prices and, hence, index in the days to come. "Given the
likelihood that the cease-fire reached by the two warring sides would last this time,
stock market performance can be expected to run high in the future."
Nepal’s stock market performance had been
on a continuously downhill trend since a single-day market crash that saw the index spiral
down by over 22 points in February 2001. Further weakening of the stock was as a result of
the clamping of a state of emergency in November 2001.
The spate of arson and attacks carried out by
the Maoist insurgents, many of them even against business establishments, and even before
the state of emergency was imposed, was the core reason for waning secondary market
confidence. Despite today’s gain, the stock market is way below what it had achieved
over two years back. The index that closed at 213 points today had once touched an all
time high of over 545 points.
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