However, business executives who took part
in an opinion poll conducted by Business Age believe otherwise. Among the respondents,
nobody accepted the crash to be a normal market phenomenon. While about 43% described it
as a reflection of market imperfections, implying that the officials can do something to
make the market more perfect in terms of information flow and the like, 57% of the
respondents blamed the investors for their reckless speculation.
The February 28 crash was not a sudden one, the writing on
the wall was visible ever since early December last year. After growing steadily
throughout the year and reaching 508.85 on December 1, NEPSE had fallen down to 487.26 on
January 1, 2001 and further down to 467.02 on February 1, 2001.
Replying to a question, 58% of the respondents viewed that
the market regulators could have heeded to the abnormal growth of the past and took
appropriate steps to avoid the sudden crash. Only 30% of the respondents expressed doubt
whether the authorities could have done anything while about 15% said they could not
comment about it.
Most of the respondents said they can’t be sure
whether the market will revive sooner or later than one month or a year. Though the NEPSE
index registered a slight increase on the following day of the investor agitation,
observers feel it was orchestrated by some elements who manipulate stock prices for their
vested interests. But such orchestration cannot be sustained for long. That may be the
reason why the NEPSE index has continued its downward trend. On March 20, 2001 NEPSE
closed at 385.35
Some quarters have also blamed the management of commercial
banks for the recent stock exchange crash. People were expecting bonus shares from the
banks and thus went on buying banking company shares. And this tendency had pushed their
prices up. The market crashed when the expectation was not met. This may be true, as a
major banking company, Nepal Grindlays Bank Ltd. (NGBL) announced a hefty 100% dividend,
but not bonus shares. And the NEPSE crash followed soon after. But it was naivety of the
investors to expect bonus shares of NGBL as it had already reached the Rs 500 million
target set by Nepal Rastra Bank for capital, and thus had no reason to issue bonus shares
and raise the paid up capital. Everest Bank Ltd. already had decided to issue right shares
and Nepal Bangladesh Bank announced that it was to put the proposal to the coming AGM to
distribute bonus shares. When all such information were openly available in the market, it
was sheer naivety on the part of investors to go on buying the share that was already
being traded at a quite high P/E ratio.
The participants of the opinion poll viewed that, in such a
situation, if the bank managements have to be blamed, they deserve only a partial blame.
That means, had the banks clarified to the public about their interntions right at the
beginning of the phase when the share prices had crossed an abnormally high level (e.g.
during September 2000), the sudden crash could have been avoided.
Overall, the respondents of the poll were not so certain
about whom to blame for the crash. Among those who chose to blame someone, the majority
turned to the regulators, indicating that the regulators should have read the signals when
some scrips were trading at an abnormally high price on a single expectation which the
regulators could have made the bank managements to confirm or deny in time.
