KATHMANDU: Nepal Stock Exchange (Nepse) index plunged 22.68 points this week to close at 1,759.71 points on Thursday — the last trading day of the week. The stock market has taken a downward path in recent weeks after a long bull run, which was fuelled by liquidity surplus in the banking system and announcement of handsome stock dividend by bank and financial institutions to raise their paid-up capital. As BFIs are now saying that they are starting to feel liquidity crunch, the stock market is also feeling the pinch, say stock analysts. BFIs are now increasing their interest rates as they are starting to face liquidity crunch. Slowdown in remittance growth rate, huge surplus in government treasury due to failure to boost capital spending and recent pick-up in lending of BFIs are some of the factors attributed for tight liquidity situation.
“Banks are now saying that they do not have excess liquidity anymore. This is likely to tighten their lending toward stock market. The stock market was enjoying cheaper fund of the banking system during liquidity surplus. Now liquidity situation is tightening for banks,” Anjan Raj Poudyal, former president of Stock Brokers Association of Nepal (SBAN), said “Many investors, who used to rely on bank financing in the stock market are now booking profit as banks are raising their rates.” Also, the sluggishness in the stock market is due to the festive season when transactions and market activities go down, say brokers.
