Sebon urges NRB for coordination

KATHMANDU, SEP 10 - The Securities Board of Nepal (Sebon) on Tuesday asked Nepal Rastra Bank (NRB) to coordinate with it before taking any decision affecting the share market after its cap on investments by banks put stocks in freefall.

Sebon officials told a press meet held by the Nepal Stock Exchange (Nepse) that they would request the central bank for proper coordination between the two regulators.

Sebon’s move follows complaints from stockbrokers that the Nepse has taken

a beating due to unclear and untimely directives from the central bank.

Sebon Director Paristha N Poudyal said they would request the central bank to work in concert while formulating such policies. He also urged investors not to panic over

the recent drop in the Nepse.

Share prices have been on a downhill course for the last two weeks after NRB directed banks and financial institutions (BFI) to limit their investments in held-for-trading securities to 1 percent of their core capital. Held-for-trading securities are shares or bonds bought with the sole purpose of selling them at a profit after a short period.

Although the central bank later clarified that the provision would not prevent BFIs from investing in other types of shares, it does not seem to have assuaged the stock market’s fears much.

Sebon Spokesperson Niraj Giri said that they were closely observing the Nepse’s recent downward spiral. “As the secondary market is dominated by shares of BFIs, a small change in policies influencing the sector brings great fluctuations in the Nepse,” he added.

Giri said that the Nepse was due for a takeoff. “The statistics of the last few years show that the market should be growing during this time,” he said. According to Giri, the market was affected largely by the presence of a small number of institutional investors at present. “As small investors are large in number, the market slumped mainly due to a drop in their confidence.”

Similarly, Nepse General Manager Sitaram Thapaliya said, “There is no reason that should affect the stock market at present.” He added that new investors in particular should consider the situation carefully before buying shares.    

Meanwhile, former Sebon chairman Chiranjeevi Nepal described the sharp fall in the stock market as abnormal. “At a time when the market needs to rise, the sharp fall is likely to bring down the confidence of investors to make further investments,” he said.