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🇳🇵 Nepal /Economy & Trade

Political reset fails to lift Nepal’s stock market

From Kathmandu Post · () English

Summarized and contextualized by DistantNews.

At a glance

News Sources not specified Context piece
  • Nepal's stock market has declined significantly since the Rastriya Swatantra Party (RSP) took office, contrary to investor expectations of stability.
  • Investor confidence remains weak due to ongoing investigations into stock-market-related incidents and uncertainty over the government's intentions.
  • The government's focus on good governance and property detail collection has created fear among large investors, leading to a shrinking market capitalization.

Investors in Nepal had anticipated that the formation of a new government led by the Rastriya Swatantra Party (RSP) would usher in political stability and renewed confidence, thereby boosting the stock market. However, the opposite has occurred. In the 106 days since the RSP took power, the Nepal Stock Exchange (Nepse) index has fallen by over 380 points, marking a significant decline and reaching a six-month low.

After the new government was formed, investigations were launched against some major businesspeople in the name of promoting good governance. Most of those cases involved stock market transactions. This mainly increased fear among large investors.

— Narendra Raj SijapatiExplaining the impact of government investigations on investor sentiment.

This downturn reflects a deep erosion of investor confidence. The Nepse index has dropped from 2,950.50 points to 2,570.28 points, and the total market capitalization has shrunk by nearly Rs600 billion. Analysts attribute this slide to sellers gaining the upper hand and a general pessimism among investors who expected the new government to end political uncertainty and foster policy stability.

Lingering fear and uncertainty over the government's intentions are major factors contributing to the market's poor performance. While current government policies are viewed as favorable, investigations into stock-market-related incidents and actions perceived as targeting major businesspeople have spooked large investors. Narendra Raj Sijapati, former president of the Stock Brokers’ Association of Nepal, noted that these investigations, often involving stock market transactions, have caused large investors to stay on the sidelines, hindering market recovery.

Because of that fear, large investors have stayed on the sidelines. This is the main reason the market has failed to recover.

— Narendra Raj SijapatiIdentifying the primary cause of the stock market's stagnation.

Adding to investor unease is the government's move to collect property details, which has further fueled fear in the stock market. Despite the general support for stronger governance in Nepal, actions that affect specific sectors can create apprehension. This environment has prevented the Nepse from recovering, leaving investors wary of the market's future prospects.

The government’s move to collect property details has also created fear in the stock market.

— Narendra Raj SijapatiHighlighting another factor contributing to investor apprehension.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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