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Why Nepal’s share market is bullish while Covid-19 is shattering the entire economy

As Covid-19 has limited investment opportunities in Nepal, a lot of people have resorted to investing in stocks. Even though there were initial fears that the market might crumble due to the lockdown, the exact opposite has happened. When the government reopened the stock market in May 2020, the Nepse index stood at 1,200. On Monday (May 23) the index reached as high as 2,823, the highest it has ever reached as there were trades in excess of Rs 13 billion. That record was soon broken as on Thursday (May 27), Nepse closed at 2,815 while turning over Rs 14.7 billion.

While various other industries continue to suffer due to the pandemic, the stock market seems to have thrived. But, why?

Basic factors

The Nepal Stock Exchange (Nepse) CEO Chandra Singh Saud says that two factors have played an important role in the rise of Nepal’s share market.The first he says was the use of technology. With trading now done via a trade management system (TMS), things have become easier for traders to buy and sell stocks from home. The second he says is easy access to loans from financial institutions.

The TMS, when initially introduced, was heavily criticised by everyone. But in recent time, people have been praising the software as it has made trading of shares easy.

“We have always tried to make sure that we want to change according to time. Thanks to the software, more and more people have started to invest in stocks,” says Saud. “There are over 600,000 people who use the software. They have the comfort of trading even when they are at home.”The second factor he says is easy access to loans. Ever since the Covid-19 hit Nepal, deposits at banks have risen significantly. With limited investment opportunities, the banks have been giving out loans to buy shares.

He says that as interest rates are low, various investors in the market started margin lend (lending money backed by shares). The margin lending is still at 70 per cent. That has helped the stock market rise up exponentially, says Saud.

 

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