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Interest rates Investing NEPSE

Will The Nepali Share Market Crash In 2021?

The Nepali Stock Market (NEPSE) hit its all-time high of 2600 multiple times in the past 12 months. The bull run we’ve seen has been nothing short of spectacular and the public has seen their portfolio value increase significantly. 

Every sensible investor is now wondering if the market is too high and wondering if a major correction is on the way. 

So, if you’re wondering if the share market will crash then you need to consider what factors affect the Nepali stock market. 

What causes the stock market to rise or fall?

These five factors were demonstrably shown to affect the Nepal Share Market by a study done by P.K. Shrestha / S. Pokhrel | SEBON Journal-VII May (2019).

  1. The stock market responds quite well to macroeconomic development and especially monetary sector development. A loose monetary policy could trigger an asset price bubble in the share market, which is mainly dominated by BFIs. Things such as low interest rates, more money supply (M2) etc. have a demonstrable effect on the stock market.
  2. Nepal Rastra Bank’s policy on margin lending (loan against share as collateral) is a key factor in influencing the share market. 
  3. The Nepali share market is also highly influenced by rumours, news and speculations. 
  4. Hike in paid up capital of BFIs through FPO, right shares etc. also increases stock prices. 
  5. Positive political development nudged the share market upwards while negative developments put downward pressure on NEPSE. And these were closely watched by long term investors.

A look at the history of the NEPSE index also clues us into what affects the market.


presearch

NRB’s stimulus

When COVID-19 forced the government to lock down the country, the economy suffered. The GDP which was expected to grow by 6-7% only grew by 2.30%. 

So, if the economy suffered then why did it not affect the stock market? Well, it did. The market index did see a drop of approximately 400 points from around 1600 to 1200.  

The NRB in response to the unprecedented impact of COVID-19 on the economy: 

  • Reduced interest rates,
  • Increased the limit on margin lending to 65% of the share collateral (up from the previous limit of 50%), and
  • Increased the money supply (M2) which is up 23% (Broad Money Growth according to NRB). And more all in an effort to give the flailing economy a boost. 

But just these factors alone do not fully explain the unprecedented growth we have seen. So, what does?

The effect of new money  

As money sitting in savings accounts were getting a lower rate of return due to the drop in interest rates, people started looking for better returns. And they found the stock market. 

As of March 2021, there are now a total of 32,26,111 citizens in Nepal who have a Demat account according to the official website of CDS and Clearing Limited. In addition, there are a total of 6,27,662 active clients in all the broker offices with 2,43,348 active online accounts.  If even a small portion of these investors start investing actively, the volume of participation that we’ll see in the secondary market is truly unimaginable. 

The  “digitisation” of NEPSE with the introduction of the online Trade Management System (TMS) has made it easier for many newer investors to trade in the secondary market.

More new investors coming into the market means more money pouring into the market which creates demand on what is a finite amount of stocks. As more and more new investors flow through the demand has put upward pressure on the NEPSE index. 

Investors have poured money into companies with low earning potentials such as Upper Tamakoshi or widely overpaid for shares of Chandragiri Hills Resort.

Can you predict a stock market crash?

The book by Scott Nations, History Of The United States In Five Crashes, seeks to answer this very question.

The central idea of the book is the fact that, the most obvious phenomenon in all stock market crashes is the steep appreciation in the stock market prior to the crash. Precisely how the market appreciates is common to all crashes; two year periods of particularly aggressive buying inside a robust decade are common just before most of the crashes. 

The stock market is vulnerable when it has rallied strongly in the recent past and is now beyond a level that might generate a reasonable return. 

What sets off the crash itself is the unknowable or unforeseeable element. In 1907 it was as random as an earthquake, while in 2010 it was a riot in a place far away. 

The catalyst will push the market toward chaos. If a poorly understood financial contraption then causes selling at the worst time, we’ll get our next crash.

By comparing the phenomena common to every crash we can better understand the stock market and how it continues to change.

What will cause the next big crash in NEPSE?

The biggest factor could be Nepal Rastra Bank’s policy on interest rates and margin lending as well as monetary policy that could potentially cause the next crash. 

There are many situations where NRB could be forced to raise interest rates or limit margin lending. One is high inflation, another is formation of asset price bubbles whether in the property market or the share market.  

Yet another factor to look out for is the percentage of Non-Performing Loans in the financial institutions. A rise in NPL could see these companies’ earnings significantly reduced. 

On the other hand, this bull run could go on for much more than we might expect.

Also, the latest entry of Nagarisk Stock Dealer (CIT’s subsidiary) into the market is expected to add  significant additional buying power and liquidity into the system. And it is no surprise that in a single day, (1 March 2021), they bought Rs 57,253,656 worth of shares. It may just be that they’re just to ramp up. 

What do you think? Are we going to see another bull run or is a crash imminent?

Categories
News

Interest On Savings Account Likely To Increase After New Rule

The Nepal Rastra Bank (NRB) has announced that the maximum and minimum interest rates offered by banks and financial institutions on deposit accounts cannot be differentiated by more than 5 percentage points. 

This is likely to increase the interest rate on savings account which had fallen off a cliff recently. 

Currently, Nepali commercial banks have been offering fixed deposit interest rates up to 9.5% p.a. while the interest rate on some ordinary savings accounts stood at  just 1.5% p.a. 

The provision once implemented will mean the difference between the highest interest rate on fixed deposits and the lowest interest rate on savings account will not be more than 5 percentage points.

The central bank took this decision following its quarterly review of the existing monitory policy meeting yesterday. 

NRB Governor Maha Prasad Adhikari also stated that this change was announced so that the depositors would not be adversely affected by these low rates. 

He further added that flexibility in the policy would be maintained in view of the government’s goal of economic growth and the entire economy.

Source:

Nepal Rastra Bank

Categories
cryptocurrencies

Get Free Cryptocurrencies In Nepal

The revolution of the blockchain technology is just beginning and the adoption of cryptocurrencies in Nepal is also taking off, albeit behind the scenes.

While there are other ways to get crypto such as by mining, investing and staking, I’ve mostly focused this blog post around cryptos you can earn passively from your home without having to buy specialised equipment or to buy them off a crypto exchange.

1. Use the Brave browser to earn BAT coins 

All you have to do to earn BAT coins is to use the Brave browser. Get paid to use the brave browser.

Brave is perhaps the best privacy focused browser right now.

The Brave browser is arguably the best privacy focused online browser where users are rewarded for using it with BAT coins. 

BAT or Basic Attention Tokens is the token that powers this new blockchain-based digital advertising platform designed to fairly reward users for their attention, while providing advertisers with a better return on their ad spend. Under this modely, advertisers pay for their advertising campaigns in BAT tokens. Out of this budget, 30% is reserved for Brave developments, while 70% is distributed to users.

If you had any reservation over using a new browser, you can rest assured knowing that the Brave project is being led by the creator of the JavaScript programming language and co-founder of the Mozilla Firefox browser, Brendan Eich. Before Chrome became popular over the last couple of decades, Mozilla used to be the go to browser after Internet Explorer.

As of October 2021, Brave had 42.1 Million active monthly users and 14 million daily active users.

Brave browser monthly usage statistics – October 2021

BAT price hovered around the $1.00-$1.30 mark as of November 2021.

Over just a few days of personal usage, I’ve acquired 0.459 BAT coin on my phone browser usage. You can earn more BAT coins by using it on your computer, laptop etc.

BAT coins received for using Brave browser on my phone.

2. Use Presearch to earn PRE coins

Presearch is a decentralised search engine where users are paid in PRE cryptocurrency. Unlike Google’s search engine, Presearch does not track or store any of your information or searches. 

And you get paid to use it. You’ll get 25 PRE coins just for signing up if you use my referral link, otherwise, you’ll receive 3 PRE for signing up. You can collect more PRE cryptocurrency just by using the search engine in your normal day to day life. 

There is however, a daily limit of 30 paid searches users can do. That means a maximum of 3 PRE per day.

Advertisers who want to run ads on the search engine results page will use the PRE coins to advertise.

Over my own normal daily usage for a month, I earned 92 PRE coins.

My PRE balance

As of November 2021, 1 PRE coin is worth around $0.23-$0.25. 

presearch

3. Earn Nano cryptocurrency for free

Nano is a fee-less, eco-friendly, instant transaction cryptocurrency that is easy to use, accept and integrate with. It is a digital currency that can be used as a medium of exchange which it does extremely well, bar none.

Imagine being able to send money anywhere in the world, instantly and without any fees, that’s what Nano offers. And it does it extremely well.

To earn NANO, first you have to create a Nano wallet either in Natrium (mobile app) or Nault.cc (browser wallet)

  • Just put your nano address to get a small amount of nano on Nano Faucet.
  • Playnano is a website that has multiple ways of earning nano. You can earn by completing tasks and surveys as well as by watching videos. In fact, you even get paid to play video games. You can also get paid small amounts of Nano when you watch videos on their Watch & Learn feature.
  • You can also get paid with Nano to watch videos on Cryptovision.live, which is a community and crypto-centric video sharing platform. 

There are multiple ways you can start earning nano, visit https://earn-nano.com/ for more info. 

Over just a couple of weeks, I’ve collected Nano worth about $4.56.

Nano balance acquired for free over a couple of weeks.

As of November 2021, 1 Nano is worth around $5.79. 

Other ways to get more free crypto

There may be plenty of other ways to earn free cryptocurrencies without any cost or risk.

Do you know of a new exciting block chain project that incentivizes its users?

Do you know more ways you can earn cryptocurrencies in Nepal passively?

Feel free to share them with me or leave a comment below, and I’ll be sure to include them here.