Any hypothesis on why Nepal keeps penduluming between liquidity crisis and excess liquidity?
View on r/NepalStock by Exact-Intention-9463
Any hypothesis on why Nepal keeps penduluming between liquidity crisis and excess liquidity?
View on r/NepalStock by Exact-Intention-9463
Amidst a surge in liquidity, the central bank is actively withdrawing deposits from banks and financial institutions, having withdrawn a substantial 105 arba rupees in the month of Poush alone. Despite these efforts, the average interest rate for deposits has moderately increased from 2.4784% to 2.8594% between Poush 1 and Poush 11.
While managing liquidity, the interbank interest rate remains below the central bank’s deposit collection rate of 3%, indicating ample liquidity in the market. If lending activities don’t align with available liquidity, a further decrease in interest rates is possible.
Recognizing the evolving situation, the central bank may reconsider policies and introduce more flexible provisions. Recent adjustments in the first quarter monetary policy review demonstrate an adaptive approach. Continued liquidity growth may prompt additional measures to maintain a balanced and stable financial environment.
The banking sector in Nepal has recently witnessed a decrease in the interbank interest rate, indicating an increase in liquidity within the system. According to data provided by Nepal Rastra Bank, the interbank interest rate of banks has fallen below 1 percent. Specifically, on Ashad 27, the interbank interest rate remained stable at 0.83 percent.
In parallel, the average Cash Deposit (CD) ratio experienced a decline on Ashad 27, reaching 81.67 percent compared to the 82.11 percent recorded on Ashad 25. This decline in the CD ratio can be attributed to the infusion of an additional Rs. 23 Arba into the banking system.
As of Ashad 25, the total deposits held by banks and financial institutions amounted to Rs. 57.13 Kharba. By Ashad 27, this figure had increased to Rs. 57.36 Kharba. Moreover, the credit investment by banks stood at Rs. 48.51 Kharba.
Overall, these developments indicate a higher level of liquidity within the banking sector in Nepal, reflected by the decrease in interbank interest rates and the rise in total deposits. This increased liquidity provides potential opportunities for financial institutions to support credit investment and drive economic growth.
Nepal Rastra Bank (NRB) has responded to the accumulation of excess liquidity in the banking system by issuing another reverse repo. After previously issuing reverse repos on two separate occasions, NRB has now introduced Rs. 20 Arba on Tuesday. The reverse repo is a monetary tool utilized to absorb surplus liquidity and bring stability to the system. Considering there is approximately Rs. 40 Arba of excess liquidity in the system, this marks the fourth reverse repo issued by NRB during the current financial year.
The Securities Board of Nepal (Sebon) has granted licenses to 11 new companies to act as stock brokers in Nepal’s securities market.The board issued the licenses on Monday, June 5, 2023.
The 11 companies that received licenses are:
With the issuance of these licenses, the total number of securities dealers in Nepal has increased to 69. Of these, 50 are full-time securities brokers and 19 are limited-time securities brokers.
The Sebon has been issuing licenses to new securities dealers in order to expand the reach of the stock market and to increase the number of investors. The board has also been taking steps to improve the regulatory framework for the securities market.
The issuance of licenses to 11 new companies is a positive development for the Nepali stock market. It will help to increase the number of investors and to deepen the market. It will also help to improve the liquidity of the market.
Sebon is expected to continue to issue licenses to new securities dealers in the coming months. This will help to further expand the reach of the stock market and to increase the number of investors.
Ridi Power Company Limited (RIDI) reported a 95.81% decrease in net profit in the second quarter (Q2) of the current fiscal year 2079/80. Profit declined to Rs. 1.96 crores in this quarter from Rs. 46.98 crores in the previous year’s equivalent quarter.
In this quarter, the firm recorded total income of Rs. 18.92 crores, a 71.94% reduction from the previous year’s similar period.
According to management, there has been no substantial change in the organization’s balance, income, or liquidity during this quarter. The operations are carried out in accordance with the company’s business plan. During this quarter period, as the company’s interest climbed, the income decreased, and it is projected that the profit will improve when the interest expenditure reduces in the future days, and the income will improve from the following quarter.
It has a reserve resource of Rs. 50.25 crores and a share capital of Rs 1.10 Arba. For Fiscal Year 2078/79, the corporation additionally proposed 40% bonus shares worth Rs. 44,25,43,200 and a 2.10% cash dividend (including tax) of Rs 2,32,33,518. The firm has capitalized these extra dividends, resulting in an increased paid-up capital of Rs. 1.54 Arba.
Furthermore, the business intends to issue 77,44,506 rights shares (1: 0.50 ratio right shares) to shareholders. Following SEBON clearance, this will be given from the paid-up capital of Rs. 1.54 Arba.
Its annualized earnings per share are Rs 3.56, its net value per share is Rs 145.43, and its P/E ratio is 153.94.
Everyone is looking for a quick and easy way to riches and happiness. It seems to be human nature to constantly search for a hidden key or some esoteric bit of knowledge that suddenly leads to the end of the rainbow or a winning lottery ticket.
While some people do buy winning tickets or a common stock that quadruples or more in a year, it is extremely unlikely, since relying upon luck is an investment strategy that only the foolish or most desperate would choose to follow. In our quest for success, we often overlook the most powerful tools available to us: time and the magic of compounding growth. Investing regularly, avoiding unnecessary financial risk, and letting your money work for you over a period of years and decades is a certain way to amass significant assets.
Here are several tips that should be followed by beginning investors.
Everyone is looking for a quick and easy way to riches and happiness. It seems to be human nature to constantly search for a hidden key or some esoteric bit of knowledge that suddenly leads to the end of the rainbow or a winning lottery ticket.
While some people do buy winning tickets or a common stock that quadruples or more in a year, it is extremely unlikely, since relying upon luck is an investment strategy that only the foolish or most desperate would choose to follow. In our quest for success, we often overlook the most powerful tools available to us: time and the magic of compounding growth. Investing regularly, avoiding unnecessary financial risk, and letting your money work for you over a period of years and decades is a certain way to amass significant assets.
Here are several tips that should be followed by beginning investors.
1. Set Long-Term Goals
Why are you considering investing in the stock market? Will you need your cash back in six months, a year, five years or longer? Are you saving for retirement, for future university expenses, to purchase a home, or to build an estate to leave to your beneficiaries?
Before investing, you should know your purpose and the likely time in the future you may have need of the funds. If you are likely to need your investment returned within a few months, consider another investment; the stock market with its volatility provides no certainty that all of your capital will be available when you need it.
By knowing how much capital you will need and the future point in time when you will need it, you can calculate how much you should invest and what kind of return on your investment will be needed to produce the desired result.
Remember that the growth of your portfolio depends upon three interdependent factors:
Ideally, you should start saving as soon as possible, save as much as you can, and receive the highest return possible consistent with your risk philosophy.
2. Understand Your Risk Tolerance
Risk tolerance is a psychological trait that is genetically based but positively influenced by education, income, and wealth (as these increase, risk tolerance appears to increase slightly) and negatively by age (as one gets older, risk tolerance decreases). Your risk tolerance is how you feel about risk and the degree of anxiety you feel when risk is present. In psychological terms, risk tolerance is defined as “the extent to which a person chooses to risk experiencing a less favourable outcome in the pursuit of a more favourable outcome.” In other words, would you risk NPR 1000 to win NPR 10,000? Or NPR 10,000 to win NPR 10,000? All humans vary in their risk tolerance, and there is no “right” balance.
Risk tolerance is also affected by one’s perception of risk. For example, flying in an aeroplane or riding in a car would have been perceived as very risky in the early 1900s, but less so today as flight and automobile travel are common occurrences. Conversely, most people today would feel that riding a horse might be dangerous with a good chance of falling or being bucked off because few people are around horses.
The idea of perception is important, especially in investing. As you gain more knowledge about investments – for example, how stocks are bought and sold, how much volatility (price change) is usually present, and the difficulty or ease of liquidating an investment – you are likely to consider stock investments to have less risk than you thought before making your first purchase. As a consequence, your anxiety when investing is less intense, even though your risk tolerance remains unchanged because your perception of the risk has evolved.
By understanding your risk tolerance, you can avoid those investments which are likely to make you anxious. Generally speaking, you should never own an asset which keeps you from sleeping in the night. Anxiety stimulates fear which triggers emotional responses (rather than logical responses) to the stressor. During periods of financial uncertainty, the investor who can retain a cool head and follows an analytical decision process invariably comes out ahead.
3. Control Your Emotions
The biggest obstacle to stock market profits is an inability to control one’s emotions and make logical decisions. In the short-term, the prices of companies reflect the combined emotions of the entire investment community. When a majority of investors are worried about a company, its stock price is likely to decline; when a majority feel positive about the company’s future, its stock price tends to rise.
A person who feels negative about the market is called a “bear,” while their positive counterpart is called a “bull.” During market hours, the constant battle between the bulls and the bears is reflected in the constantly changing price of securities. These short-term movements are driven by rumours, speculations, and hopes – emotions – rather than logic and systematic analysis of the company’s assets, management, and prospects.
Stock prices moving contrary to our expectations create tension and insecurity. Should I sell my position and avoid a loss? Should I keep the stock, hoping that the price will rebound? Should I buy more?
Even when the stock price has performed as expected, there are questions: Should I take a profit now before the price falls? Should I keep my position since the price is likely to go higher? Thoughts like these will flood your mind, especially if you constantly watch the price of a security, eventually building to a point that you will take action. Since emotions are the primary driver of your action, it will probably be wrong.
When you buy a stock, you should have a good reason for doing so and an expectation of what the price will do if the reason is valid. At the same time, you should establish the point at which you will liquidate your holdings, especially if your reason is proven invalid or if the stock doesn’t react as expected when your expectation has been met. In other words, have an exit strategy before you buy the security and execute that strategy unemotionally.
4. Handle Basics First
Before making your first investment, take the time to learn the basics about the stock market and the individual securities composing the market. There is an old adage: It is not a stock market, but a market of stocks. Your focus will be upon individual securities, rather than the market as a whole. There are few times when every stock moves in the same direction; even when the averages fall by 100 points or more, the securities of some companies will go higher in price.
The areas with which you should be familiar before making your first purchase include:
Knowledge and risk tolerance are linked. As Warren Buffett said, “Risk comes from not knowing what you are doing.”
5. Diversify Your Investments
Experienced investors such as Buffett eschew stock diversification in the confidence that they have performed all of the necessary research to identify and quantify their risk. They are also comfortable that they can identify any potential perils that will endanger their position, and will be able to liquidate their investments before taking a catastrophic loss.
The popular way to manage risk is to diversify your exposure. Prudent investors own stocks of different companies in different industries, sometimes in different countries, with the expectation that a single bad event will not affect all of their holdings or will otherwise affect them to different degrees.
Imagine owning stocks in five different companies, each of which you expect to continually grow profits. Unfortunately, cirplusstances change. At the end of the year, you might have two companies (A & B) that have performed well so their stocks are up 25% each. The stock of two other companies (C & D) in a different industry are up 10% each, while the fifth company’s (E) assets were liquidated to pay off a massive lawsuit.
Diversification allows you to recover from the loss of your total investment (20% of your portfolio) by gains of 10% in the two best companies (25% x 40%) and 4% in the remaining two companies (10% x 40%). Even though your overall portfolio value dropped by 6% (20% loss minus 14% gain), it is considerably better than having been invested solely in company E.
6. Avoid Leverage/Margin Loan
Leverage/Margin loan simply means the use of borrowed money to execute your stock market strategy. In a margin account, banks and brokerage firms can loan you money to buy stocks, usually 50% of the purchase value. In other words, if you wanted to buy 1000 shares of a stock trading at NPR 100 for a total cost of NPR 100,000, your brokerage firm could loan you NPR 50,000 to complete the purchase.
The use of borrowed money “levers” or exaggerates the result of price movement. Suppose the stock moves to NPR 200 a share and you sell it. If you had used your own money exclusively, your return would be 100% on your investment [(200,000 -100,000)/100,000]. If you had borrowed NPR 50,000 to buy the stock and sold at NPR 200 per share, your return would be 300 % [(200,000-50,000)/$50,000] after repaying the NPR 50,000 loan and excluding the cost of interest paid to the broker (which is usually 16% and over).
It sounds great when the stock moves up, but consider the other side. Suppose the stock fell to NPR 50 per share rather than doubling to NPR 200, your loss would be 100% of your initial investment, plus the cost of interest to the broker [(50,000-50,000)/50,000].
A margin is a tool that can go extremely bad in a stock market like Bangladesh.
Final Thoughts
Stock investments historically have enjoyed a return significantly above other types of investments while also proving easy liquidity, total visibility, and active regulation to ensure a level playing field for all. Investing in the stock market is a great opportunity to build large asset value for those who are willing to be consistent savers, make the necessary investment in time and energy to gain experience, appropriately manage their risk, and are patient, allowing the magic of compounding to work for them. The younger you begin your investing avocation, the greater the final results – just remember to walk before you begin to run.
Bitcoin prices have plummeted in recent months, losing more than half their value since mid-April and falling to just under $30,000 this morning.
According to CoinDesk numbers, the world’s most common digital currency reached $30,201.96 today.
According to additional CoinDesk data, it was down more than 55 percent from its all-time high of nearly $65,000 at this point.
At the time of writing, the cryptocurrency was trading around $37,000, and many market analysts weighed in, shedding light on the digital asset’s recent price fluctuations and evaluating its short-term prospects.
[Editor’s note: Investing in cryptocoins or tokens is extremely risky, and the market is largely unregulated.] Anyone thinking about it should be aware that they might lose their entire investment.]
“Over the last 24 hours, the selling pressure in the BTC market has been relentless, perfectly aligning with elevated bitcoin inflows to exchanges seen on-chain,” said Sean Rooney, head of research at Valkyrie Investments.
“Binance led the charge on Monday, with over 53,000 BTC dumped into the exchange to be sold,” he explained.
Nick Mancini, a research analyst at Trade The Chain, a crypto sentiment data provider, discussed how events like these influenced prices.
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“Bitcoin is now down 45 percent from its April high of nearly $65,000,” he said.
“Short-term sentiment seemed to be bottoming out with price, but it appears that they were only consolidating for a further decline,” Mancini said.
“The good news is that Bitcoin’s primary liquidity levels in the $30,000 range remained stable throughout the decline, causing the price to recover from $30,000 to near $37,000 in less than an hour.”
“Key support levels are $28,500, $24,000, and $20,000, which all correspond to order book liquidity levels,” Mancini said.
StockCharts.com’s chief market strategist, David Keller, added:
“Bitcoin’s drop to $30,000 made technical sense because it’s a 100 percent retracement back to the January lows. It’s all about seeking equilibrium after a serious selloff like this.”
“Where do we see investors with enough clout to drive the price back up?”
“Based on previous price support and the influx of buyers this morning, $30,000 is the new floor for Bitcoin,” Keller said.
The market may have overreacted in light of recent events and bitcoin’s losses since roughly mid-April, according to analysts.
According to Mancini, Bitcoin’s relative strength index (RSI), a technical measure used to gauge an asset’s momentum, recently dropped to “the lowest level since March 2020,” meaning the digital currency is “highly oversold.”
He also stated that the Moving Average Convergence Divergence (MACD), a momentum indicator used by technical analysts, is “at its lowest level in Bitcoin’s history, further suggesting Bitcoin is oversold.”
“The market is due for a bounce,” according to Rooney, but “a fast turnaround in the short term is unlikely.”
“A correction of this magnitude in the middle of a bull market seems out of place, but the absence of mania topping trends indicates the bull run is not over,” he said.
“With new users joining the network, long-term fundamentals on-chain remain strong.”