Nepal Rastra Bank s Macroeconomic update report (7 th month of FY 74/75) Summary

Transcription

1 Nepal Rastra Bank s Macroeconomic update report (7 th month of FY 74/75) Summary BANKING SECTOR (Tables 1, 2 & 3) Banks have witnessed an increase in deposits of 6.8% in the first 7 months this fiscal year which is lower than the growth last year over the same period. The year over year increase in deposits is 13.5%. Loan growth, at 13.5% has been higher than deposit growth which has resulted in resurfacing of the credit crunch that the banks had been facing leading to higher interest rates. What is relevant to the stock market is that this year, the proportion of deposits in FDs is 43.9% which is also higher than previous months 42.8 %. Since the savings in the economy are being locked into Fixed Deposits, this reduces the demand side of the equation in the stock market which is another area of investments of the savings. Most of the deposits are still being held in Fixed Deposits (43.9%). After which, 36.60% of the total deposits is held in savings account and then 8.2% in current accounts. The average base rate of commercial banks is at 10.19% while it was 7.80% during the same period last year. However, it is also higher than the previous month s value of 9.94%. Since the interest rates for loans are based on base rates, businesses are having to bear higher costs of interest on loans and will still need to wait further for the interest rates on loans to go down. CAPITAL MARKET (Tables 4 & 5) The capital market witnessed significant addition in listed securities amounting to Rs 89 arba 12 crores the first 7 months of this FY. The increase in addition of paid up capital was 35.5% year over year. The above means that investors had to put in huge sums of capital in already owned shares to acquire right shares. This money otherwise might have resulted in new purchase of stocks from the secondary market.

2 Also, since lot of BFIs chose to give out bonus shares to increase their paid up, less cash dividends were given out. If they were able to give out cash dividends, new investments could have been made by those receiving the cash dividends in the secondary market. Thus, the above mentioned factors causing a significant cut in the demand side in for stocks. BOP (Table 6) Current account is at a deficit of billion rupees which during the same period this deficit was only billion. Balance of payment is at a deficit of billion while it was at a surplus of billion during the same period last year. The increase in the BOP deficit of the Nepalese economy is a matter of concern and needs to be addressed by the Government by implementing measures that encourage domestic production and consumption. REMITTANCE (Table 7) There has been a rise in Remittances for the first 7 months when compared to the same period last year. Remittances grew by 1.7% in the first 7 months this FY when compared to the same period last year. There had been a decline in remittances till the 6th month of this FY which was a cause of concern for businesses as well as policy makers since the Nepali economy has been highly dependent on remittances for economic growth and welfare. The latest monthly data indicating a rise in remittance comes as a welcome relief. MONEY SUPPLY M2

3 (Tables 8) Broad Money Supply (M2) grew by 7.70 % in the review period while last year the increase in money supply was 9.50 % during the same period. GOVERNMENT EXPENDITURE (Table 9) Government Expenditure has increased by 36.9% in review period compared to the same period last year. Rs 428 arba 88 crore was spent the review period while this amount was only Rs 248 arba 20 crore in the same period last year. The improvement in government expenditure will contribute to higher money supply and also a help in the growth of bank deposits.

4 Tables

5 Table 1 7 months months months months Increase in Deposits 6.80% 8.90% 6.90% 4.40% Increase in Loans (private 13.50% 15.10% 11.90% 7.60% sector) Increase in Deposits(yoy) 11.80% 13.70% 12.70% Increase in Loans (private sector- yoy) 16.70% 17.20% 16.10% Table 2 Share of Deposits 7 months months months months Current 8.20% 8.10% 8.40% 8.20% Savings 36.60% 38.70% 36.40% 36.50% Fixed Deposits 43.90% 35.10% 42.80% 41.60% Table 3 Interest Rates Average Base rate commercial banks 7 months 7 months 6 months 5 months % 7.80% 9.94% 9.87% Table 4 Capital Market (in billions) months Paid up Capital Paid up capital increase YOY 35.50%

6 Table 5 Capital Market (in months months months billions) additions Common Share Listed Right Share Listed Bonus Listed Government bonds Total Addition Table 6 Current Account 7 months of months of Current Account -141,060,000,000-10,640,000,000 BOP -18,280,000,000 36,950,000,000 Table 7 Remitta nce Amount Growth % 7 months months months months ,567,000, ,349,000, ,543,473, ,480,700, % 5.20% -0.50% -0.80%

7 Table 8 Money Supply M2 7 months months months months This year (review period) 7.70% 9.50% 6.70% 4.10% Year Over Year 13.50% 14% 12.90% Table 9 Government Expenditure Amount for the period Growth over same period last year 7 months months months months ,880,000, ,300,000, ,950,000, ,299,000, % Disclaimer Any opinions, news, research, analysis, prices, or other information contained on this website or any other material provide by icapital Pvt. Ltd. is provided as general market commentary and we cannot guarantee that the information is accurate or complete. These opinions, news, research, analysis, prices, or other information contained on this website also does not constitute investment advice or a solicitation to buy or sell any securities of any type and by viewing any material or using the information within this site you agree that this is general commentary material and you will not hold any person or entity responsible for loss or damages resulting from the content or general information provided here by icapital, it's employees, directors or fellow members. All investments are speculative in nature and involve substantial risk of loss.