September 11: The interest of investors in the shares of commercial banks, which were once considered attractive in the secondary market of securities, has been declining over the past few years. This  is clearly evident from the data published by Nepal Stock Exchange (NEPSE) for the last three fiscal years (FY). Although the market capitalization of commercial banks is strong, the shares of commercial banks have recently taken a nosedive in the secondary market.

Investor Navraj Dahal says that the investors’ attraction towards commercial banks has decreased as they are more attracted to other sectors that gives them more returns in a short period of time.

According to him, this is also due to the impact of the share mortgage loan limit. The investors are not happy with the limit of share mortgage loan fixed by the authorities.

The investors have a perception that they can be forced to sell the shares if they take loans by keeping their shares as collateral. This has given them an impression that buying shares is not a good idea.

“Many investors buy shares of commercial banks basically to take loans. It is because they believe that they will get more loans by gaining the trust of the banks. But, if the central bank makes some policy changes, they will have to sell the shares under pressure. That's why they opt for other safe areas for investment," said Dahal, adding, "Another reason is the declining dividend of commercial banks. Earlier they used to give good dividends. Currently, they are not able to do that because of the lack of business growth according to the increased capital after merger. Today, small companies give the returns that commercial banks used to give.”

Another investor, Manju Parajuli, says that since the shares of commercial banks are in the hands of many people, it is not possible to make huge capital gains by manipulating them like the shares of other sectors. The latest quarterly financial statements have shown that bad loans of commercial banks have increased significantly. That is why their shares are not preferred by investors.

Looking at the data of NEPSE for the last three years, it seems that the share transactions of commercial banks has decreased significantly. In the fiscal year (FY) 2077/78, the share of commercial banks was 25.99 percent of the total transactions, but by the end of the fiscal year 2079/80, it decreased to 14.31 percent.

In the year 2077/78, the commercial bank traded 951 million shares worth Rs 378 billion, while in the last fiscal year, only 217.2 million shares worth Rs 66.85 billion were traded.

The shares transactions of hydropower group is increasing. In the year 2077/78, the share of this group in the total turnover was 15.27 percent, but it increased to 27.88 percent in the last fiscal year.

Recently, with the increase in the number of listed hydropower companies, share trading has also increased. Since the number of shares of this group of companies is low, there is also a situation where the price can be reduced by manipulation. Therefore, investors are more interested in the shares of such companies.

The share trading of hotels and tourism groups is also increasing recently. In the year 2077/78, this group accounted for only 0.81 percent of the total turnover, which has increased to 3 percent in the last year.

The hotel and tourism sector, affected by the Coronavirus pandemic, has now progressed significantly. The arrival of foreign tourists also improved in April, May and June. Due to the increase in tourism activities, the business of the hotel sector has increased significantly, and the profits of these companies have also increased. This is also believed to have attracted investors. In the past few months, the share price of this group of companies has doubled.