New Business Age

Investors Troubled by Margin Call as Share Market Continues to Decline 

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Investors Troubled by Margin Call as Share Market Continues to Decline 

May 5: Investors are worried about the margin call as the price of securities is declining in the secondary market. Investors who have taken loans of a margin nature from banks and financial institutions have started facing margin calls.

Banks and financial institutions, when giving loans of a margin nature, call for an additional amount or share in case the value of the pledged shares falls by 20 per cent. It has raised concerns among the investors who have taken loans of the margin nature.

Secretary of the Share Investors Pressure Group, Nayan Bastola, informed that investors have been suffering due to the recent margin call. Investors who took loans when the market was at a historic high are now facing the risk of margin calls, he said.

According to Bastola, there is a lack of investable capital in the financial system, and investors will have difficulty completing the margin call process when the stock price is declining day by day. He is of the view that investors will be relieved from the problem of the margin call if the government pays attention to the need for policy change in the market.

An experienced investor and secretary of Nepal Investors Forum, Durga Tiwari, also said that investors are falling prey to margin calls. He says margin calls have added tensions as investors are worried about declining market. "Liquidity can ease this problem," said Tiwari.

Tiwari said that the problem of not wanting to sell at a loss when the price of securities is low and also the problem of not getting loans from banks and financial institutions is making the investors panic.

According to the rate at which the market has declined, investors do not have the problem of margin calls.

According to sources, if the market continues to decline, all the borrowers will face the problem of margin calls. Nepse had set a record by crossing 3,200 points on August 20.

After that, the market dropped to 2,259.51 points on November 12 and climbed to a historic point on January 15. On that day, the Nepse index had risen to 2,956 points. On Wednesday, the last trading day, Nepse stood at 2,275.68 points. Based on the high point of January 19, Nepse has dropped by 23 per cent in the meantime.

Banks and financial institutions can disburse margin loans up to 70 per cent. Investors can get such loans up to Rs 40 million from one institution and up to Rs 120 million from four banks by pledging their shares.


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