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Srijana Rai of Dharan had to drop her plans to buy new gold orna­ments for an upcoming wed­ding. She was hoping for the pre­cious metal price to climb down. The price instead kept inching upward indefinitely. Gold prices have been continually rising for the past few months. On February 24, it hit an all-time high of Rs 80,300 per tola (11.664 grams). A day before, it was traded for Rs 78,800 per tola. On February 21, it was going for Rs 78,100 a tola.

“I am scared just to hear the gold price,” says Rai. An increment of Rs 2,200 in just three days was unex­pected in the gold market.

Narendra Kumar Gupta of Riddhi Siddhi Jewelers says his business has been suffering for past six months. “Due to the unprecedented price rise, few people can purchase gold these days,” he says. “They now buy only if they are compelled to.”

Nepali women have traditionally considered gold a necessity during religious ceremonies like marriages and bratabandhas. “Only those who have such events in their family are buying,” Gupta laments.

When it was cheaper, people bought gold to add to their collec­tion of golden ornaments or as a safe investment. Those incentives work no more, according to traders.

Gupta recalls that his average cus­tomer used to buy as much as five tolas of gold until last year. But a typical customer hardly buys even a tola now.

As per reports, gold prices have surged globally, most recently due to the coronavirus outbreak. According to a Reuters report, “Gold price soared as much as 2.8 per­cent on February 24 in international markets, the highest in seven years. Investors are worried about global economic growth in the face of sharply rising coronavirus cases out­side China.” Reportedly, the virus has spread to at least 29 countries and territories.

Mohan Kumar Biswokarma, presi­dent of the Federation of Nepal Gold and Silver Dealers’ Association, con­firms that gold prices have surged in Nepal due to global conditions. “Gold traders are struggling just to keep themselves afloat,” according to Biswokarma. “If the situation persists, it is hard to guess what will happen to our business.”

Kamala Sharma from Pokhara, who hasn’t been keeping tab of the price for the last few month, was surprised when she went to a gold shop at New Road. She wanted to make a golden ring for her son. When she first heard the price, she thought the shop owner was trying to cheat her, so she checked at the next shop. “It is unbelievable. I was shocked. Why is it so expensive? We ordinary people cannot buy it.”

According to traders, gold busi­ness has gone down by about 25 to 30 percent in recent months. But while the traders are struggling to sell gold, people who are hoarding gold are rushing to sell. But as there is little demand gold traders are reluctant buyers.

Om Senchuri, owner of New Dibya Gold and Silver Shop, also at New Road, reports many people are tak­ing out gold from their lockers and coming to his shop to sell. He thinks the price will go down only after the coronavirus crisis is resolved.

On a Facebook post of Riddhi Sid­dhi Jewelers, one Sweekriti Kafle writes: “I am thinking of selling all the gold I have.” The shop puts price and related information on its Face­book page. On the same post, Sani Ghising Lopchan comments: “Poor people like us should stop dreaming about wearing gold from now on.”

Gymkhana Muay Thai and the team, which has already hosted two Gymkhana Fight Nights (GFN I and GFN II)—a platform generated to pro­mote combat sports athletes (Box­ing and Muay Thai)—are partnering with AP1 HD TV for the broadcasting/ networking rights for the upcoming GFN events. AP1 HD, a cutting-edge TV channel in Nepal, will now live broadcast GFN III at 3 pm on March 7.

The main and co-main fights will be Nepal vs international fighters, with the latter coming from India (boxing) and Thailand (Muay Thai). There will be four weight categories (55, 60, 65 and 70kgs) in both boxing as well as Muay Thai.

 Issuing a statement, Mega Bank has announced its prepa­rations to bring $20 million (Rs 2.25 billion) in loan from the Qatar-based Doha Bank.

Anupama Khunjeli, CEO of Mega Bank, and Suraj Bikram Shah, chief of Nepal-based office of Doha Bank, signed an agree­ment to this effect this week. If the Nepal Rastra Bank approves the deal, this will be the first instance of Doha Bank investing in Nepali banking.

Mega Bank is vying for loan investment from Doha Bank in line with the central bank policy allowing commercial banks to acquire foreign loans worth up to 100 percent of the bank’s core capital. The loan is expected to ease liquidity crunch in the banking system.

Mega Bank has been providing its services through its network of 111 branches, 29 extension counters, 79 branchless banking facilities, 114 ATMs, and 2,500 remit agents.

 An Increase in the deposit rates had to reflect the impact on the lending rates. This was nat­urally seen from late 2016, when the lending rates continued to grow in the same proportion as the deposit rates. This adversely hit the produc­tive sector. New investments, expan­sions and working capital—every­thing became dearer. The sector, through the apex business member­ship organizations, including FNCCI, CNI and the relevant sectoral asso­ciations lobbied with the Ministry of Finance and the central bank to introduce measures to mitigate the situation. The central bank issued repo time and again, but this hardly addressed the long-term liquidity needs of financial institutions. The battle for deposits raged on. The understanding between the commercial banks to put a ceiling on the deposit rates provided some respite to the competing financial institutions and the debtors. Still, the voracious need of new funds to manage the gap between the demand and supply forced finan­cial institutions to issue multi-year debentures with an average 10-plus percent return. This par­tially addressed long-term credit needs, primarily in infrastructure. But it did not bring down the base rate and cost of capital. The recent NRB directives put a sudden halt in financial institutions’ aggressive lending capacity.

This in turn eased the mandatory need of keeping credit to core cap­ital plus deposit ratio (CCD ratio) at 80 percent and below. CCD ratio below 80 percent means the finan­cial institution is in a comfortable position to extend money and is not desperate to collect deposits. The situation is assessed by the market as an early indication of bank rates cooling down in near future. While it usually takes a minimum of one fis­cal for any change in interest rates to be reflected in the macro economy, the secondary market’s response is immediate. As is reflected in the chart, the increment in bank rates played role in the market direction taking a southbound dive from late- 2016. The expected decline in bank rate is already reflected in the chart from December 2019.

The second quarter-end of the current fiscal brought more answers. Net profit has increased by 10.77 percent, which is below average growth in previous years and this might not be pal­atable to the market. Till the end of the second quarter, the industry average of distributable profit is in the red zone and earnings per share is stagnant, meaning the com­mercial banks have a tougher road ahead in the next two quarters. The positive signs are a slight decline in base rate, cost of fund and CCD ratio. This mixed result provides some hope for better liquidity while still not motivating institu­tional investors to aggressively enter the market.

As the banking and financial institutions are the backbone of the Nepali bourse and its financial reports are transparent and pub­lished on a regular basis, institu­tional investors feel comfortable with their traditional choice of long-term entries. As mentioned in previ­ous issues, as long as the BFI sector does not show a steady rise in the trading floor, the current eupho­ria might not have enough fuel to last long