KATHMANDU, May 3: Equity investors can now get up to 70% margin loans from stockbrokers as the Securities Board of Nepal (Sebon) enforced a revised margin trading guideline last Wednesday .
Previously, the margin lending threshold was 50%. In the revised rule, stockbrokers only take 30% as a margin on the valuation of stocks held by investors.
Since February 2019, Sebon allows brokerage firms to provide a financing service to their clients to buy shares on the secondary market. The industry regulator also revised the criteria for valuing the shares when issuing the margin loan.
According to Sebon, brokerage firms can now consider the average stock market price of the last 120 days or the last market price, whichever is lower, to issue loans under the rubric. Previously, the threshold was held at the average value of the shares over the past 180 days.
Similarly, investors must maintain a margin amount of at least 20% of the stock valuation on a daily basis. If the margin amount falls below 15%, the brokers themselves can sell the shares by giving four days notice to affected investors.
Brokerage firms are free to set their interest rates on the margin loan. However, they must inform the Nepal Stock Exchange and Sebon beforehand of the interest rates they charge their clients.