Nepal’s External Sector and NEPSE Implications

First published 22 Aug 2026 · Last verified 29 Aug 2026

A Nepali investor who studies only price-earnings ratios and quarterly earnings releases is reading half the ledger. NEPSE does not float in a closed domestic system; it floats on a sea of foreign currency that Nepal does not print, cannot fully control, and must earn, borrow, or receive as remittance from its citizens working abroad. When that sea runs low, Nepal Rastra Bank does not have the luxury of standing aside — it tightens credit, and credit is the oxygen of the equity market, as established in the credit-cycle framework of Chapters 0.1 and 0.2. This chapter builds the external-sector half of the analytical toolkit: the balance of payments, remittance inflows, foreign exchange reserves, and the import-cover discipline that ties them together, and then traces — with the actual data from Nepal's 2022 reserve crisis and its subsequent recovery through 2025/26 — exactly how a balance-of-payments squeeze becomes a NEPSE correction. An investor who can read NRB's monthly macroeconomic bulletin with the same fluency as a balance sheet has an edge that most retail participants in Kathmandu's brokerage floors do not bother to acquire, and that edge is durable precisely because it requires patience with unglamorous data rather than a hot tip.

Lesson 4.1 — The Architecture of Nepal's Balance of Payments

The balance of payments (BOP) is the double-entry record of every transaction between Nepal and the rest of the world over a given period — a fiscal year, or the monthly and periodic slices that Nepal Rastra Bank publishes as "Current Macroeconomic and Financial Situation" reports. It has three broad accounts, and a Nepali investor needs a working fluency in all three, not because you will ever compute one yourself, but because the financial press, NRB statements, and brokerage commentary constantly reference them, often loosely, and the loose usage is where mistakes creep into investment decisions.

The current account records trade in goods (the merchandise trade balance), trade in services (tourism receipts, transport, IT exports), primary income (interest and profit flows), and — critically for Nepal — secondary income, which is where workers' remittances are booked. Nepal runs a structurally and severely negative goods trade balance; the country imports far more than it exports, a fact rooted in a narrow manufacturing base, energy import dependence for petroleum, and rising consumer demand for imported vehicles, electronics, and construction materials. What keeps the current account from being catastrophically negative is remittance income, which is large enough that in many periods it converts an enormous merchandise trade deficit into an overall current account surplus. In the eleven-month period of fiscal year 2025/26 the merchandise trade deficit ran near Rs 1.78 trillion — imports of roughly Rs 2.096 trillion against exports of only about Rs 315 billion, an export-to-import coverage ratio under 15 percent — and yet remittance inflows across the same window totalled roughly Rs 2,120.80 billion, large enough on their own to swing the current account into an overall surplus of about Rs 802 billion. That single fact — remittances routinely exceeding the entire merchandise trade gap — is the load-bearing structural feature of the Nepali external accounts and is developed in full in Lesson 4.2.

The capital and financial account records cross-border investment: foreign direct investment into Nepali companies, portfolio investment (foreigners buying Nepali securities, which is minimal given NEPSE's restricted foreign participation), external loans taken by government and the private sector, and grant aid. Nepal's financial account is thin by regional standards — FDI inflows are modest and volatile year to year, external borrowing is dominated by concessional multilateral loans (World Bank, ADB) rather than commercial capital markets, and foreign grant flows fluctuate with donor politics and disbursement cycles. This thinness matters: it means Nepal cannot easily paper over a current account shortfall by attracting hot portfolio capital the way some emerging markets do. When the current account weakens, there is no large offsetting capital account cushion standing by — the shock lands directly on reserves.

The overall balance of payments is the sum of the current and capital/financial accounts, and its counterpart is the change in gross foreign exchange reserves held by Nepal Rastra Bank. A BOP surplus means reserves are accumulating; a BOP deficit means reserves are being drawn down to settle Nepal's net external obligations. This is the master variable of the whole chapter, because reserves — and specifically the number of months of import cover they represent — is the trigger variable that determines whether NRB tightens or eases monetary policy, and monetary policy is the variable that moves NEPSE through the credit channel.

A second architectural point deserves emphasis before moving on: Nepal operates a pegged exchange rate regime, with the Nepali rupee fixed to the Indian rupee at a ratio of 1.60 NPR per 1 INR, and the NPR floats against other currencies only insofar as the INR floats against them. This peg is the reason BOP and reserve dynamics matter so much more in Nepal than they would in a country with a freely floating currency. Under a float, a current account deficit would in principle be self-correcting — the currency depreciates, imports become more expensive, exports become more competitive, and the deficit narrows through the price mechanism, with reserves largely untouched. Under Nepal's peg, that automatic adjustment channel is switched off. NRB is committed to defending the peg, which means it must supply foreign currency (dollars, effectively, since the peg to India is itself anchored by India's own dollar reserves and by the open, low-friction currency convertibility arrangement between the two countries) to the market at the fixed rate whenever domestic demand for foreign currency exceeds supply. That defence is financed out of reserves. When reserves run low, NRB cannot let the exchange rate simply adjust — its policy response has to fall on the quantity of credit and import demand instead. This is the mechanical reason the credit channel becomes NRB's primary lever whenever the external accounts come under stress, and it is why Nepali monetary policy behaves differently, and often more abruptly, than monetary policy in inflation-targeting floating-currency economies that Nepali business news sometimes uses as a loose comparison.

Lesson 4.2 — Remittances: The Load-Bearing Wall of the External Sector

No single data series matters more to the Nepali economy, and by extension to NEPSE, than workers' remittances. Nepal is among the most remittance-dependent economies in the world in relative terms; remittance inflows have for over a decade represented somewhere in the range of a quarter to a third of GDP depending on the year and the exchange rate used for conversion, a dependency ratio exceeded by only a small number of countries globally, most of them small Pacific and Central Asian states. This is not a minor macro curiosity — it means that the spending power of a very large share of Nepali households, the deposit base of the banking system, and ultimately the liquidity available to buy NEPSE shares are all, at one remove, a function of overseas labor markets in the Gulf Cooperation Council states, Malaysia, and increasingly South Korea, Japan, and parts of Europe, rather than of domestic production.

The mechanics of how remittances reach NEPSE run through the banking system. A remittance dollar earned in Doha or Kuala Lumpur is converted to rupees and deposited, directly or through a family member, into a Nepali bank account. That deposit becomes part of the deposit base against which banks lend. Some of it is drawn down for consumption, some for real estate, some for education, and a portion — historically a meaningful and NRB-monitored portion — finds its way into margin-financed or cash purchases of listed equity. Remittance strength therefore feeds NEPSE liquidity through two channels simultaneously: it expands the deposit base that underwrites bank lending capacity (including margin lending against shares), and a slice of it is invested directly. Both channels compress when remittance growth stalls, and both channels expand when remittance growth accelerates, which is exactly the dynamic that played out in reverse and then in recovery across the 2022 crisis and the 2025/26 rebound examined later in this chapter.

Recent trends have been unusually favourable. In the eight months of fiscal year 2025/26 ending mid-March 2026, remittance inflows reached roughly Rs 1,449.65 billion, up 37.7 percent in rupee terms and about 31 percent in US dollar terms over the same period a year earlier — an exceptionally strong pace by any historical standard for Nepal. By the eleven-month mark of the same fiscal year, cumulative inflows had reached approximately Rs 2,120.80 billion, growth of roughly 38.2 percent year on year. This acceleration reflects a combination of factors: a large and still-growing stock of Nepali workers abroad, particularly in the Gulf, continued strength in Gulf labor markets and construction activity tied to regional infrastructure programs, a widening gap between formal exchange rates and informal channels that has pushed more remittance traffic through official banking and hundi-displacing formal channels (partly a function of digital remittance platforms and NRB's own formalisation drive), and currency effects from a relatively weaker rupee that make each dollar earned abroad convert into more rupees at home.

The dependency carries real structural risk, and a disciplined investor should treat it as a risk factor rather than a permanent tailwind. Remittance flows are a function of foreign labor demand that Nepal does not control. A construction slowdown in Gulf states tied to lower oil prices, a shift in destination-country immigration policy, competitive displacement of Nepali workers by cheaper labor from other South Asian or Southeast Asian sending countries, or a maturing of the outbound migration wave as fewer young Nepalis choose overseas labor migration relative to prior cohorts, are all plausible scenarios over a multi-year horizon that would slow remittance growth materially. Because remittances are the single largest offset to Nepal's chronic trade deficit, any sustained slowdown in inflows translates mechanically into current account deterioration, reserve pressure, and — following the transmission chain built out in Lesson 4.4 — eventual credit tightening that hits NEPSE.

Table 4.1 below assembles the key external-sector data points across a five-year span that spans Nepal's 2022 reserve crisis and its subsequent, quite dramatic, recovery. The reader should treat these as NRB-sourced reference figures illustrating the trend rather than a substitute for the latest monthly bulletin, which should always be pulled fresh before acting on any of the conclusions in this chapter.

The arc in that table is the single most important chart a NEPSE investor can hold in memory: from a reserve position covering barely 6.6 months of imports — well under the internationally accepted minimum comfort threshold — to a position covering over 19 months on the same goods-and-services basis (over 22 months of merchandise imports), in the space of under four years. Understanding what NRB did at the low point of that arc, and what it has been able to relax as reserves rebuilt, is the substance of the rest of this chapter.

Lesson 4.3 — Foreign Exchange Reserves and the Import Cover Discipline

Foreign exchange reserves are the stock of foreign currency — held predominantly in US dollars, with smaller allocations in other reserve currencies and monetary gold — that Nepal Rastra Bank holds to meet the country's external obligations: financing imports, servicing external debt, and defending the currency peg described in Lesson 4.1. The single most important derived statistic from the reserve stock, and the one every NEPSE investor should track as routinely as they track the NEPSE index itself, is import cover: the number of months of prospective merchandise and services imports that current reserves could finance if no further foreign currency earnings arrived at all.

Import cover (months) = Gross Foreign Exchange Reserves ÷ Average Monthly Merchandise and Services Import Bill

The international rule of thumb, cited by the IMF and widely referenced in NRB's own communications, treats seven months of import cover as an adequate minimum buffer for an import-dependent economy without deep capital markets or a floating currency to absorb shocks. Below that threshold, a country is considered externally vulnerable — exposed to the risk that a shock to export earnings, remittances, or global commodity prices could leave it unable to finance essential imports (fuel and food chief among them for Nepal) without an emergency response. Nepal Rastra Bank monitors this ratio explicitly and publishes it in every periodic macroeconomic bulletin, and it functions internally as something close to a policy trigger: when import cover falls meaningfully below the seven-month comfort zone, NRB has historically responded with the toolkit examined in Lesson 4.4 — credit tightening, import curbs, and rate hikes — regardless of what domestic growth or asset market conditions might otherwise call for.

Nepal's reserve position by mid-June 2022 — eleven months into FY2021/22 — had fallen to approximately Rs 1,176 billion, equivalent to only about 6.6 months of goods-and-services import cover, the lowest in well over a decade and a figure that sat below the seven-month comfort threshold NRB itself references (the fiscal year closed marginally better, at roughly Rs 1,216 billion and 6.9 months). That decline was driven by a combination of forces on both sides of the ledger: on the outflow side, the trade deficit surged roughly 25 percent year on year, driven by a spike in global commodity prices (petroleum product costs alone rose by roughly 89 percent compared to the prior fiscal year, a shock transmitted through the Russia-Ukraine war's effect on energy markets) and a strengthening US dollar that made every unit of import more expensive in rupee terms; on the inflow side, remittance growth stagnated to under 4 percent year on year through the first eleven months (the full year closed at 4.8 percent, remittances reaching Rs 1,007 billion), a sharp deceleration from the double-digit growth rates Nepal had become accustomed to, while foreign grant inflows collapsed from roughly Rs 23 billion to about Rs 6.4 billion and FDI inflows grew only marginally. The combination — a widening deficit financed by weakening inflows — is precisely the scenario that drains reserves fastest, and it is worth internalizing as the canonical stress pattern to watch for going forward, because it will recur in some future cycle even if the specific triggers (a war-driven energy price shock, in 2022) differ next time.

By contrast, the reserve position by the eight- and eleven-month marks of fiscal year 2025/26 had rebuilt to roughly 18.5 and 19.1 months of goods-and-services import cover respectively (21.4 and 22.5 months counting merchandise imports alone) — a buffer more than three times the comfort threshold, and among the strongest external positions Nepal has recorded in recent memory. The composition of that recovery is instructive: it was driven overwhelmingly by the remittance surge documented in Lesson 4.2, not by any dramatic change in Nepal's export base or a narrowing of the underlying trade deficit, which in fact widened further in absolute terms over the same period (to roughly Rs 1.78 trillion for the fiscal year). This is a crucial nuance for the analyst: a comfortable import cover figure can coexist with, and indeed can be produced entirely by, an ever-widening trade deficit, so long as remittance growth outpaces it. The headline "reserves at record high" is reassuring in the near term but should not be read as evidence that Nepal's underlying trade competitiveness has improved — it has not, and the reserve buffer remains a function of externally-earned wage income rather than of domestically produced export value.

Lesson 4.4 — The Transmission Mechanism: From BOP Stress to Credit Crunch to NEPSE Correction

This lesson is the analytical hinge of the chapter and connects directly back to the credit-cycle framework established in Chapters 0.1 and 0.2. The essential claim is this: because Nepal defends a fixed exchange rate and cannot use currency depreciation as its primary adjustment valve, whenever the balance of payments weakens and import cover falls toward or below the seven-month threshold, Nepal Rastra Bank is compelled to compress domestic credit and import demand directly through monetary policy — and that compression is transmitted into NEPSE through the same credit channel mechanics developed earlier in the book: higher policy rates, tighter liquidity, reduced margin lending capacity, and, in the more severe episodes, direct restriction on the loan products that fund equity purchases.

The 2022 episode is the clearest illustrated case in Nepal's recent history, and it is worth walking through step by step because the sequence will very likely repeat, in some variant, in a future cycle.

Step one: external shock and deceleration of inflows. As detailed in Lesson 4.3, the trade deficit widened sharply in FY2021/22 on the back of a global commodity price shock (petroleum costs up roughly 89 percent year on year) at the same time remittance growth stalled to under 4 percent and grant inflows collapsed. Reserves fell to roughly 6.6 months of import cover.

Step two: administrative and monetary response. Nepal Rastra Bank moved on two fronts simultaneously. On the administrative front, the Ministry of Finance and NRB imposed an outright ban on the import of a list of non-essential and luxury goods (vehicles, certain electronics, and other discretionary consumer items) from late April 2022 — initially through the end of the fiscal year, then extended repeatedly, with the final categories freed only on 6 December 2022, roughly seven months later, partly to meet IMF programme conditions — explicitly to conserve foreign currency. On the monetary front, NRB's monetary policy for FY2022/23 raised its policy rate corridor sharply: the repo rate was lifted from 5.5 percent to 7 percent and the bank rate from 7 percent to 8.5 percent, a full 150 basis point tightening, and the cash reserve ratio banks were required to hold against deposits was raised from 3 percent to 4 percent, mechanically shrinking the pool of deposits available for lending. Private sector credit growth targets were slashed from roughly 19 percent to 12.6 percent for the year, a deliberate policy choice to choke off the domestic demand — including import-financing demand — that was draining reserves.

Step three: transmission into the banking system and into NEPSE. Higher CRR requirements and a higher policy rate corridor immediately tightened interbank liquidity and pushed up deposit and lending rates across the banking system. Banks facing binding credit-to-deposit (CD) ratio constraints — the 90 percent ceiling that in 2021 replaced the older credit-to-core-capital-cum-deposit (CCD) ratio — and a shrunken lendable pool cut back on all discretionary lending categories, margin lending against shares prominent among them. Investors who had built leveraged NEPSE positions during the preceding liquidity-abundant period faced margin calls they could not easily refinance, forcing forced selling into an already weakening market. Higher term-deposit and fixed-income yields simultaneously made bank deposits and debentures more attractive relative to equities on a risk-adjusted basis, pulling incremental capital away from NEPSE even among investors under no margin pressure at all. The result, well documented in NEPSE's own trading history, was a decline from an index peak near 3,200 points in 2021 to a trough near 1,806–1,810 in mid-2023 — a fall of roughly 43 percent — with market commentary at the time and in retrospective analysis attributing the crash primarily to NRB's monetary tightening rather than to any deterioration in listed companies' underlying earnings. Corporate fundamentals, in fact, had not collapsed anywhere near proportionally; what collapsed was the liquidity and credit available to hold and finance equity positions, precisely the credit-cycle mechanism that Chapters 0.1 and 0.2 identify as the dominant driver of NEPSE cycles.

It is worth noting, as a point of nuance that a careful investor should retain, that not every element of NRB's 2022 policy package was purely contractionary toward the equity market specifically — the same monetary policy statement that raised rates and CRR also relaxed the margin lending caps (the so-called 4/12 rule — Rs 40 million per institution and Rs 120 million across all institutions combined — was eased by dropping the Rs 40 million per-institution cap, leaving a single Rs 120 million combined ceiling), technically permitting larger margin loans from a single bank against share collateral even as overall system liquidity tightened. This detail matters because it illustrates that NRB's policy toolkit does not always move in a single consistent direction toward NEPSE — the reserve-defence objective (tighter aggregate credit) and other policy objectives (broadening access to margin financing, supporting brokerage and banking sector business) can pull in different directions within the same policy statement, and a mechanical reading of any one instrument in isolation, without checking the net liquidity effect, can mislead.

The recovery side of the cycle followed the same logic in reverse. As remittance inflows surged from 2024 into 2025 and 2026 and reserves rebuilt past 15, then 18, then 22-plus months of import cover, the acute pressure that had justified emergency-level tightening receded, private sector credit growth ceilings were relaxed in subsequent monetary policy statements, CRR and policy rate settings were eased back down over the following fiscal years, and system liquidity — as tracked through interbank rates and the CD ratio — loosened materially. NEPSE's recovery from its 2023 trough tracked this loosening with a lag, consistent with the credit-cycle timing patterns documented elsewhere in this book: monetary easing shows up in bank lending capacity and interbank rates within a quarter or two, but it takes longer — often two to four quarters — to show up as sustained NEPSE turnover and index gains, because investor risk appetite and margin capacity rebuild more slowly than raw system liquidity.

Lesson 4.5 — Reading the Signals: A Practical Framework for Investors

The preceding three lessons establish the theory and the historical case; this lesson converts that into an operating checklist. A disciplined NEPSE investor should build a simple, recurring habit of monitoring five external-sector indicators, all of which are published by Nepal Rastra Bank on a monthly or periodic basis and are freely available without subscription cost, well before the equivalent signal shows up in NEPSE price action or brokerage commentary.

Import cover and reserve trend. Pull NRB's "Current Macroeconomic and Financial Situation" report — issued roughly monthly, cumulatively through the fiscal year — and track the reported months of import cover against the seven-month threshold discussed in Lesson 4.3. Falling cover approaching single digits from a comfortable level, even before it crosses seven months outright, is the earliest actionable signal in this entire framework, because NRB has historically begun signalling policy intent well before the ratio becomes acute.

Remittance growth rate, in both NPR and USD terms. A deceleration in the year-on-year growth rate — not the absolute level, which will nearly always be positive given Nepal's large expatriate labor base, but the rate of change — is the leading indicator for reserve stress roughly two to three quarters ahead, since a slowing remittance inflow takes time to compound into a materially weaker BOP position.

Trade deficit growth relative to remittance growth. The two series should be read against each other, not in isolation. A widening trade deficit is tolerable, even benign for reserve purposes, so long as remittance growth is outpacing it, as has been the case through 2025/26. The moment trade deficit growth begins to outpace remittance growth — which is exactly the pattern that preceded the 2022 crisis — is the moment the external accounts flip from strengthening to weakening.

Policy rate corridor and CRR settings, published with every quarterly monetary policy review and its periodic updates. A tightening bias here — rate hikes, CRR increases, or credit growth ceiling reductions — is the direct mechanical transmission point into bank lending capacity and, with a lag, into NEPSE liquidity.

Interbank lending rate and the banking system's aggregate CD (credit-to-deposit) ratio. These are the fastest-moving real-time gauges of system liquidity, updated far more frequently than the quarterly policy statements, and they will typically move before the policy rate itself changes, since NRB's open market operations and standing facilities respond to liquidity conditions continuously rather than only at scheduled policy review dates.

An important calibration point for using this framework: the signal is asymmetric in its urgency. A weakening external position, once it crosses NRB's internal comfort thresholds, tends to produce policy responses that are administratively urgent — rate hikes and CRR increases can be announced and take effect within a single monetary policy statement, and import bans can be imposed within days by executive order. A strengthening external position, by contrast, tends to be eased into policy more gradually and cautiously, because NRB is naturally more reluctant to loosen credit conditions quickly for fear of reigniting the same imbalances that caused the prior tightening. Investors positioning for a NEPSE recovery on the back of an improving BOP picture should expect the credit-easing transmission to be slower and more grudging than the credit-tightening transmission was on the way down — an asymmetry worth pricing into position-sizing and timing expectations rather than assuming a mirror-image, equally fast recovery.

Lesson 4.6 — Current Position and Forward Risks

As of the most recent data available in this fiscal year, Nepal's external sector position is, by historical standards, unusually strong. Foreign exchange reserves have climbed past Rs 3.7 trillion, equivalent to roughly 19 months of goods-and-services import cover (over 22 months of merchandise imports) as of mid-June 2026, remittance inflows have grown at rates approaching 38 percent year on year in rupee terms, and the current account has posted a substantial surplus (roughly Rs 802 billion over the eleven-month period of FY2025/26) despite a trade deficit that itself continues to widen in absolute terms toward roughly Rs 1.78 trillion for the fiscal year. Inflation has, over the same period, remained comparatively contained. Taken together, this combination has allowed NRB considerable room to maintain an accommodative credit stance relative to the acute tightening of 2022, and NEPSE's multi-year recovery since its 2023 trough has broadly tracked that accommodative backdrop, consistent with the credit-cycle logic of this chapter and of Chapters 0.1 and 0.2.

The investor's task, however, is not to extrapolate the current comfortable position forward indefinitely, but to identify the specific stress points that could reverse it, since the 2022 episode demonstrates how quickly a seemingly stable external position can deteriorate once its supporting conditions change. Four forward risks merit explicit tracking.

First, remittance concentration risk. Nepal's outbound labor migration remains heavily concentrated in a small number of Gulf destination countries and Malaysia, economies whose labor demand is itself tied to oil prices, regional construction cycles, and immigration policy decisions made entirely outside Nepal's control. A moderation in Gulf construction activity, a shift toward greater automation or toward labor sourced from lower-cost sending countries, or an outright policy tightening on foreign labor quotas in any of Nepal's top two or three destination markets would show up first in the remittance growth rate and, per the framework in Lesson 4.5, would be an early warning worth acting on well before it shows up in NEPSE price action.

Second, the durability of the export base. Nepal's trade deficit continues to widen in absolute terms even as the current account posts surpluses, meaning the entire external cushion rests on remittance growth outrunning an ever-larger import bill rather than on any improvement in the underlying competitiveness of Nepali exports. This is a structurally fragile foundation: it requires remittance growth to keep re-accelerating merely to keep pace, let alone to keep strengthening the reserve position, and any plateau in remittance growth — even without an outright decline — would translate into a narrowing, and eventually reversal, of the current account surplus given the trade deficit's own trajectory.

Third, global commodity price exposure, particularly petroleum. Nepal imports the great majority of its petroleum needs, and the 2022 crisis demonstrated concretely how a global energy price shock (petroleum costs up 89 percent year on year in that episode) can widen the trade deficit fast enough to overwhelm even a functioning remittance inflow. Any renewed geopolitical shock to global energy markets is a direct and fast-acting channel back into Nepal's reserve position, faster-acting than most domestic developments an investor might otherwise be tracking.

Fourth, the political economy of policy response itself. NRB's willingness and speed to tighten in 2022 was itself shaped by the acuteness of the crisis and by pressure from multilateral partners and rating considerations; future episodes may unfold with different policy responsiveness depending on the political environment at the time, the government's fiscal position, and NRB leadership's own risk tolerance. An investor should not assume the specific policy toolkit and timing used in 2022 — the CRR increase, the rate corridor hike, the import bans — will be replicated identically in a future stress episode; the direction of the response (tightening) is a reliable pattern, but the magnitude, speed, and specific instruments used may vary.

For the practical purpose of this book — analysing NEPSE — the takeaway is not that investors should attempt to forecast Gulf labor markets or global oil prices themselves, a task well beyond the scope of equity analysis. It is instead that the external-sector indicators in Lesson 4.5 function as a leading, publicly available, and systematically underused early-warning system for the credit conditions that, per the framework established earlier in this book, are the dominant driver of NEPSE's cyclical turns. A retail investor who checks NRB's monthly bulletin with the same regularity as they check the NEPSE index has a genuine, structural informational advantage over the majority of market participants who react only after a credit tightening has already begun showing up in falling share prices and margin calls.