During the review period of June 19 to July 23, the Nepal Stock Exchange (NEPSE) index plunged by 31.68 points (-2.58%) and closed at 1194.50points. Mid-way during the review period, the market showed some signs of recovery; nonetheless, it couldn’t withstand the growth as supply of shares mounted in the market. As investor grappled with various policy changes, their confidence remains shaken as the market failed below psychological barrier of 1200 points. Furthermore, the total trading volume during the period decreased substantially by 13.82% and stood at Rs 5.63billion.
During the review period, all the sub-indices landed in the red zone except for the Finance sub-index.
The Hotels sub-index (-7.64%) led the pack of losers with the decrease in share value of Orient Hotels (-Rs 20), Soaltee Hotel (-Rs 26) and Taragaon Regency (-Rs 3). Similarly, Hydropower sub-index (-5.73%) was second in line with the slump in share value of Api Power (-Rs 30), Arun Kabeli (-Rs 29),Chilime Hydropower (-Rs 20) and Arun Valley Hydropower (-Rs 20). Likewise, Manufacturing and Processing sub-index (-4.72%) followed suit with decrease in share value of Unilever Nepal (-Rs 2019) and Bottlers Nepal-Terai (-Rs 190).
The Microfinance sub-index (-4.65%) went down with the decrease in the share value of Naya Nepal Microfinance (-Rs 1327), Janautthan Microfinance (-Rs 75) and Womi Microfinance (-Rs 66). This was followed by Insurance sub-index (-3.39%); top losers in this index were National Life (-Rs 482), Rastriya Beema (-Rs 471), Nepal Insurance (-Rs 104). Likewise, Commercial Bank sub-index (-2.13%) shed value with decrease in the share value of Nabil Bank (-Rs 41), Sanima Bank (-Rs 19) and Mega Bank (-Rs 18). Likewise, Development Bank sub-index (-1.02%) decreased as the share value of Kankai Development (-Rs 125) and Purnima Development (-Rs 10) went down. The only gainer, Finance Sub-index (+ 0.01%) rose marginally with share value of Pokhara Finance (+Rs 6) and Reliance Finance (+Rs 3) going up.
With the beginning of the new fiscal year 2018/19, NEPSE has rolled out the fully automated trading system as promised. The new NEPSE Online Trading System (NOTS) is running parallel with the existing Computerised Trading System (CTS). Nonetheless, the full-fledged operation of NOTS will come into force once the User Acceptance Test (UAT) is conducted by the third party and upon approval from SEBON. Under the current system, investors can only see the status of their investment order and are not able to execute online order.
The central bank via the monetary policy for the FY 2018/19 has allowed commercial banks to work as securities brokerage firm via a separate subsidiary. Likewise, Banks and Financial Institutions (BFIs) now onwards will only be able to provide margin loans up to 25% of their core capital, such limit was 40% earlier. Similarly, to curve individual overdraft loan, the central bank has decreased the amount of overdraft loan to Rs 5 million from previous Rs 7.5 million.On a positive note, investors who have borrowed margin type loans by keeping their shares as collateral will now be facing fewer margin calls from their banking partner. As per the latest directive by the central bank, BFIs will not be liable to margin calls to borrowers unless the value of share decreases by more than 20%
On the public issue front, Panchakanya Mai Hydropower issued Initial Public Offering (IPO) worth Rs 110 million. The issue was assigned IPO grade 4 by ICRA Nepal indicating below average fundamentals. Likewise, the Further Public Offering (FPO) of Nepal Bank Limited is open to the public since June 29. The issue price per unit share is Rs 280, with a premium of Rs 180 per share. Also, the FPO of Citizens Banks International is going to open from July 31, the issue price per unit share is Rs 200 with a premium of Rs 100 per share. The issue was assigned IPO grade 3 by ICRA Nepal indicating average fundamentals.
Despite the soft beginning of fully automated trading system at NEPSE, Investors confidence has remained low since the beginning of the new Fiscal Year 2018/2019. Further, investors are awaiting the annual financial performance of listed companies to be published. Even though the central bank has tightened the margin type loans, such change is less likely to affect the secondary market as banks have adequate space to provide additional loans. As the central bank has eased some policies to enhance liquidity in the banking system via the monetary policy, subsequent improvement is going to have a direct positive impact on the future course of the market.