During the review period of April 21 to May 23, the Nepal Stock Exchange (NEPSE) went up by 82.29 points (+6.68%) to close at 1314.55 points. Strong profits depicted by the unaudited third quarter financial reports of commercial banks boosted the market, contrary to the previous period where most commercial banks were trading at historically low Price to Earning (PE) ratios. Moreover, initiatives and revisions in regulations related to the operation of online trading platforms have aided in boosting the confidence of investors. The surge was reflected in the market volume at the end of the period, the total market turnover during the period went by whopping 162% and stood at Rs 22.3 billion.
During the review period, nine of the sub-indices landed in the green zone whereas one landed in the red zone. Out of the indices from the green zone, Manufacturing and Processing sub-index (+29.80%) led the pack of gainers with increase in the share value of Himalayan Distillery (+Rs.409) and Shivam Cements (+Rs.238). Similarly, Hotels sub-index (+21.43%) followed with a jump in share value of Orientals Hotels (+Rs.235) and Soaltee Hotel (+Rs.32). Hydropower sub-index (+12.90%) was third in line with increase in share value of Butwal Power Company (+Rs.60), Upper Tamakoshi Hydropower (+Rs.58) and Sanima Mai Hyropower (+Rs.49). Likewise, Life Insurance (+9.49%) went up with increase in share value of Life Insurance Co. Nepal (+Rs.328), which was followed by the Others sub-index (+8.63%) where the top gainers were Nepal Telecom (+Rs.58) and Citizen Investment Trust (+Rs.50).
Similarly, Non-life Insurance sub-index (+7.78%) witnessed increase in share value of Rastriya Beema Company (+Rs.1901) and Rastriya Beema Company Limited Promoter Share (+Rs.1744). Further, Development Bank sub-index (+6.03%) went up with increase in share value of Lumbini Bikas Bank (+Rs.29) and Excel Development Bank (+Rs.28). Commercial Bank sub-index (+4.08%) gained marginally as share value of Agriculture Development Bank (+Rs.81) and Standard Chartered Bank Limited (+Rs.64) went up. Similarly, Micro finance sub-index (+2.38%) went up with increase in share value of Global IME Microfinance (+Rs.183) and RMDC Microfinance (+Rs.84).
News & Highlights
The Nepal Stock Exchange (NEPSE) has reached the final stage of link up with Nepal Clearing House (NCH) following which ease in the settlement of financial transactions between multiple institutions via an electronic platform is expected. Particularly transactions through 76 banks and financial institutions, including all 28 commercial banks can be done up to Rs 100,000 via the integrated system by paying a fee.
In the process, Securities Board of Nepal (SEBON) has already allowed Citizen Investment Trust (CIT) to operate as market dealers. But contrarily, stock brokers have not been granted license to function as market dealers yet, which was formerly decided to be done immediately after the launch of the online trading platform in November. The failure of revising and enforcing Securities Businessperson Regulation related to online trading platform is apparent which has limited the working area for stockbrokers and thereby hampering the secondary market performance as well. In an attempt to regulate the energy sector and enact Regulation Commission Act 2074 and Electricity Regulation Commission Rules 2075,SEBON has directed hydro companies to obtain permission from Nepal Electricity Regulatory Commission prior to making stock offerings to the general public.
On the public issue front, Swabhimaan Laghubitta Bittiya Sanstha issued Initial Public Offering (IPO) of 198, 610 units worth Rs 1.98 crore. Similarly, Janasewi Laghubitta Bittiya Sanstha issued IPO of 463, 3000 units worth Rs 4.63 crores. As per the prevailing credit rating regulations and the size of the issue, rating is not necessary for these companies. Infinity Laghubitta Bittiya Sanstha also issued IPO of 674,300 units worth Rs 6.74 crore. Care Rating Nepal Limited has assigned grade 4 rating to this issue, indicating below average fundamentals of the company.
Investor confidence remained high during the review period as reflected by strong market volumes. The market surge which started with strong demand for commercial banks scrips was further strengthened by demand for scrips of insurance and hydropower companies. The inclusive growth of all key sub-indices has strengthened the current growth trend. The direction of the market is likely to be affected by the upcoming fiscal budget for 2019/2020. Nonetheless, investors are pessimistic about favourable provisioning which is likely to further boost their confidence level.
This is an analysis from beed management pvt. ltd. No expressed or implied warrant is made for usefulness or completeness of this information and no liability will be accepted for consequences of actions taken on the basis of this analysis.