During the review period of April 19 to May 21, the Nepal Stock Exchange (NEPSE) index plunged by 51.18 points (-3.69%) and closed at 1337.13 points. The secondary market index started on a positive note touching 1,438.49 points on April 22, the highest in the past three months. Nonetheless, the market could not withstand the selling pressure thus rapidly declining by 100 points reaching 1,333.85 points by mid-May. Moreover, the total trading volume during the period decreased by 9% and stood at Rs 9.4 billion mainly on account of recent rule brought by the Securities Board of Nepal (SEBON) to update know-your-customer (KYC) record before any transaction.
During the review period, all the sub-indices landed in the red zone except for the Microfinance sub index.
The Finance sub-index (-5.74%) led the pack of losers with decrease in share value of Janaki Finance (-Rs 20), Goodwill Finance (-Rs 16) and ICFC Finance (-Rs 12). Similarly, the Development Bank sub-index (-5.39%) was second in line with slump in share value of Muktinath Development Bank (-Rs 28), Shangrila Development Bank (-Rs 25) and Karnali Development Bank (-Rs 22). Likewise, Commercial Bank sub-index (-5.27%) followed suit with decrease in share value of key banks such as Everest Bank (-Rs 99), Standard Chartered Bank (-Rs 75) and Nabil Bank (-Rs 56).
The Hotel sub-index (-5.09%) went down with decrease in the share value of Oriental Hotels (-Rs 34), Taragaon Residency Hotel (-Rs 20) and Soaltee Hotel (-Rs 14). This was followed by Hydropower sub-index (-3.50%). Top losers in this index were Barun Hydropower (-Rs 31), United Modi Hydropower (-Rs 26), Chilime Hydropower (-Rs 24). The Others sub-index (-2.74%) shed value with decrease in the share value of Nepal Telecom (-Rs 27) and Citizen Investment Trust (-Rs 16). Likewise, Manufacturing and Processing sub-index (-2.00%) also decreased as share value of Bottlers Nepal (-Rs 249) decreased however there was an increase in the share value of Himalayan Distillery (+Rs 140). The only gainer, Microfinance sub-index (+ 4.45%) rose with increase in the share value of Swadeshi Microfinance (+Rs 722), Swarojgar Microfinance (+Rs 290) and Mirmire Microfinance (+Rs 280).
Securities Board of Nepal (SEBON) has been working on the final stages of software retesting in order to roll out the fully automated stock trading. SEBON had inaugurated its semi-automated trading system in the New Year 2075 via email, SMS and mobile app and is now ready to introduce full-fledged online trading by July. The soon-to-be-released system has a special provision to address the requirement of a seller who happens to place sell order of more shares than s/he actually possesses i.e., the provision of Auction Market.
Another new concept to the market would be Trade Guarantee Fund, where if payments are not made for the orders of some shares, then a loan will be issued from Trade Guarantee Fund which would later be settled between the stock broker and the investor. Apart from selling and purchasing shares, investors can also view market depth, information sent from NEPSE, details of transaction history and share portfolio.
SEBON celebrated its silver jubilee by holding a two-day Capital Market Expo on May 9 and 10 mainly offering technical sessions related to capital markets, issues related to merchant bankers, brokering companies and prospects of development besides challenges of the capital market.
The Nepal Stock Exchange (NEPSE) is preparing to allow shareholders to sell their rights to buy additional shares in a bid to introduce new instruments in the secondary market. Currently, shareholders who do not wish to buy right shares cannot sell their stock purchase right to another person. NEPSE has been drafting a new bylaw to allow transfer of stock purchase right. Investors who buy the stock purchase right will not be eligible to receive dividends issued by the company until there is complete transfer of ownership of the rights shares. Likewise, the bylaw has proposed a commission ranging from 0.3 to 0.5% for brokers.
In the public issue front, Rairang Hydropower Development Company issued an Initial Public Offering (IPO) worth Rs 84 million at par value of Rs 100 with IPO Grade 4 assigned by ICRA Nepal. The IPO was oversubscribed by 17 times. Securities Board of Nepal (SEBON) has approved the IPO of Nadep Microfinance worth Rs 48 million at Rs 100 per unit share. After this issue, the company’s capital will reach Rs 160 million from Rs 112 million. Meanwhile, 26.4 million unit shares IPO of Upper Tamakoshi Hydropower has once again been postponed due to late submission of audit report to SEBON which was previously put off due to the protests from the project affected locals of Dolakha district.
Despite the current downward momentum in the review period, online trading of shares that has been scheduled to operate from July is expected to increase volume of transactions resulting in an upward incline of the index. Moreover, as the annual fiscal budget and monetary policy is expected to unfold, the future path of the index will also largely depend on its provisions as the market has general tendency of fluctuating based on rumours and speculations regarding changes in government policies.
This is an analysis from beed invest 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.