During the review period of March 21 to April 19, 2018, the Nepal Stock Exchange (NEPSE) index rose by 157.24 points (12.77%) and closed at 1388.31 points. The secondary market witnessed a turbulent month; the index started on a negative note and plunged to 1,168.55 points on March 26, 2018, the lowest in the last two years.
However, by the start of April, it posted a steady recovery and pushed itself upward with central bank taking the initiative to address the issues for the development in stock market, and indication of the flow of development project funds in the banking channel. The total trading volume during the period increased significantly by 57% and stood at Rs 10.33 billion indicating promising growth in transactions.
During the review period, all sub-indices landed in the green zone. The micro-finance sub-index (+19.22%) led the pack of gainers with increase in share value of Janautthan Samudayik Microfinance (+NPR 619), Naya Nepal Microfinance (+NPR 518) and Nag Beli Microfinance (+NPR 458). The second biggest gainer is the Insurance sub-index (+17.05%) with rise in share values of Rastriya Beema Company (+NPR 3,030), United Insurance (+NPR 357) and Everest Insurance (+NPR 307). Likewise, Hydropower sub-index (+14.64%) followed suit as share value of Chilime Hydropower (+NPR 140), Arun Kabeli Power (+NPR 62) and Api Power (+NPR 59) increased.
The Hotels sub-index (+13.33%) rose with increase in share value of Oriental Hotels (+NPR 127), Taragaon Regency Hotel (+NPR39) and Soaltee Hotel (+NPR 31). Similarly, the Development Bank sub-index (+10.65%) went up as share values of Nirdhan Utthan Bank (+NPR 231), Deprosc Development Bank (+NPR 171) and Miteri Development Bank (+NPR 58) increased. This was followed by the Commercial Bank sub-index (+10.02%) with top gainers being Everest Bank (+NPR139), Nabil Bank (+NPR 70), Himalayan Bank (+NPR 59) and NMB Bank (+NPR 59).
Likewise, Others sub-index (+9.80%) also increased as share value of Nepal Telecom (+NPR 64) and Hydroelectricity Investment and Development Company (+NPR 24) went up. Also, Manufacturing and Processing sub-index (+ 9.47%) rose with increase in the share values of Bottlers Nepal (+NPR 843), Unilever Nepal (+NPR 481) and Himalayan Distillery (+NPR 271). Finally, the Finance sub-index (+ 5.02%) increased as share values of Janaki Finance (+NPR 25), Manjushree Finance (+NPR 20),Pokhara Finance (+NPR 19) increased.
Securities Board of Nepal (SEBON) has inaugurated a semi-automated trading system from the new year 2075 via email, SMS and mobile app. In this semi-automated system, instead of share trade request going directly to the NEPSE’s system, investors have to give online request for the share trade from broker’s back office software, and the order is only executed when the broker approves the requests. This system is expected to make investors familiar with full online trading platform that is planned for full implementation from mid July 2018. SEBON has already directed all brokers to provide investors with online trading of shares.
SEBON has issued a directive with the view to control flow of black money into the secondary market. Companies dealing with stocks are required to inform ‘Financial Information Unit (FIU)’ at Nepal Rastra Bank (NRB) about stock trading exceeding Rs one million per day. Moreover, companies must inform about suspicious transactions in the secondary market to FIU. It also requires the company mandated by SEBON to introduce internal control measures and train officials on ways to curb money laundering.
On the public issue front, SEBON has approved Initial Public Offering (IPO) of two hydropower companies: Joshi Hydropower Development Company with 371,400 unit shares worth Rs 37.1 million and Shuvam Power with 200,000 unit shares worth Rs 20 million. Meanwhile, the Further Public Offering (FPO) of 462,826 units of Citizens Bank International is yet subject to approval from SEBON. The bank is planning to issue FPO at premium in order to maintain its promoter and general shareholders at 51:49 which is currently at 51.29:48.71. After the FPO issuance, the paid-up capital of the bank will reach Rs 46.3 million.
The upward momentum showcased by the index in the review period after continuous decline for more than six months has boosted investor confidence. As the much awaited online trading of shares is initiated, the volume of transactions is expected to go up. Further increase in economic activities following the announcement of first budget under federal structure in the coming months and increase in profits of Banking and Financial Institutions in their third quarter results is expected to have positive influence on the market.
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.