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beed’s take on the market

During the review period of January 26 to February 20, the Nepal Stock Exchange (NEPSE) index went up by a whopping 137.10 points (+10.57%) to close at 1434.57 points. The market continued to remain bullish during the review period as listed companies published attractive second quarter results led by stocks of Banks and Financial Institutions (BFIs). On February 20, the share market breached the threshold of 1430 points, and closed at a 22 month-high signaling a strong revival of the market. The total market turnover during the period went up by46.36% and stood at Rs 31.83 billion.

During the review period, nine of the sub-indices landed in the green zone while one landed in the red zone. The Microfinance sub-index (+32.46%) was the biggest gainer as share value of Forward Community Microfinance (+Rs 581), Janauthan Samudayik Microfinance (+Rs 565), and Sana Kisan (+Rs 441) went up. Non-Life Insurance sub-index (+30.67%) was second in line with the increase in the share value of Rastriya Beema (+Rs 2514), Shikhar Insurance (+Rs 287) and Neco Insurance (+Rs 192).

Life Insurance sub-index (+17.45%) followed suit with the rise in the share value of Life Insurance Co. (+Rs 252), Gurans Life Insurance (+Rs 157) and Nepal Life Insurance (+Rs 140). Similarly, Manufacturing & Processing sub-index (+17.03%) was also in the gaining side with rise in the share value of Himalayan Distillery (+Rs 346) and Shivam Cements (+Rs 156). Development Bank sub-index (+7.67%) also faced an increase in the share value of Miteri Development (+Rs 92) and Shine Resunga (+Rs 47).

Following this, Others sub-index (+7.10%) saw a jump in the share value of Citizen Investment Trust (+Rs 694). Commercial Bank sub-index (+5.48%) went up with the rise in the share value of NIC Asia (+Rs 82), Everest Bank (+Rs 68) and NMB Bank (+Rs 58). Hydropower sub-index (+4.33%) also saw a surge with the increase in the share value of Butwal Power (+Rs 68) and Sanima Mai (+Rs 33). Finance sub-index (+1.49%) also saw a significant rise as the share value of ICFC Finance (+Rs 17) and Shree Investment (+Rs 13) went up.

On the losing streak, Hotels sub-index (-1.84%) toppled as share value of Oriental Hotels (-Rs 10) and Soaltee Hotel (-Rs 7) went down.

News and Highlights

During the review period, SEBON has amended four key regulations namely Merchant Bankers Regulation, Mutual Fund Regulation, Securities Business-Broker, Businessman & Market Maker Regulation, and Securities Registration and Distribution Regulation. As per the new amendments, subsidiary companies of the commercial banks can now perform as stockbrokers while stockbrokers will be allowed to provide margin loans as well. Now onwards the securities business will have to maintain a minimum capital of Rs 200 million (USD 1.7 million). The new amendment has also created provision for implementation of the book building system during the initial public offering of the securities. Also, the duration of public offering has been decreased to 15 days from the existing 30 days. Listed companies will now be allowed to float bonds/debentures in foreign capital markets in foreign currency.

On the public issue front, SEBON has approved the proposed Initial Public Offering (IPO) of NRN Infrastructure and Development Limited, and Nepal Re-insurance Company Limited worth Rs 339 million and Rs one billion respectively. CARE Ratings Nepal has assigned ‘CARE-NP-IPO Grade 4’ to NRN Infrastructure and Development Limited, indicating below average fundamentals. ICRA Nepal has assigned a [ICRANP] IPO Grade 2 to Nepal Re-insurance indicating above average fundamentals.

Similarly, SEBON has added the IPO of two companies: Ajod Insurance worth Rs 300 million and Madhya Bhotekoshi Hydropower worth Rs 1.5 billion to its pipeline. NIBL Ace Capital has been appointed as the issue manager of Ajod Insurance, and CARE Ratings Nepal has assigned ‘CARE-NP-IPO Grade 4’ to the IPO indicating below average fundamentals. Global IME Capital is the issue manager of Madhya Bhotekoshi Hydropower.

Outlook

Investor confidence remained strong during the review period which picked up from early December last year. Signs of ease in liquidity in the banking system along with attractive underpriced securities have triggered buying in the secondary market. Further, assurance from the government for favourable investment friendly environment has boosted investor sentiment. With strong volume along with investor optimism, the market is likely to continue the bullish run.

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.

Review overview
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