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beed’s take on the market – January issue 2018

During the review period (November 23 to December 20), the Nepal Stock Exchange (NEPSE) index increased marginally by 4.21 points (+0.28%) and closed at 1,484.47 points. The index initially started below the long term support level of 1,500 points however, the market showed some recovery to hover back above 1,500 points. Nevertheless, the index slipped to 1,493.76 points on December 19 and since then the market showed a downward momentum. Moreover, trading volume increased by 5% during the review period as investor confidence was temporally boosted by the successful completion of the federal and provincial elections. The total market trading during the period was Rs 10 billion.

During the review period, majority of the sub-indices landed in green zone while only few sub-indices closed on a negative note. The Hydropower sub-index (+7.27%) led the pack of gainers with the rise in the share price of Chilime Hydropower (+NPR 86), Butwal Power Company (+NPR 78), Synergy Power Development (+NPR 28) and Sanima Mai Hydropower (+NPR 22). Likewise, the Others sub-index (+5.12%) continued with its upward momentum as share price of Nepal Telecom (+NPR 47) went up. Similarly, Microfinance sub-index (+2.92%) followed suit as share value of Naya Nepal Microfinance (+NPR 470), Mirmire Microfinance (+NPR 365), Janautthan Microfinance (+NPR 310) and Kalika Microfinance (+NPR 250) went up.

The Manufacturing and Processing sub-index (+2.62%) appreciated as the share value of Bottlers Nepal (Terai) (+NPR 1,842) and Unilever Nepal (+NPR 100) went up. Likewise, the Hotels sub-index (+2.31%) increased as share value of Oriental Hotel (+NPR 68) and Taragaon Regency Hotel (+NPR 18) increased. Similarly, the Finance sub-index (+1.09%) went up as the share value of Arun Finance (+NPR 33) increased.

Nonetheless, the Insurance sub-index (-3.48%) led the pack of losers with decrease in the share value of Premier Insurance (-NPR 110), United Insurance (-NPR 100), Everest Insurance (-NPR 55) and Asian Life Insurance (-NPR 28). Likewise, the Development bank sub-index (-1.58%) plunged with fall in the share value of Nepal Grameen Bikas Bank (-NPR 62), Swabalamban Bikas Bank (-NPR 42), First Microfinance Development Bank (-NPR 37) and Karnali Development Bank (-NPR 19). Finally, Commercial bank sub-index (-0.27%) decreased marginally as the share value of Standard Chartered Bank (-NPR 65) and Nepal Bank (-NPR 8) went down.

News and Highlights

Securities Board of Nepal (SEBON) has implemented commodity Act, 2074 from November 25, 2018 after getting approval from Nepal Government. The regulation aims to develop the commodity market by ensuring the safety of investors, commodity transactions, clearing and settlement and warehouse operation. Similarly, SEBON has come up with a circular baring merchant bankers from working as issue manager of its holding company who is intending to float shares. Similarly, merchant bankers are not allowed to perform the task if their companies hold major stake in their client companies for which they are mandated to issue shares. Further, a single merchant banker is barred from being both the issue manager and underwriter of their client companies.

On the public issue front, the market witnessed two Initial Public Offerings (IPOs): Sanima Equity Fund and Radhi Bidhut Company Ltd. Sanima Equity Fund had floated a closed-end 7-years equity oriented mutual fund scheme of 120 million units worth Rs 1.2 billion with face value of Rs 10 per unit. ICRA Nepal had assigned AMC Quality 3 indicating adequate credit quality rating on management quality. Likewise, Radhi Bidhut Company Ltd. issued IPO of 764,550 units ordinary shares worth Rs 76.4 million at face value of Rs 100 per share.This IPO has been assigned Grade 3 rating by ICRA Nepalindicating average fundamentals.

Outlook

With the successful completion of federal and provincial elections and the left alliances winning with clear majority, a stable government is expected in the country for the next five years. However due to election issues of the national assembly in this transition phase, investors seem to be in wait and watch mode. Further, rise in interest rates post-election indicates tightening of liquidity in the banking system, which is likely to drive the market in reverse direction in the near future.

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.

Review overview
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