beed’s take on the market - march 2018

During the review period of January 17 to February 20, the Nepal Stock Exchange (NEPSE) index went down by 9.80 points (-0.70%) and closed at 1,396.72 points. The index started above 1,400 points and reached the lowest point of 1,380.29 on February 12. Though the market managed to bounce back marginally with the formation of the new government, the index has been showcasing correction mode with occasional gains. The total trading volume during the period decreased by 16.85% and stood at Rs 6.46 billion.

During the review period, except Commercial Bank and Development Bank Sub-index, all the sub-indices landed in red zone.

The Hydropower sub-index (-5.24%) led the pack of losers with decrease in share value of Butwal Power Company (-Rs 125), Sanima Mai Hydropower (-Rs 25), Arun Kabeli Power (-Rs 17) and Api Power Company (-Rs 16). Likewise, the Insurance sub-index (-2.75%) slumped as the share value of Asian Life Insurance (-Rs 467), NLG Insurance (-Rs 355), Neco Insurance (-Rs 225) and Premier Insurance (-Rs 123) went down. The Microfinance sub-index (-2.59%) followed the suit with the fall in the share value of Kalika Microcredit Development Bank (-Rs 391), RSDC Microfinance (-Rs 328), Kisan Microfinance (-Rs 281) and Nagbeli Microfinance (-Rs 109). The Hotels sub-index (-2.10%) shed value with the decrease in the share value of Soaltee Hotel (-NPR 9) and Taragaon Regency Hotel (-Rs 3).


The Finance sub-index (-1.72%) plunged as the share value of Pokhara Finance (-Rs 8), Arun Finance (-Rs 6) and Jebils Finance (-Rs 5) went down. This was followed by the Others sub-index (-1.69%) with the fall in share value of Citizen Investment Trust (-Rs 30) and Nepal Telecom (-Rs 17). Finally, the Manufacturing and Processing sub-index (-0.71%) decreased as the share value of Unilever Nepal (-Rs 338) and Himalayan Distillery (-Rs 9) went down.

Nevertheless, the Development Bank sub-index (+1.15%) increased marginally with the rise in the share value of Swabalamban Bikas Bank (+Rs 20), Gandaki Bikas Bank (+Rs 14), Kailash Bikas Bank (+Rs 13) and Green Development Bank (+Rs 12). Likewise, the Commercial Bank sub-index (+0.61%) managed to remain on the gaining side with increase in the share value of Nabil Bank (+Rs 61), Nepal Investment Bank (+Rs 30), Sanima Bank (+Rs 27) and NMB Bank (+Rs 15).

News Highlights

According to CDS and Clearing Ltd, Applications Supported by Blocked Amount (ASBA) system has now been upgraded to Centralised Applications Supported by Blocked Amount (C-ASBA) system. With the new system, primary shares can be applied through a uniform process at all ASBA members that is operated in a centralised way by the CDSCL. Investors can now submit application for new Initial Public Offering (IPO) or Further Public offering (FPO) of any public company through Banking and Financial Institutions (BFIs) and online using https://meroshare.cdsc.com.np.

With view of ensuring financial discipline in listed companies and to safeguard the interest of investors in the stock market, Securities Board of Nepal (SEBON) has issued new directives on good governance. Some of the highlights of the new directive include prohibiting listed companies from providing loans to family members of their board of directors. Similarly, the board members can serve in one position for a maximum term of four years without extension. The directive will come into full-fledged effect from the next fiscal year i.e. 2075-76.

Similarly, to protect investor interest, maintain transparency and clarity in the stock market, SEBON has modified the Know Your Customer (KYC) detail to efficiently implement the changed Acts, Rules and Directives related to securities market and the Act promulgated for prevention of asset laundering. The board has also started taking action against brokers failing to comply with the modified KYC.


On the public issue front, the market witnessed only one IPO. Butwal Power Company issued FPO of 4.08 million units worth Rs 2.04 billion at Rs 501 per unit. The total collection of FPO was around Rs 1.32 billion. ICRA Nepal had assigned Grade 3 to the FPO indicating average fundamentals.

Outlook

Despite formation of new government and other political developments including unification of two major parties of the country, the market is witnessing bearish trend which is mainly attributed to uncertainty surrounding the political transition. Further due to increasing liquidity crunch, banks have lured investors with higher interest rates and has mounted sell-off pressure to investors due to margin call as stock value are in downward trend. In this situation, investors seem to be in wait and watch mode resulting in continuation of the ongoing downward trend for some more time.
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.

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