beed’s take on the market – october issue 2017

The Nepal Stock Exchange (NEPSE) index continued its downward trendduring the review period (August 17 to September 20, 2017) too. The market plunged by 89.94 points (-5.52%) to close at 1,539.81 further, the trading volume decreased by 22% during the review period. The total market trading during the period was NPR 13.35 billion. Investors did not appear to react to attractive returns posted by listed companies mainly Bank and Financial Institutions (BFIs) in the fiscal year 2016/17, few listed companies have already started to declare dividends. Further, despite ease in liquidity and access to margin loans, investor confidence remained on the lower side largely due to the influx of shares and higher selling pressure before the festivities. During the review period, all sub-indices, except the Others sub-index, landed in the red zone. The Insurance sub-index (-8.48%) led the pack of losers with decrease in share value of Rastriya Beema (-NPR 2,050), Prime Life Insurance (-NPR 782), Life Insurance Company Nepal (-NPR 264) and United Insurance (-NPR 246). The Commercial Bank sub-index (-5.86%) followed suit as the share value of key banks such as Nabil Bank (-NPR 483), Everest Bank (-NPR 167) and Standard Chartered Bank (-NPR 146) plunged. Likewise, the Development Bank sub-index (- 5.50%) also went down with fall in the share value of RSDC Microfinance (-NPR 1,740), Summit Microfinance (-NPR 1,540), Kisan Microfinance (-NPR 658) and Laxmi Microfinance (-NPR 375). Similarly, the Hotels sub-index (-5.05%) went down with decrease in share value of Oriental Hotels (-NPR 52), Soaltee Hotel (-NPR 19) and Taragaon Regency Hotel (-NPR 17). The Finance sub-index (-4.90%) also followed a downward trend as the share value of Jebils Finance (-NPR 103), Pokhara Finance (-NPR 22), Janaki Finance (-NPR 20) and Guheshwori Merchant Bank and Finance (-NPR 15) dropped. Likewise, the Hydropower sub-index (-4.7%) declined with fall in the share value of Api Power (-NPR 74), Arun Valley Hydropower (-NPR 48), Barun Hydropower (-NPR 38) and Ngadi Group Power (-NPR 38The Manufacturing and Processing sub-index (-0.69%) also slumped as share value of Himalayan Distillery (-NPR 162) and Bottlers Nepal (Terai) (-NPR 99) decreased. Nonetheless, the Others sub-index (+1.34%) managed to remain in the green zone with increase in share value of Nepal Telecom (+ NPR 11).

News Highlights

Securities Board of Nepal (SEBON) in its policy and programme launched for the fiscal year 2017/18 has mandated Permanent Account Number (PAN) to all investors for share trading from the beginning of the next fiscal year. Further, the policy and programme also talks about framing corporate governance guidelines for listed companies, developing rules for venture capital and private equity fund and enforcing supervision manual of stock broker companies. Likewise, considering the immense growth in the secondary market in the past few years, SEBON is planning to issue stock exchange license to a new company. However, NEPSE, the only secondary market operating in the country, is of the view that SEBON should focus on improving the existing one instead of opening a new stock exchange. Meanwhile, NEPSE has extended its deadline to come out with full-fledged online trading system from November 7, 2017 to mid-January 2018 because of delayed derivable by the software vendor. Out of the 18 modules of work to be completed by the software developer, only five have been approved by NEPSE. Moreover, there has been no progress on the live trading module till date. In the public issue front, Nepal Grameen Development Bank, a national-level microfinance development bank, has issued Further Public Offering (FPO) worth NPR 97.5 million at face value NPR 100 per share i.e. without any premium. The issue was oversubscribed by more than 28 times. ICRA Nepal had assigned IPO grade 4 to this issue indicating below-average fundamentals.

Outlook

As the annual festivities are around the corner, the market is likely to get affected in the coming days. Historical trends further substantiate the current trend in the market. Nonetheless, as economic activates accelerate post festivities, the market is likely to rebound as savvy investors are expected to boost buying at bargain prices. Moreover, the successful completion of local level elections and the implementation of recently released policy and programme launched by SEBON is expected to boost investor confidence in the coming days further strengthening the capital market.

Disclaimer

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.