During the review period of May 23 to June 20, the Nepal Stock Exchange (NEPSE) index fell by 50.19 points (-3.82%) to close at 1264.36 points. The reports on shortfall of loanable funds of banks made investors reluctant to inject money into the secondary market as they feared that interest rate could shoot up, contrary to the previous period where most commercial banks depicted strong profits in their unaudited financial reports. The drop was reflected in the market volume at the end of the period, the total market turnover during the period fell by -48.22% and stood at Rs 11.57 billion.
During the review period, contrary to the previous period, only one sub-index landed in the green zone while nine sub-indices landed in the red zone. The Manufacturing sub-index (+4.60%) was the biggest gainer as share value of Shivam Cements (+Rs 106) went up.
On the losing side, Non-life insurance sub-index (-11.11%) faced the biggest drop as the share value of Rastriya Beema Company (-Rs 1399), Rastriya Beema Company Promoter Share (-1250) and Premier Insurance (-196) went down. Similarly, Life Insurance sub-index (-8.10%) went down with the decrease in the share value of Life Insurance Co. Nepal (-Rs 292) and Surya Life Insurance (-124). The Hydropower sub-index (-5.95%) followed suit with decrease of Nepal Hydro developers (-Rs 42), Joshi Hydropower development (-Rs 39) and Chilime Hydropower (-Rs 25). Likewise, Microfinance sub-index (-5.41%) fell as the share value of Janautthan Samudayic Laghubitta Bikas Bank (-Rs 1157), Unnati Micorfinance Bittiya Sanstha (-Rs 224) and Samata Microfinance Bittiya Sanstha (-Rs 208) decreased. The Others sub-index (-5.13%) also went down with fall in share value of Citizen Investment Trust (-NPR 109) and Nepal Doorsanchar Company (-Rs 46). Further, Hotels sub-index (-4.05%) lost marginally as share value of Oriental Hotels (-68) fell. Additionally, Commercial Bank sub-index (-2.70%) went down with decrease in share value of Himalayan Bank (-Rs 37), Prime Commercial Bank (-Rs 33) and Nepal Investment Bank Promoter Share (-Rs 32). The Finance sub-index (-0.23%) witnessed a loss due to the fall in the share value of Reliance Finance (-NPR 8) and United Finance (-NPR 7). Development Bank (-0.17%) booked loss due to decrease in share value of Excel Development Bank (-NPR 18) and Shine Resunga Development (-NPR 16).
News and Highlights
The budget for the fiscal year 2019/20, has ensured the security and transparency of digital transactions and made possible online transaction of government bonds. Through this, the online trading process is expected to be streamlined. Additionally, it has also made provisions of reducing the capital gains tax to 5% from 7.5% and providing easy access to non-Nepali residents to invest in the share market.
Further, Securities Exchange Board of Nepal (SEBON) has proposed a two-factor biometric authentication mechanism for traders and investors in the buying or selling of stocks, in order to address the rising issue of fake share trader accounts opened using other people’s documents. On the implementation of the biometric system, investors would be required to use touch ID-enabled devices like fingerprints or eye scans to access their trading and demat accounts, which is expected to provide security to the service providers and account holders.
Moreover, SEBON has also come up with a new direction stressing on the strict implementation of anti-money laundering enforced in the previous year. The new directive grants SEBON the right to annul the operating license of those agencies which repeatedly breach rules.
In the public issue front, SEBON has approved the Initial Public Offerings (IPOs) of two micro finance companies. Aandhikhola Laghubittia Bittiya Sanstha issued IPO of 400,000 units worth Rs 40 million. Also, the credit rating agency, ICRA Nepal has assigned Grade 4 rating to the issue, indicating below average fundamentals. Similarly, Ghodighoda Laghubittia Bittiya Sanstha issued IPO of 132,600 units worth Rs 13.2 million. ICRA Nepal has assigned grade 4 rating to this issue, indicating below average fundamentals of the company.
Outlook
The budget for the fiscal year 2019/20 acknowledged secondary market as one of the important contributors to the economy and ensured provisions to improve the trading and credibility of the share market. Following this, the market showed some signs of improvement for a few days as investors were hopeful about the secondary market boost. However, as the period went by, investor confidence took a beating and the market couldn’t sustain the anticipated growth as most commercial banks reported shortfall of loanable funds indicating insufficient funds for investors to invest in the secondary market. Nonetheless, with new directives and amendments coming up including monetary policy for the upcoming fiscal year, coupled with signs of improvement in market interest rates, the market is likely to gain some positive momentum in the days ahead.
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.
