beed’s take on the market & April Issue 2018

During the review period of February 20 to March 21, the Nepal Stock Exchange (NEPSE) index decreased significantly to the lowest level in two years. The index nosedived by 138 points (-9.88%) to close at 1,231.07 points. Such freefall has been mainly attributed to increasing interest rates amidst credit crunch in the banking system. During the review period, all the sub-indices landed in the red zone. The Hydropower sub-index (-15.47%) observed significant decline with the shrinking in share value of Chilime Hydropower (-Rs 140), Api Power (-Rs 109), Arun Kabeli Power (-Rs 80), Sanima Mai Hydropower (-Rs 62) and Butwal Power (-Rs 58). Likewise, the Insurance sub-index (-15.26%) slumped as the share value of Premier Insurance (-Rs 361), Nepal Insurance (-Rs 339), National Life Insurance (-Rs 330), United Insurance (-Rs 294) and Life Insurance Co. Nepal went down. The Microfinance sub-index (-13.92%) followed suit with fall in the share value of Janautthan Samudayic Microfinance (-Rs 562), Mirmire Microfinance (-Rs 500), NagBeli Microfinance (-Rs 460) and NMB Microfinance (-Rs 459). The Manufacturing and Processing sub-index (-11.35%) plunged with contraction in the share value of Bottlers Nepal (Terai) (- Rs 1,318), Unilever Nepal (-Rs 1,207). Similarly, the Hotel sub-index (-11.32 %) decreased with the fall in share value of Taragaon Regency (-Rs 41) and Soaltee (-Rs 21). Likewise, the Commercial Banks sub-index (-10.48%) also plunged by double digits with decrease in share value of key banks including Everest (-Rs 158), Standard Chartered (-Rs 124) and Nabil (-Rs 115). The Finance sub-index (-7.51%) went down with decrease in share value of Progressive Finance (-Rs 56), Reliance Finance (-Rs 29), Manjushree Finance (-Rs 21) and ICFC Finance (-Rs 21). Similarly, the Development Bank sub-index (- 7.42%) decreased with contraction in the share value of Swabalamban Bikas Bank (-Rs 201), Nirdhan Utthan Bank (-Rs 195) and Deprosc Development Bank (-Rs 126). Lastly, the Others sub-index (-6.10%) decreased with fall in share value of Citizen Investment Trust (-Rs 715), Nepal Telecom (-Rs 27) and Hydroelectricity and Investment and Development Company (-Rs 22).

News Highlights

With an aim to stimulate the market, the Security Board of Nepal (SEBON) is planning to introduce favourable market policies. SEBON is in talks with the Finance Ministry to reduce taxes on share trading. Further other priorities of the regulator include introducing institutional investors as market dealers, revising provisions related to margin lending, and adjusting commission for stockbrokers. The Centralised Application Supported by Blocked Amount (C-ASBA) that allows investors to buy primary and rights shares online has been officially launched on February 24. This system aims to reduce the number of days required for share allotment process and minimise hassles for the merchant bankers involved in issuance of shares. As a result of successful implementation of C-ASBA, IPO allotment of Aarambha Microfinance was completed within 36 hours. NEPSE, by revising Securities Listing Bylaw 1996, is planning to introduce new standards for classification of listed companies on stock market into four categories; A,B, G and Z. Currently, NEPSE has categorised better performing companies into Group ‘A’ with no other categories in place. The new classification is expected to promote good governance and transparency among the listed companies. In the public issue front, two hydropower companies Sanjen Hydropower and Rasuwagadhi Hydropower issued shares to members of the Employees Provident Fund, employees of Promoter Companies (i.e. Nepal Electricity Authority, Chilime Hydropower), staff of local bodies of Rasuwa district and employees of lending institutions (Employees Provident Fund). Sanjen Hydropower issued a total of 8.7 million units shares while Rasuwagadi Hydropower issued a total of 16.42 units shares at Rs 100 per share respectively.

Outlook

At the moment, correction of index seems supported by a barrage of bleak economic indicators including increasing interest rate, declining remittance, deteriorating liquidity and negative balance of payment. Nevertheless, anticipation in acceleration of economic activities coupled with positive development in the secondary market such as timely introduction of full-fledged online trading platform and other favourable regulatory revisions are expected to rebound the market in the long term. 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.