Beed’s take on the market – february 2018

During the review period of December 20, 2017 to January 17, 2018, the Nepal Stock Exchange (NEPSE) index plunged by 77.95 points (-5.25%) and closed at 1,406.52 points. The stock exchange went through a drop in the index below 1,400 points on the last day of the year 2017, lowest in the last 10 months. The selling pressure in the stock market mounted as the banking sector increased their fixed deposit interest rates amidst liquidity crisis. Likewise, the delay in formation of the government has also demotivated investors. The total trading volume during the period decreased by 22% and stood at Rs 7.8 billion. During the review period, all sub-indices landed in the red zone. The Others sub-index (-12.15%) led the pack of losers with decrease by double digit in share value of Citizen Investment Trust (-NPR 125), Nepal Telecom (-NPR 114) and Hydroelectricity Investment and Development Company (-NPR 13). The second biggest loser is Development Bank sub-index (-7.77%) with slump in share values of Nirdhan Utthan Bank (-NPR 1,023), Summit Microfinance Development Bank (-NPR 449), Green Development Bank (-NPR 354) and Deprosc Development Bank (-NPR 257). Likewise, the Hydropower sub-index (-7.52%) followed the suit with decrease in the share values of Sanima Mai Hydropower (-NPR 89), Chilime Hydropower (-NPR 59), Api Power (-NPR 59) and Butwal Power Company (-NPR 41). Similarly, the Microfinance sub-index (-5.61%) went down with decrease in share value of Janautthan Samudayic Microfinance (-NPR 770), Naya Nepal Microfinance (-NPR 684), Kisan Microfinance (-NPR 549) and Nerude Microfinance (-NPR 206). This was followed by Insurance sub-index (-5.31%); the top losers in this index were Rastriya Beema Company (-NPR 961), Everest Insurance (-NPR 762), Premier Insurance (-NPR 136) and Prime Life Insurance (-NPR 121). The Finance sub-index (-4.37%) shed value with the decrease in share values of Janaki Finance (-NPR 57), Pokhara Finance (-NPR 37), Guheshowori Merchant Bank & Finance (-NPR 22) and Arun Finance (-NPR 20). Likewise, Commercial bank sub-index (-3.90%) followed the suit as the share values of key banks such as Standard Chartered Bank (-NPR 1,113), Everest Bank (-NPR 252), Himalayan Bank (-NPR 186) and Nabil Bank (-NPR 116) went down. Also, Manufacturing and Processing sub-index (-2.93%) shed value with decline in share values of Unilever Nepal (-NPR 1,044) and Bottlers Nepal (Terai) (-NPR 742). Finally, Hotels sub-index (- 0.67%) slumped marginally with fall in the share values of Oriental Hotels (-NPR 25) and Taragaon Regency Hotel (-NPR 3).

News Highlights

Nepal Stock Exchange (NEPSE) has notified that Citizen Investment Trust (CIT) will now be moved from Finance category to the Others category. This move has been taken by NEPSE as the nature of CIT is different from the existing Finance companies. In the public issue front, the market witnessed three IPOs and one FPO. Unnati Microfinance issued IPO of 165,000 units worth Rs 16.5 million. The total collection of IPO was around Rs 800 million. Likewise, NIC Asia Growth Fund floated 100 million unit shares worth Rs 1 billion at par value of Rs 10 per unit. ICRA Nepal had assigned AMC Quality 3 indicating adequate credit quality rating on management quality. Citizen Mutual Fund-1 issued 7 years closed end fund of 100 million unit shares worth Rs 1 billion at par value of Rs 10 per unit. Similarly, Premier Insurance Company (Nepal) issued FPO of 659,565 units worth Rs 526.9 million at Rs 799 per unit. The total collection of FPO was around Rs 3.22 billion. ICRA Nepal had assigned Grade 3+ to the FPO indicating average fundamentals.

Outlook

As the bearish trend in the market has kicked in, a lot of selling pressure was observed in the market during the review period. This trend is expected to continue in the near future as the Banking and Financial Institute (BFIs) are offering higher interest rates luring investors to park their money in banks. Also, the charm of investors’ towards BFIs stock are fading after they have fulfilled their increased paid-up capital which earlier were announcing frequent bonus and right issues to meet the stipulated requirement. In addition, investors seem to be in wait and watch mode due to ongoing political transition and uncertainty surrounding the implementation of federalism post-elections. 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.