beed’s take on the market – december issue 2017

During the review period (October 18 to November 23), the Nepal Stock Exchange(NEPSE) index nosedived by 88.09 points (-5.62%) and slipped below the long term support level of 1,500 points to close at 1,480.26 points. The secondary market witnessed a turbulent month; the index started off with a downward spiral and slipped to 1,460.73 points on November 9, the market showed some recovery to hover back above 1500 points nonetheless, market has continued with its downward momentum. During the review period, except the two sub-indices, namely Others sub-index and Hydropower sub-index all the other sub-index landed in red zone. The Hotels sub-index (-14.14%) led the pack of losers with the decrease in share value of Oriental Hotel (-NPR 258), Soaltee Hotel (-NPR 98) and Taragaon Regency Hotel (-NPR 7). Likewise, the Development Bank sub-index (-9.62%) decreased as the share value of Swabalamban Bikas Bank (-NPR 347), Nirdhan Utthan Bank (-NPR 150), Deprosc Development Bank (-NPR 140) and Excel Development Bank (-NPR 104) went down. Similarly, Insurance sub-index (-7.44%) followed the suit as the share price of Siddhartha Insurance (-NPR 361), Prudential Insurance (-NPR 328), Sagarmatha Insurance (-NPR 300) and Prabhu Insurance (-NPR 295) plunged. The commercial Bank sub-index (-6.08%) decreased with downward spiral in the share value of key banks such as Standard Chartered Bank (-NPR 131), Nabil Bank (-NPR 111), Nepal SBI Bank (-NPR 84) and Everest Bank (-NPR 76). Similarly, the Finance sub-index (-5.71%) decreased as share value of Janaki Finance (-NPR 36), Reliance Finance (-NPR 22) and Goodwill Finance (-NPR 19) went down. Likewise, the Manufacturing and Processing sub-index (-3.48%) shed value with the slump in the share price of Bottlers Nepal (Terai) Limited (-NPR 650). Nonetheless, the Others sub-index (+4.93%) saw an upward trend with increase in the share value of Nepal Telecom (+NPR 49).The Hydropower sub-index (+0.25%) also managed to increase marginally with increase in share value of Arun Kabeli power (+ NPR 14).

News Highlights

With the view of making the merchant banking business fair and transparent, Securities Board of Nepal (SEBON) has restricted merchant bankers from working as issue managers and underwriting of their parent companies. Meanwhile, SEBON has also started preparations to regulate the commodity market as it plans to introduce Commodity Market Exchange soon. A minimum capital requirement of Rs 50 crores has been set by the board for the operation of the exchange wherein an individual investor can hold up to 5% of ownership and foreign strategic partners can hold maximum 51% ownership. NEPSE has added a new sub-index for microfinance companies which was previously grouped under the Development banks sub-index so as to determine the real value of development banks as well as microfinance companies. After this separation, 38 listed development banks fall under the development sub-group while 33 listed microfinance companies fall under microfinance sub-group. SEBON has approved “Centralised ASBA Directive, 2074” presented by CDS & Clearing Ltd. which is expected to bring uniformity in the process of applying for public issues across all registered ASBA members. Meanwhile, all the processes will be done centrally through CDS & Clearing Ltd. which will substantially reduce the time required for collecting applications, verifying bank and BOID accounts, filtering duplicate applications, and presenting final details for allotment enabling shares allotment to be completed within 15 days. Meanwhile, SEBON has issued a circular to allow stock brokerage firms to provide margin lending service to their customerssubject to the directive of ‘Margin lending Facility 2074’. SEBON has also directed NEPSE and brokerage firms to formulate a working procedure regarding the same. With the view to make the process of applying rights shares easier and accessible, SEBON has urged all merchant bankers and ASBA approved members to develop a process of applying rights shares through ASBA process. Further, the board has also directed the concerned authorities to implement auction of unclaimed rights share in major cities namely Biratnagar, Birgunj, Pokhara, Butwal, Nepalgunj, Surkhet and Dhangadhi.

Outlook

The market remained highly volatile during the review period. The investors’ sentiment was observed to be low due to unimpressive results of financial institutions for the first quarter of the current fiscal year. Moreover, with federal and provincial elections around the corner, investors might be waiting for post-election stability in the country. Once the elections are successfully completed, the market is expected to rebound in the days ahead. 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.