September: Beed’s take on the market

During the review period of September 4 to September 27, the Nepal Stock Exchange (NEPSE) index decreased by a whopping 139.57 points (-7.08%) to close at 1,831.05 points. The market started with as high as 1,977.30 points on September 4 but it gradually declined thereafter. Low investor confidence, high selling pressure amidst the festive season as well as a spillover from the previous review period to book profits have been notable factors behind the decline of the secondary market. As a result, the overall market volume during the review period decreased significantly by 71.35% with a total transaction of Rs 17.975 billion only.

During the review period, all sub-indices landed in the red zone showing signs of selling pressure across the sub-sectors. Hydropower sub-index (-13.28%) was the biggest loser as share value of Arun Kabeli (-Rs 76.8), Radhi Bidyut Company (-Rs 67) and Nepal Hydro Developers (-Rs 66) decreased substantially. Others sub-index (-11.43%) was second in line with decline in the share prices of Citizen Investment Trust (-Rs 181) and Nepal Telecom (-Rs 102). Finance sub-index (-10.10%) followed suit with fall in the share prices of Goodwill Finance (-Rs 67.3), ICFC Finance (-Rs 63.9) and Best Finance (-Rs 52). Likewise, Microfinance sub-index (-8.19%) also declined as share value of RMDC Microfinance (-Rs 383.9), Asha Microfinance (-Rs 193.1), and Samudayik Microfinance (-Rs 176.1) went down.

The Development Bank sub-index (-7.33%) went down as share prices of Sindhu Development (-Rs 41.5), Corporate Development (-Rs 38) and Lumbini Development (-Rs 30.8) decreased. Hotels and Tourism sub-index (-6.68%) also declined with drop in the share value of Oriental Hotels (-Rs 48), Taragaon Regency (-Rs 13.5) and Soaltee Hotel (-Rs 13). Similarly, Life Insurance sub-index (-6.22%) witnessed a plunge in the share prices of Asian Life Insurance (-Rs 130), Nepal Life Insurance (-Rs 72) and National Life Insurance (-Rs 5). Non-life Insurance sub-index (-6.04%) faced a slump with the fall in the share value of Rastriya Beema (-Rs 1,399.99), Shikhar Insurance (-Rs 65) and Nepal Insurance (-Rs 61). Manufacturing & Processing sub-index (-6%) followed suit with decline in the share value of Bottlers Nepal (-Rs 1,340.50), Unilever Nepal (-Rs 600) and Himalayan Distillery (-Rs 160). Lastly, Commercial Bank sub-index (-3.13%) also lost value with marginal decline in share prices of Sunrise Bank (-Rs 16.9), Nepal SBI Bank (-Rs 15.5) and Prime Commercial Bank (-Rs 15).

News and Highlights

Until now, the Nepal Stock Exchange (NEPSE) has been working as the only regulator of securities in Nepal. However, given the increasing volume of stock trading in recent days, stakeholders have been requesting to issue a license to a new market player. Towards this, the Securities Board of Nepal (SEBON) is working to issue license to a new stock exchange company and brokers, and has requested applications for the establishment of a new stock exchange company, commodity exchange and stock brokers. The minimum paid-up capital for the new stock exchange company and new broker license have been set at Rs three billion and Rs 200 million to Rs 1.5 billion. Under this, those brokers who provide limited services of stock market transaction will be required to have a minimum capital of Rs 200 million to acquire the broker license. Those brokers who provide share transaction, depository participant, investment consultancy and other similar services will have to abide by the capital requirement of minimum Rs 600 million. Similarly, a minimum capital requirement of Rs 1.5 billion will have to borne by the third type of stock dealers.

While applications for commodities and stock exchanges must be submitted in 45 days, the application for stock brokers must be submitted in 30 days. Previously, SEBON had requested applications for commodity twice but failed to grant any license. However, this time, it is adamant on issuing the license to those who can meet the criteria set by the board.

On the public issues front, SEBON has added the IPO of one hydropower and one manufacturing and processing company in its pipeline. These are Modi Energy worth Rs 725 million along with Sonapur Mineral Oil at Rs 1.23 billion. The issue managers for the IPO issuance of the two companies are Sunrise Capital and NIBL Ace Capital respectively.

Outlook

The last two review periods have revealed that investor confidence has been eroding as a result of increased selling pressure in the market with rising long-term interest rates in contrast to how the new fiscal year started on a bright note with rising NEPSE index. The upcoming festivities have further increased selling pressure. Nevertheless, investors are optimistic that the market is likely to rebound as economic activities are likely to pick up post festivities. Further, the recent issuance of Private Equity Licenses is expected to strengthen the overall market.

This is an analysis from beed Management. 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.

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