Nepal | September 28, 2020

Excess supply exerts pressure on country’s sole secondary market

Himalayan News Service
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Kathmandu, September 9

The Nepal Stock Exchange (Nepse) index dropped by 1.61 per cent or 25.48 points in the trading week between September 3 and 9. The market remained open for just three days out of the normal five trading days. It remained closed on Sunday and Tuesday as the country observed Bakar Eid and Indra Jatra festivals, respectively.

Over the three trading days, the secondary market fell to 1,554.55 points. The benchmark index had opened at 1,580.03 points on Monday morning and had dropped to 1,554.56 points by the time of closing. However, the market went up to 1,566.5 points on Wednesday before retreating to 1,554.55 points on Thursday.

Market analysts believe excess supply of shares to be the prime reason for the decline in the secondary market. “The supply has outpaced the demand of shares in the share market, which is the major reason for the index declining,” said Dhruba Timilsina, chief executive officer of Siddhartha Capital.

He also said that investors have already speculated the returns from the market. This means that declaration of bonus and rights shares cannot attract investors.

According to Timilsina, banks and financial institutions had unveiled their capital plan two years ago, which helped investors to calculate possible returns and share price of companies have gone up already.

“With the increment of paid-up capital, banks and financial institutions have been able to increase their profit. However, earning per share is not growing. This is another reason for the drop in the market at present,” he informed.

During the review period, the sub-index of manufacturing slipped by 3.4 per cent or 90.61 points to close at 2,574.39 points. The subgroup was weighed down by share price of Himalayan Distillery slumping by 9.66 per cent to Rs 1,346.

Likewise, the sub-index of class ‘A’ financial institutions fell by 1.70 per cent to 1,339.18 points. Share price of commercial banks like Nabil dropped by 1.47 per cent to Rs 1,675 and Janata fell by 3.83 per cent to Rs 251.

Insurance sector sub-index also retreated to 8,658.4 points, with a drop of 2.22 per cent or 196.34 points. Share price of Rastriya Beema Company closed at Rs 15,820, down 4.18 per cent.

Likewise, sub-index of hydropower sector closed at 1,785.16 points, declining by 40.43 points or 2.21 per cent. Similarly, hotels sector also closed at 2,378.06 points, down 2.37 points or 0.09 per cent.

Sub-indices of development banks and finance companies landed in the red in the week. Finance fell by 8.26 points or 1.04 per cent to 782.31 points and development banks rested at 1,985.91 points, down 20.98 points or 1.04 per cent.

The sub-index of others sector inched up by 0.29 point or 0.04 per cent to 716.1 points, while the trading sector remained unchanged at 214.11 points.

Altogether, 4.45 million shares of 171 companies worth Rs 2.41 billion were traded through 25,860 transactions during the week. The traded amount was 32.24 per cent less than the total weekly turnover of the previous week.

Nepal Investment Bank secured the top position in terms of total turnover with Rs 123.12 million. It was followed by Nabil Bank with Rs 104.65 million, Nirdhan Utthan Bank with Rs 92.12 million, Nepal Life Insurance Company with Rs 80.07 million and Nepal Investment Bank (Promoter Share) with Rs 72.13 million.

Gurans Life Insurance Company topped the list in terms of trading volume, with 175,000 of its shares changing hands and Himalayan Power Water Partner was the forerunner in terms of number of transactions with 2,676.

New listings

Company Type Unit
Kalika Microcredit Bonus 325,000
Purnima Bikash Bank Rights 814,051
Sahayogi Bikash Bank Rights 1,101,135

A version of this article appears in print on September 10, 2017 of The Himalayan Times.

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