• Index at all-time high of 1,838.49 points
• Daily share transaction hits Rs 2.24 billion

Kathmandu, July 25

Total value of shares of firms listed on Nepal Stock Exchange (Nepse) today surged past Rs two trillion mark for first time in country’s history, as the stock index jumped by 39.66 points, or 2.2 per cent, on the back of higher demand for stocks of almost every sector, except hydropower.

Nepse opened at 1,798.83 points today and closed at fresh peak of 1,838.49 points. With this, market capitalisation of Nepse stood at an all-time high of Rs 2.02 trillion.

“The stock market is setting new records lately, as there is no short-term risk — albeit there are concerns about long-term prospects of the market. So, many investors are making speculative bets, as they are under the impression that prices of shares bought today will go up by tomorrow,” Deepesh Vaidya, managing director of Kriti Capital and Investments Ltd, said.

Also, the decision of the Securities Board of Nepal, the securities market regulator, to slash brokerage fee on securities transaction by up to 60 per cent played a positive role in lifting the market, as investors had more money at their disposal to invest in shares.

With reduction in broker commission — which officially came into effect today — share transaction amount rose to all-time high of Rs 2.24 billion today. Today, all sub-indices, except hydropower, ended in green, with stocks of commercial banks, development banks and insurance companies leading the rally.

“Investors are upbeat about shares of financial institutions and insurance firms, as fourth quarter results published by some of these firms look pretty impressive,” Vaidya said.

So far, three mid-sized commercial banks have published their fourth quarter financial results. And all of them have booked profit of over Rs one billion.

“Investors are expecting other banks and financial institutions to come up with similar results, hence growing interest in stocks of these companies,” Vaidya said. “Also, many investors are well aware that banks and financial institutions (BFIs) will have to issue more of bonus and rights shares to meet new minimum regulatory capital requirement within fiscal-end. So, there is growing demand for stocks of these companies.”

The regulatory requirement for BFIs to raise minimum paid-up capital is also pushing up share prices of small finance companies and development banks, as many are expecting these firms to be acquired by bigger financial institutions, according to Vaidya.

As demand for shares of almost every company went up today, stock prices of microfinance institutions, which had started taking a dip, are also on a path to recovery.

Shares of microfinance institutions had started taking a beating after the central bank, through new Monetary Policy, fixed interest spread of seven per cent. This meant funds borrowed by microfinance firms at, say, five per cent interest, could not be extended to borrowers at interest rate of over 12 per cent. This meant microfinance institutions would have to lower lending rates, reducing their profits.

“Lately, rumours that central bank won’t be so tough on microfinance institutions are doing the rounds. This is because central bank has been coming up with policies to promote microfinance institutions and many believe banking sector regulator won’t do something that can be detrimental to sector,” said Vaidya.