KATHMANDU, DECEMBER 30
The year 2022 was less than favourable for the secondary market, with the Nepal Stock Exchange (Nepse) index plunging by 19.63 per cent in between January 1 and December 29.
A drop in investors' sentiment as a result of a negative view towards the stock market by government authorities followed by introduction of regressive policies, conflicting news over media regarding the market, and high rate of interests as a result of persistent economic pressure in the country at present weighed on the share market, stakeholders say.
Despite the plunge, stakeholders expect positive changes as the economic indicators have witnessed some improvement towards the end of the year, introduction of provisions for the addition of eligible stock brokers and a new stock exchange market, guidelines for proper management of mergers and acquisitions, provision of having 10 per cent quotas on IPOs for migrant workers and an considerable increase in remittance flow over the past few months. The country has received Rs 378.04 billion in remittance in the first four months of the current fiscal year, an increase by 20.4 per cent against a decrease of seven per cent in the same period of the previous year.
Main indices
Opening at 2,524.50 points on January 2, the benchmark index had gone up to 2,891.34 points by February. In March, Sri Lanka witnessed its worst economic crisis, raising an alarm in Nepal that intimidated investors as concerns grew over the country's economy. The benchmark index dropped from 2,547.04 points at the start of March to 2,513.42 points by April before decreasing further to 2,307.00 points at the start of May as effects of Russia-Ukraine war dimmed the global outlook.
The Nepse index stood at 2,130.73 points at the start of June but continued to decrease at a steady pace to 2,028.77 points in July, even though the Monetary Policy for 2022-23 scrapped the limit of the margin loan up to Rs 40 million from a single BFI, but it gave continuity to the cap of Rs 120 million to seek loans from multiple BFIs to buy shares.
In August, the NRB scrapped the credit to core capital plus deposit (CCD) ratio rule with the CD Ratio for the bank and financial institutions (BFIs) followed by Nepal Banker's Association's announcement to cancel 'Gentlemen's Agreement' in October, which further affected share investors' sentiment.
The index which stood at 2,196.25 points at the beginning of August dropped below the 2,000-point threshold to 1,972.29 points before falling further to 1,853.76 points at the start of October.
However, Securities Board of Nepal (SEBON)'s initiative to introduce new provisions regarding additional stockbrokers, a second stock exchange, among others, helped prop up the market sentiment and the benchmark index rose to 1,878.88 points in November-end and further to 2029.03 points on December 29 on positive political cues.
The sensitive index, which measures the performance of class 'A' stocks, also dropped by 79.93 points or 16.96 per cent from 471.24 points at the start of January to close at 391.3 points in the review period.
The float index that gauges the performance of shares actually traded also fell by 30.77 points or 17.78 per cent to 142.22 on December 29.
Subgroups
All the subgroups landed in the red during the review period, with insurance leading the pack of losers. Life insurance subgroup plunged by 29.06 per cent or 4,130.33 points to 10,080.54 points. Close on its heels was non-life insurance, which slumped by 28.55 per cent or 3,315.33 points to 8,294.75 points.
Trading fell 25.83 per cent or 678.91 points to 1,949.54; manufacturing and processing lost 24.04 per cent or 1,647.95 points to 5,206.19 points; others dropped by 20.23 per cent or 393.87 points to 1,553.46 points; investment was down 20.17 per cent or 15.68 points to 62.05 points.
Similarly, banking fell by 19.76 per cent or 336.34 points to 1,365.78 points; hydropower dropped by 18.19 per cent or 501.27 points to 2,254.66 points; finance was down 17.35 per cent or 360.13 points to 1,714.94 points; and development banks lost 14.80 per cent or 625.50 points to 3,599.58 points.
Microfinance, mutual funds and hotels and tourism subgroups managed to limit their losses to less than 10 per cent.
Microfinance fell by 8.29 per cent or 405.58 points to 4,486.67 points; mutual funds landed at 13.72 points, down 1.21 points or 8.10 per cent; hotels and tourism closed at 2,870.58 points on December 29, a drop of 152.77 points or 5.05 per cent compared to the start of the year.
Market capitalisation
The total market capitalisation of the country's sole secondary market had stood at Rs 3.57 trillion when the market opened for trading in January. It had decreased by 17.93 per cent to stand at Rs 2.93 trillion by the time the market closed for the day on December 29.
Daily turnover
The average daily turnover in the year 2022 stood at around Rs 2.26 billion. The lowest daily turnover was on October 23 when total traded amount stood at just Rs 51.68 million.
That was right before the share market closed for the Tihar holidays. The daily turnover was highest in the week of January 9 to 13, when it averaged at Rs 7.13 billion.
Timings
After the government announced a two-day weekend - Saturday and Sunday - would come into effect from May 15, Nepse also followed suit. But when the government revoked its decision of public holiday on Sundays, Nepse announced it would be operational for six days a week effective from June 15. However, the Friday trading was cancelled from the week of September 18 in view of lukewarm response from the share investors.
18 pc population involved in Nepse
According to the data provided by the CDS and Clearing Ltd, as many as 5.48 million people have opened a demat account, 4.57 million are registered in MeroShare, 2.7 million have participated in initial public offerings (IPOs) while 1.4 million are registered in the online trading system. As of the last day of the year 2021, there were altogether 4.78 million demat accounts in the country, while 3.89 million had activated their MeroShare accounts.
Looking ahead
According to Chhote lal Rauniyar, former president of Nepal Investors Forum, the investor sentiment over the market has become stronger compared to before as a result of newly introduced provisions and guidelines by the authorities alongside some improvement in the country's economic activities.
He also opined that the reappointment of Bishnu Prasad Paudel as the minister for finance, improvement in economy compared to past and increased collaboration among the private sector are likely to improve the market situation in the coming months.
"As necessary provisions for the market's development, including introduction of a second stock exchange, is positive and welcomed by investors, the market is likely to take an upward trend. As many works related to the development of the market are still in their early phases we are likely to see a steady growth in the coming year."
Another financial analyst and adviser also opined that the liquidity situation will improve as remittance flow into the country increases.
"The secondary market has remained volatile due to lack of liquidity in the country. However, if remittance flow continues to improve and eases the liquidity situation, the secondary market will also witness significant growth within the first few months of the next year," he said.
A version of this article appears in the print on December 31, 2022, of The Himalayan Times.
