Weekly share update: Nepse does the yo-yo act

Kathmandu, July 25:

The secondary market reacted sharply this week and lost 19.54 points to 972.47 points from last week’s closing of 991.91 points.

Nepse, in its four-day session this week, wound up in negative territory for the first three days. The market opened in the red on Sunday as it plunged by 6.67 points to 985.24 points. On Monday, it continued its downslide and closed at 973.30 points — a loss by 11.94 points.

Similarly, on Tuesday, it further plunged by 10.52 points to 962.78 points. However, on Wednesday, the last day of trading in the domestic market for this week as Thursday was a public holiday, it bounced back by 9.69 points to close the weekly trading at 972.47 points.

Though the contribution of A-category companies increased this week to 68.41 per cent, the sensitive index — a barometer of A-category companies — dipped by 8.43 points to 253.75 points from last week’s closing of 262.18 points.

Except development bank and insurance groups, all other groups wound up in negative territory this week. The development group gained 23.56 points to close at 1347.22 points while insurance group gained 5.37 points to 828.58 points from last week’s closing of 823.21 points.

Nepal Credit and Commerce Bank (Rs 51.68 million), Bank of Kathmandu (Rs 32.77 million), Kist Merchant Bank and Finance (Rs 32.70 million), Nepal Investment Bank (Rs 27.58 million) and Standard Chartered Bank Nepal Ltd (Rs 26.16 million) were the top gainers in terms of monetary value this week. Nepal Credit and Commerce Bank topped in terms of numbers

of share units (1,11,000) of its shares traded and the number of transactions, with 255 in the kitty.

Altogether 75 companies of the total listed companies saw their shares traded at the sole secondary market of the country this week. Nepse listed 60,00,000-unit rights shares of Kist Merchant Bank and Finance. But this week too, Nepse did not see any transaction of government and institutional bonds.

Forward P/E

Kathmandu: If you’ve been investing for some time but not getting success, the rule of the thumb to follow is that past results do not guarantee future earnings.

That’s why there is the forward P/E. It evaluates a stock’s price — whether it’s fair, cheap or too expensive and on next year’s earnings. The idea is the same. Take the estimated earnings

for next year and divide by today’s price.

For instance, if a share has P/E of 20 because its last four quarters added up to one rupee in earnings and its price was Rs 20. But, suppose analysts expect earnings to be Rs 1.35 next year. Once again, you divide (Rs 20 /Rs 1.35) and get a forward P/E of 14.8. That seems quite reasonable for a stock with earnings growing that well.

In truth, nothing about a stock is perfectly predictable ahead of time. But looking ahead in earnings is still a more reliable gauge of potential than looking over your shoulder.

Many a value investor has beaten the market because he or she could understand the flaw in treating last year’s earnings as a statement of potential earnings. — HNS