Nepse records slender growth

April 30, 2017

The Kathmandu Post, Post Report, 30th April 2017, Kathmandu

The announcement of the country’s economic growth rate failed to lift the sentiment of stock investors, as uncertainty loomed over the government’s ability to hold local polls within the scheduled dates.

Late on Tuesday, the Central Bureau of Statistics (CBS), the government’s statistics agency, said the country’s economic growth rate is projected to hit a 23-year high of 6.9 percent this fiscal year. This news, however, failed to cheer stock investors, as the Nepal Stock Exchange (Nepse) index dipped 2.08 points to close at 1670.3 points on Wednesday. 

A portion of this loss was recovered on Thursday, the last trading day of the week, as the index rose by a marginal 0.32 point. With this gain, the stock market, which opened for the week at 1658.34 points on Sunday morning, closed for the week at 1670.62 points--up 12.28 points, or 0.7 percent.

“Lately, the market has been looking for some clarity on the political front, especially on local level elections,” said Deepesh Vaidya, managing director of Kriti Capital & Investments. “So, the government’s ability to hold local polls within the scheduled dates will determine stock market’s movement.”

The government is holding local elections in two phases on May 14 and June 14. These local polls are the first in almost two decades. But many are not sure whether these elections would be held on time, as many political parties have not made much preparation even when only two weeks are left for the first phase of voting to take place.

“These polls are important because they will help Nepal move beyond the transitional phase in politics [which began since the Maoist insurgents joined mainstream politics in 2006],” said Vaidya. “Successful elections will also help the country to focus on economic agendas, which will help the market to grow.”

Vaidya was trying to drive home the point that the market is currently looking for an element of certainty, which could help investors to change their perception.

Nepse’s trading data this week showed that the top performing sector was insurance. The sub-index grew 4.2 percent over the week as investors thronged to purchase shares of insurance companies. 

Demand for shares of insurance companies has been soaring since the insurance sector regulator directed life insurers to raise minimum paid-up capital to Rs2 billion and non-life insurers to maintain a minimum paid-up capital to Rs1 billion by mid-July 2018. At present, minimum regulatory paid-up capital requirement for life and non-life insurance companies stands at Rs500 million and Rs250 million, respectively.

Other sectors that saw buying pressure were finance companies, hotels and development banks.

On the contrary, the sector that saw biggest selling pressure was commercial banks. Commercial banks, which account for more than 50 percent of the stock market capitalisation, shed 9.91 points, or 0.65 percent. 

“Lately, investors are more interested in stocks of insurance companies and smaller financial institutions like finance companies along with development banks. This has reduced demand for shares of commercial banks, hence the fall,” said Vaidya. 

Because of the fall in commercial bank sub-index, the sensitive index lost 0.82 point, or 0.2 percent, over the week to close at 357.21 points on Thursday.

This week, stocks of 156 companies were traded on Nepse. These companies saw transaction of stocks worth Rs5.7 billion, up 9.9 percent from the previous week. 

In terms of trading volume, Prabhu Bank topped the list this week, recording share transaction of Rs239.2 million during the week, followed by Prime Life Insurance, which registered share transaction of Rs236.4 million, and Siddhartha Insurance, which saw share trading of Rs199.8 million. 

With all these trading and moderate hike in Nepse index, the value of all the stocks listed on Nepse rose by Rs24.7 billion, or 1.3 percent, to Rs1,936.9 billion.