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Kathmandu Saturday August 26, 2000 Bhadra 10, 2057.
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Investors run for banking shares
NEPSE swings record 42 point within a week
By a Post Reporter
KATHMANDU, Aug 25 - Nepal Stock Exchange (NEPSE) Index registered a record 42
point swing in the last one week and touched 416.94 when market closed Friday.
The Index also registered a record single day rise Friday by bouncing 10.88
point. The stock market is cheering rise in the price of commercial bank’s shares.
During the last one-week alone, banking sector index has increased by a record 46.7 point
touching 472.04 Friday.
Investors are exuberantly running after banking sector share, especially of
the banks with a paid-up capital below 500 million rupees. According to Nepal Rastra
Bank’s guidelines, all the commercial banks operating at a national level are
required to upgrade their paid-up capital to 500 million rupees by the end of the current
fiscal year. As many commercial banks are trying to meet this obligation by offering bonus
shares and issuing rights shares, investors are trying to tap the opportunity.
There are indications that the investors are channeling their deposit for
investment in shares. Even some finance companies are indirectly investing in the banking
sector share though the standing regulations prohibit them from such practice, says an
official at the Nepal Stock Exchange on condition of anonymity. Such investment has
greeted the investors with rich dividend. Take, Everest Bank Limited, for instance. The
share price of the bank has shot up from 1080 rupees to 1425 rupees after it announced
bonus and rights share offers. Other banks have benefited equally as the investors
anticipate windfall gain from the banking sector in near future. Almost all the
banks’ share prices have increased substantially in the one-week. (See table for
change in commercial banks’ share prices)
Dambar Prasad Dhungel, Chairman of Security Board, the regularity body of the
stock market, says it is not only the rights and bonus share offers by the commercial
banks that is pumping in investment in banking sector share. "Since the market is
flushed with liquidity and there is no investment opportunity, the pressure is naturally
on the lucrative banking sector," says Dhungel. He also urges for a need to closely
monitor this unprecedented boom in the share prices and adding, "we should cautiously
watch how real the boom is."
Pramod Bhattarai, Deputy Manager at the Stock Exchange, however, argues that
there is little chance that the present rise in the share price is a bogus one.
"Unlike in the mid-1990s, there is a little chance that the present stock bubble is
an artificial, and by extension, unsustainable one", he says.
"In earlier case, share price of all the
sectors had increased exorbitantly. Now the investors have become cautious and selective
concentrating their investment only on profitable sector," argues Bhattarai.
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