Stock Market

Sustained Growth

-By: Jagdish Agrawal

Positive signals are there behind the increase. First of all the volume has positive elasticity with the price index and secondly, the almost constant supply of bank and other blue chip shares do not match with the increasing demand for these shares. Previously, the players in the stock exchange were only individuals. But the situation is now changed with some of the finance companies and cooperative finance companies also participating. However, they are investing in blue chips only. Another positive signal is that some of the big trading and export houses also are taking part in the market.

The daily average traded volume in Magh, 2056 (Mid-January-Mid-February, 2000) is lower than the average of previous fiscal year (2055-56) that ended in mid-July 1999. But that was due to a big deal of Bank of Kathmandu during the previous year. The traded volume during Magh, 2056 is 3.68 times higher than the figures of corresponding month of previous year, which is a better indicator of the trend. Moreover, the trading of this month is higher by 40% of the trading of the previous month. The increase is mainly due to increase in the volume of the banking sector, which was registered at 79% above that of the previous month.

The NEPSE index moved up from 216.92 points as of opening day of the year to 285.3 as of the closing of Magh, 2056. The main movers were banking, insurance and finance sectors.

Heavy trading was noted in Bank of Kathmandu amounting to Rs. 21.34 million during Magh, 2056, followed by Grindlays Bank (Rs. 10.01 million). But Nabil bank was also not far behind with total volume of Rs. 9.92 million.

Nepal Bank, which was recognized by an analyst some time back as a sleeping giant, seemed to awaken. Its price climbed to Rs. 361 from Rs. 335, but could not be sustained due to the lack of support from the investors, and fell back to Rs. 330. Nepal Bank does not provide the quarterly financial information. The latest annual accounts are available for 1996/97 only. That is why it cannot gain confidence of the investors.

One sided bull position was prevailing in the market for most of the joint venture banks. (See table)

The number one in the race was Bangladesh Bank securing 27.61% increase in prices, followed by Bank of Kathmandu securing 22.67% increase. However, Himalayan Bank was also not behind in the progress. The closing price before the book closure for this bank’s seventh AGM was Rs. 1700. The declaration was 4:1 bonus and 35% dividend. The ex-bonus opening price was of Rs 1500, but it could not sustain and dropped to Rs. 1350. The situation later improved closing at Rs. 1695 as on March 5.

The skyrocketing prices of bank shares are not speculative, but based on certain information that the operating profits of some of the banks are increasing.

The insurance and finance sectors also are following the bull trend and thus, the prices were skyrocketing. The notable increase were seen in these scrips : NLGI (Rs. 565 - Rs. 600), United Insurance (Rs. 188 - Rs. 191), Everest Insurance (Rs. 250 - Rs. 297), Premier Insurance (Rs. 161 - Rs. 195), Kathmandu Finance ( Rs. 150 - Rs.170), HISEF (Rs. 112 - Rs. 120) and Peoples Finance ( Rs. 155 - Rs.175). As full information on business of this sector are not made available, the price increase seems to be speculative to an extent.

However, the prices of Nepal Insurance and Rastriya Beema Sansthan (RBS) were slipping from the top of Rs. 660 and Rs. 1265 to Rs. 625 and Rs. 1240 respectively. The expectation of bonus for this year is not confirmed for Nepal Insurance. Hence the downslide in price.

In hotel sector, the prices of Taragaon Regency Hotel slipped from Rs. 116 to Rs. 110 at the lowest during the month. But it recovered later due to more demand triggered by official publication of a news item that the commercial operation of the hotel would commence during April. The news pushed the price up to Rs. 200 as on March 3. The shares of Hotel Soaltee maintained their continuous upward trend and touched the point of Rs. 150 from Rs. 125.

Agrawal, a Chartered Accountant, is former president of Nepal Stock Brokers Association and one of the leading stock brokers in Nepal Stock Exchange

Daily Average Traded Volume

( Rs. in hundred thousands )

NB: Magh = Mid-January to Mid-February

Poush = Mid-December to Mid-January
2054-55 = 1997-98
2055-56 = 1998-99
2056-57 = 1999-2000

 Movement in Bank Scrips

(During the month of Magh, 2056)

Operating profits of Banks

(Rs. in million)

(Annualized)

Source: Information published by banks
* EPS calculated on the basis of latest figures available and annualized.

Share Price in Nepal Stock Exchange

(Closing Price Only)
(Rupees per share)

NB: Blank Cells indicate that the respective scrips were not traded on that day

Movement in Nepase Index
(Base: February 12, 1994=100)
Source: Information published by Nepal Stock Exchange Ltd.

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