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October, 2002 |
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Stock Taking |
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October Outlook by
Atma Ram Ghimire Despite
the lack of institutional investors, the stock market in Nepal has good
confidence of the general investors. This is proved by the response that
the public offering by some companies received during the recent past.
The public has the interest and capacity to subscribe the shares in
primary market. NLIC, ILFC, LIC, Shree Investment Finance company Ltd.,
Janaki Finance Company, Gorkha Finance, Sri Lanka Merchant Finance
Limited, SBI (right shares), Himalayan Bank (debenture), Everest Bank
(preference share) were offered to the public and all of them were
oversubscribed. Now, Nepal Investment Bank has issued right shares and
one can expect reasonably that this offer too will be definitely over
subscribed. There was not abundant
fund available to apply for shares in the recent days. In the past there
used to be loan available for this purpose from finance companies. They
used to finance up to 90 per cent of the amount needed for the
application. Though there were applications backed by loan money also
for almost all of these new issues, those applications were made by the
“unorganized primary issue traders”, who make 500 to 1000
applications per person by collecting citizenship certificates of a
number of other people. The actual number of such applicants is however
limited to about 50. Because of these players, the number of
applications becomes very high and disbursed across various rural and
urban areas. But the fact is that all of application firms are filled in
and/or signed by a few persons. Current Market Trend The market at present has
neither activity nor optimism. The volume of the business is very low.
Both of Nepal Stock Exchange and the brokers have lost the strength to
earn income. All of the companies are losing their prices. Nepse index
has reached 218.48, which is the lowest over the last three months. The stagnant economy
caused by political instability and violence in the country has been the
major reason for the pessimism in the market. Still more important
reason is the lack of institutional investors in the secondary market.
The structure of our market is very much unbalanced with a heavy
weightage of banks and financial institutions. Without the strong
industry and business activities, these institutions will eventually
become weak, which will result into less profitability and lower prices
in the secondary market. Currently, the most highly
priced stock is that of Standard Chartered Bank Nepal Ltd. This too has
lost its price from Rs. 1760 to Rs. 1665 and it is likely to fall down
further. However, most of the prices in the secondary market are still
very attractive. Especially Nepal Lever Limited at Rs. 1300 is a very
good purchase. Same in the case with Himalayan General Insurance at Rs.
200 and Lumbini Finance at Rs. 150. With current market trend, these
prices may fall a little bit, but they are still worth these prices. One
must not forget the principle: “If price falls, buy more”. Investors
in the secondary market should not be tied too much to the situations in
other areas in the country. The situations will take certain turns for
stability at certain times. Therefore investors should not lose
optimism. The market will remain
between 210-220 (Nepse index) this month (October 2002) and there will
be lesser volume of business due to the festivals. (Ghimire is a stock analyst) |
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| Editorial | Business News | Biztoon
| Economy & Policy | No
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