Stock Taking

by Rabindra Bhattarai

The annual budget for the fiscal year 2004/2005 has overlooked the importance of development in Nepali capital market. It again talked about increasing the efficiency of the stock market as was stated in the previous year’s budget. But no new program has been introduced to increase the efficiency of an old-aged open out cry and paper based system.

The promise of the government to list the government bond in the stock exchange for the easy access to the general public has not yet been fulfilled. This will not help to fulfill the ambitious objectives of the tenth plan to increase the dealing amount to Rs. 12 billion and market capitalization to 15% of GDP.

Annual budgets are important strategies for meeting the long-term objectives of periodic plans. But the annual budget 2004/05 lacks the appropriate strategies for meeting the objectives of 10th five-year plan. Moreover, the budget could not go for expansion of centralized stock exchange into regional stock exchange, implementation of electronic trading system as well as the electronic transfer of ownership though these programs are mentioned in the tenth plan.

Little initiation could be a great step towards the achievement of the tenth plan objectives because the overall statistics of Nepali stock markets for the first eight months of the fiscal year 2003-04 show an increasing trend over the same period in the previous fiscal year 2002-03. This momentum needs to be maintained by proper policy support.

Listed companies, number of transactions, transaction amount, number of shares traded and market capitalization have increased by 13%, 12.44%, 0.3%, 14.29%, 10.27% respectively over the eight months in the previous fiscal year.  These growths are expected to be higher during the fiscal year 2003-04 and in the coming year.

These statistics show that the size of Nepali Capital Market is increasing day by day. The increase in volume of shares traded, no of transactions, transaction amount all indicate the increasing participation of investors in the secondary market. To increase this participation even more, the government had to bring new strategies. Moreover, the issuance of new shares in the market is also increasing day by day and government owned big companies are going public. Listing of these scrips will definitely increase the volume of transaction as well as overall activities.

If the initiatives necessary for developing the efficiency in the market are not taken very soon, neither the government will achieve its objectives nor the stock exchange be able to avoid imminent disaster.

NEPSE Index

The NEPSE index during the month of July remained less volatile as compared to the previous month. The bullish trend of the index during second half of the June continued to July 6 reaching 227.83 and turned bearish when Maoist murdered a DSP and Ward President in the capital on July 7. The bearish turn continued as it again fell by 4.57 points on July 15 and reached to 222.04 when the director of Nepal Electricity Corporation was killed in the capital on July 14. The index then turned bearish upto July 21 and fell by 1 point on July 22. This fall could not continue but turned bullish during the end of the month.

The movement of NEPSE seems  to be highly affected by the political incidents and the similarity in the movement can be observed during the months of June and July. The index in the beginning of the both months is bullish and turned bearish in the middle of these months and again turned bullish during the last part of the months.

During the months of July, 560257 shares were traded. The trading volume picked on July 21 with 69129 shares due to the bulk shares transaction of Laxmi Bank Ltd. On that day 55540 shares of the bank were transacted. Lowest number of shares were transacted on July 16 with 6796 shares. Laxmi Bank Ltd. remained dominant in the market on the basis of aggregate volume of transactions for the month.

The number of transactions during the month seems consistent as compared to the volume of transaction. The transactions peaked on July 9 and the lowest was on July 23. Total number of 4282 transactions were made during the month. During the month, the transaction amount aggregated to Rs. 158.22 million and highest transaction was made on July 29 with the amount of Rs. 17.10 million. Similarly, the aggregate market capitalization during the months reached to Rs. 696555.78 million.

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