Nepse’s chin barely above IPO deluge

Nepse’s chin barely above IPO deluge
ArthaExpress, 22-Nov-08

The huge volume of Initial Public Offerings (IPOs), bonus and rights shares and debentures of various financial institutions worth billions flooded the secondary market, pulling Nepal Stock Exchange (Nepse) down. This week, Nepse plunged by 36.53 points to 770.37 points from last week’s closure of 806.90 points.

This week’s closing of 770.37 points - from August 31, when Nepse touched a record high of 1175.8 points - is a fall by almost 35 per cent or 405.43 points in these three months. However, market experts do not agree that this whopping fall of 405.43 points is a crash. They blame over-priced Nepal Telecom (NT) shares, book closing of major market propellers — the financial institutions — and deluge of shares in the secondary market for the continuous fall in Nepse.

Nepal Telecom (NT) shares — listed on August 14 — started trading from August 17. NT shares scaled as high as Rs 1400 per unit, pushing Nepse beyond 1100 points - a climb of 300 points. But, as of today NT shares are traded at around Rs 600 per unit - that closed at Rs 629 on Thursday.

NT’s share listing is the largest-ever, worth Rs 15 billion - that was 150 million-unit shares after Butwal Power Company (BPC) listed its 84,00,000-unit shares worth Rs 840 million at the secondary market. After listing of NT shares, the financial institutions dominating the capital market were expected to diversify giving option to investors but these institutions remained the market propellers.

Some experts also see flow-back of money to land from shares. They point out that one of the reasons of the unnatural climb by Nepse was that people had been selling off land and invest the money in shares.

Whatever the reason, there is still the possibility of Nepse further plunging as some of the financial insititutions are yet to announce their book closing. This they will be doing soon.

This week Nepse — in its five-day session — wound up in negative territory for three days. The market opened in the red on Sunday as it plunged by 13.04 points to 793.86 points. On Monday, it dipped further by 19.68 points to 774.18 points.

However, on Tuesday, it rose by 1.81 points to reach 775.99. On Wednesday also, Nepse closed in green while gaining 0.59 point to reach 776.58 points. However, Nepse again plunged by 6.21 points to close at 770.37 points.

In terms of monetary value, Nepal Bangladesh Bank (with Rs 144.10 million), Bank of Kathmandu (with Rs 39.02 million), Nepal Investment Bank (with Rs 27.28 million), Standard Chartered Bank Nepal (with Rs 27.07 million) and Nepal SBI Bank (with Rs 17.59 million) are this week’s top gainers.

In terms of numbers of share units traded and number of transactions also, Nepal Bangladesh Bank topped the chart with 1,99,000-unit shares and 503 transactions. Except the insurance companies group, all other groups wound up in negative territory this week because investors lost confidence.

The contribution of A-category companies this week was only 54.20 per cent and the float index — the real secondary market barometer - lost 2.45 points.