NEPSE at rock-bottom

NepaliEconomy wrote in Februay 18, 2010 when NEPSE was hoovering around 500 that it could head to 400 if it didn't hold the critical 486 level. Well it didn't and we are seeing the results.

NEPSE at rock-bottom
TKP, 9-May-2010

The capital market witnessed a four-year low in its turnover on Sunday as share trading began after a week's break due to the Maoist general strike.

The market witnessed a turnover of just Rs. 9.6 million which is the lowest since May 27, 2007 when the share market had seen a turnover of just Rs. 3.05 million. A total of 30,536 shares were traded through 615 transactions on Sunday.

The volume of trading used to worth Rs. 20-25 million daily during the last few years.

NEPSE general manager Shanker Man Singh said that Sunday's turnover was pessimistic as it remained as low as when NEPSE depended manual work. "It is a sign of shattering confidence of investors amid the political instability," he said.

President of the Stockbrokers Association Nanda Kishore Mundada said that he hoped the turnover amount would go up within a few days. "The turnover decreased as a result of the hangover of the weeklong banda."

He, however, is not hopeful about the market rebounding. "I don't see any possibility of an immediate recovery of the NEPSE index," he said. NEPSE saw a decline of 6.26 points to 413.02 points on Sunday. All the sectors that witnessed trading of shares lost points.

NEPSE standstill on second day

NEPSE is on a free-fall. NepaliEconomy.com argued that 486 is a critical level to hold. NEPSE has breached that level. If NEPSE does not bounce back quickly, then from technical standpoint it heading towards 400 i.e another 25% decline. The decline thus far seems orderly so there is no need for the government to intervene. The government should absolutely avoid making policies just to pop up the market.

It is very difficult to do any kind of proper analysis on NEPSE because of lack of data. Basic information such as daily volume or P/E are not available. If stock market investment is a game of dart, then investing in NEPSE is a game of bow-and-arrow.

Also compare NEPSE to BSE (Bombay Stock Exchange). BSE picked up in early 2009 like the rest of the world, NEPSE didn't.

NEPSE standstill on second day
TKP, 22-Feb-10

Stock market remained idle in the second consecutive trading day on Monday as the investors refrained from making transactions protesting the government's apparent apathy towards reviving the falling market.

General Manager of Nepal Stock Exchange (NEPSE) Shankar Man Singh confirmed that the stock market saw no transaction like on Sunday.

Although Nepal Rastra Bank (NRB) eased existing provisions regarding the margin lending (loan against share), in a bid to address the investors' demand, the agitating investors decided to budge from their stand saying the central bank move was inadequate. Even after the central bank issued the new directive on margin lending on Monday, General Investors Association, Nepal (GIAN), Nepal Investors Forum and Nepal Securities Investors Association held a collective meeting deciding to continue agitation.

The central bank has allowed the banks not to call margin (requirement of investors to deposit money in the lender bank up to the level of margin the share price decreases) until the share price decreases up to 10 percent. Earlier, the banks were required to call margin if the share price decreased by a minimum amount.

Likewise, NRB has also eased the renewal of the margin lending. The investors can extend loan repayment period up to one year by paying 25 percent principal in addition to regular interests. Earlier, the investors were required to pay 50 percent interest to get renewal of remaining loan amount. The investors have been demanding renewal of all loan amounts without paying principal. Likewise, they are demanding NRB to allow banks to provide up to 70 percent loans against the average value of shares.

But, Deepak Karki, president of GIAN said the NRB move was inadequate and the government must address other number of other demands that the latter can address immediately.

The government must stop 19 percent promoters' shares to come to market as public shares, take concrete step towards extending NEPSE outside Kathmandu and take some move towards recognising 10 percent capital gain tax as final tax among others, according to Karki. "We will withdraw agitation only if the government addresses the issues that can be addressed immediately," added Karki.

Nirmal Pradhan, an influential investor, said that NRB should be more flexible regarding allowing investors to get at least 60-75 percent loans against average share price to convince the investors for withdrawal of ongoing agitation.

NEPSE General Manager Singh however asked the investor to withdraw their protest programme by considering NRB move as a gesture to address their demands.

He said that NEPSE was playing the role of facilitators regarding the fulfillment of investors' demands and has delivered their demands to the concerned government agencies.

The investors stated agitation on last Friday by picketing the NEPSE office. As per the agitation schedule, they will not allow the transaction server of NEPSE to operate.

A Technical Analysis of NEPSE: Heading to 400?

A Technical Analysis of NEPSE: Heading to 400?
By NepaliEconomy.com

NEPSE, the stock market index of Nepal is on a free fall. From the peak on August 31, 2008 to February 11, 2010, the index has declined 58%, from 1,175 to 497.

There are three phases of the decline.
• First, it declined rapidly from 1,175 to 630, which represents 50% retracement. It tested that level twice forming a double bottom, and started to move up.
• Second, it failed to break a strong resistance at 730, which represents (a) 200-day moving average (b) 38.2% retracement (c) previous support. Having failed to break that resistance, the trend reversed and the index headed down. In a technical analysis parlance, it formed a classic "bear flag".
• Third, it temporarily stalled at 530, which represents (a) 61.8% retracement (b) previous resistance. When it failed to hold that level bouncing off 50-day moving average, it continued on its downtrend.

The next level to watch is 486. If the index does not hold that level, then it is heading to 400.

The worst performing sectors between August 31, 2008 and February 11, 2010 were financials - development banks (-66%), finance companies (-58%) and commercial banks (-57%) (Table below).

In terms of market cap, 137 companies that were present on both September 16, 2008 and January 14, 2010 lost Rs. 134 billion in market value. The biggest loser in market cap terms was Nepal Telecom, the biggest company on NEPSE. It lost Rs. 46 billion. In relative terms, Nepal Share Market lost the most, losing 86% of its value (Table below).

Note
• NEPSE is supposed to be market cap weighted index but it does not seem so. Market cap has declined 27% between September 16, 2008 and January 14 but index declined twice that amount, not sure why?
• Volume data for NEPSE is not available. Volume and prices trends make technical analysis (TA) possible. Doing a TA without volume data is like walking on one leg.