Euphoric investors push Nepse past 1,000 points

KATHMANDU, July 25:

Nepal Rastra Bank's announcement to raise minimum capital requirement of bank and financial institutions (BFIs) by four times fuelled buying spree in the secondary market in the closing moments on Thursday -- the last trading day of the week, with the benchmark Nepal Stock Exchange (Nepse) index logging gains of 40.11 points to close at 1003.86 points.

The market was on a downward course since July 27 last year after hitting a six-year-high of 1,073.93 points. The devastating earthquake of April 25 and aftershocks thereafter had also affected Nepse's recovery.

However, the central regulatory bank's announcement through the Monetary Policy on Thursday made the investors euphoric. They went on buying spree anticipating that BFIs will offer stock dividends to meet the minimum paid-up capital as required by the central bank.

Nepse registered a jump of whopping 40.11 points, or 4.16 percent, on Thursday alone.

"Clearly, the jump in the benchmark on the last trading day was the reflection of the investors' buoyancy following the announcement regarding new capital requirement for BFIs," Praveen Raman Parajuli, president of Nepal Merchant Bankers' Association, told Republica. "As this is the season for companies to announce dividend, BFIs are likely to prefer bonus shares over cash dividend to shore up their paid-up capital in line with the new capital requirement. This is why investors were on buying spree."

Banking, the heavyweight trading group in the secondary market, logged gains of 57.28 points on Thursday along to close at 893.02 points.

Unveiling the Monetary Policy for 2015/16, the NRB directed commercial banks to increase their minimum paid-up capital by four times to Rs 8 billion by mid-July, 2017. Similarly, it has also instructed other development banks and finance companies to increase their paid-up significantly.

Priya Raj Regmi, president of Stock Brokers Association of Nepal (SBAN), also agrees with Parajuli. "The new paid-up capital requirement has guaranteed stock dividends for investors from profit that BFIs made in 2014/15. Thus, we can expect share prices of BFIs to increase further for few more months," added Regmi.

Due to the public holidays announced by the government for feedback collection on draft constitution, the market opened for only two days this week. All trading groups ended on the green zone this week. Insurance was the biggest gainer of the week with its sub-index climbing up by 71.12 points to close at 4,217.17 points. The sub-indices of Development Banks and Hotels groups also rose 25.89 points and 12.39 points, respectively, to settle at 863.72 points and 1,923.51 points. Manufacturing and Processing, and Hydropower groups also logged gains of 6.52 points and 6.01 points to end the week at 1,685.45 points and 2,206.68 points, respectively. 'Others' and Finance sub-indices were also up 5.87 points and 6.01 points, respectively, to close the week at 728.4 points and 530.48 points. 'Trading' group remained unchanged at 202.88 points.

A total of 1.9 million units of shares of 163 companies worth Rs 932.39 million were traded through 5,912 transactions this week. Total turnover fell 29.54 percent this week compared to transaction amount recorded last week.

Source: Republica