Listed companies market value falls with index
KATHMANDU, April 25:
A sluggish secondary market has caused a steady decline in market capitalisation of listed companies in last couple of years.
The decline in the market capitalisation will repel foreign investors, said market analyst Rabindra Bhattarai. The market that is in need of foreign institutional investors will have to wait, if the market does not perform well, he said.
Poor market capitalisation has also downgraded the asset values of shareholders, but not the profit. For the real profit or loss, an investor has to sell the share, Bhattarai said.
The ratio of market capitalisation to gross domestic production stood at 26 per cent in mid- February 2011.
This ratio was 35.4 per cent a year ago. Of the total market capitalisation, the share of bank and financial institutions stood at 71.6 percent followed by other sectors with 19.1 per cent share.
Among the listed companies, the share prices of financial intermediaries -commercial banks, development banks, finance companies and insurance companies have taken the brunt of bearish share prices the most.
In last two years the plunging share prices has caused the market capitalisation of the listed companies to decline by 24 per cent.
The stock market that had a market capitalisation of Rs 421.2 billion in mid April 2008 has dropped to Rs 318.5 billion by this April 21. It has declined by 7.5 per cent in last one year alone.
Market capitalisation is the total value of shares of the stock market that will help gauge the size of market. It is calculated by multiplying a company’s shares outstanding by the current market price of one share. The figure helps in determining the market size.
Though the numbers of shares listed has steadily gone up along with the numbers of listed companies, market capitalisation could not pull itself up as share prices are dismally low.
“The growing number of shares could not compensate the declining value of shares thus despite increased numbers of securities market capitalisation has remained low,” Bhattarai said.
Earlier the over inflated share prices had pushed the market capitalisation off the roof. However, as the prices have gone into self corrective mode, the market capitalisation is predisposed to contract.
The excessive supply of stocks in comparison to demand is a reason that secondary market not being able to perform well. In last 12 months, the numbers of securities listed in the secondary market has upped by 45 per cent that is 635 million units of shares were added in the stock market.
Moreover, the higher interest rates being offered by banks and financial institutions which are higher than the average return on shares at the moment have taken away the investors from the capital market pulling the market further down.
Source: THT
A sluggish secondary market has caused a steady decline in market capitalisation of listed companies in last couple of years.
The decline in the market capitalisation will repel foreign investors, said market analyst Rabindra Bhattarai. The market that is in need of foreign institutional investors will have to wait, if the market does not perform well, he said.
Poor market capitalisation has also downgraded the asset values of shareholders, but not the profit. For the real profit or loss, an investor has to sell the share, Bhattarai said.
The ratio of market capitalisation to gross domestic production stood at 26 per cent in mid- February 2011.
This ratio was 35.4 per cent a year ago. Of the total market capitalisation, the share of bank and financial institutions stood at 71.6 percent followed by other sectors with 19.1 per cent share.
Among the listed companies, the share prices of financial intermediaries -commercial banks, development banks, finance companies and insurance companies have taken the brunt of bearish share prices the most.
In last two years the plunging share prices has caused the market capitalisation of the listed companies to decline by 24 per cent.
The stock market that had a market capitalisation of Rs 421.2 billion in mid April 2008 has dropped to Rs 318.5 billion by this April 21. It has declined by 7.5 per cent in last one year alone.
Market capitalisation is the total value of shares of the stock market that will help gauge the size of market. It is calculated by multiplying a company’s shares outstanding by the current market price of one share. The figure helps in determining the market size.
Though the numbers of shares listed has steadily gone up along with the numbers of listed companies, market capitalisation could not pull itself up as share prices are dismally low.
“The growing number of shares could not compensate the declining value of shares thus despite increased numbers of securities market capitalisation has remained low,” Bhattarai said.
Earlier the over inflated share prices had pushed the market capitalisation off the roof. However, as the prices have gone into self corrective mode, the market capitalisation is predisposed to contract.
The excessive supply of stocks in comparison to demand is a reason that secondary market not being able to perform well. In last 12 months, the numbers of securities listed in the secondary market has upped by 45 per cent that is 635 million units of shares were added in the stock market.
Moreover, the higher interest rates being offered by banks and financial institutions which are higher than the average return on shares at the moment have taken away the investors from the capital market pulling the market further down.
Source: THT
