Nepse dips below 500pts amid fears of oversupply

KATHMANDU, MAY 03:

The stock index retreated below 500 points as fear of more shares flooding the market overwhelmed investor sentiment, today.

The index slumped by 7.82 points to 492, today, sending the index below 500 points after five months. On November 10 last year, the index had crossed 500 points after two and a half years.

Since December 16, the benchmark index was above 500 points as the bull-run continued in the market.

“The fear that the market will be flooded with shares following large scale offloading of promoter shares that will bring down share prices has compelled investors to dump shares,” said Bharat Ranabhat, a share broker.

Securities Board of Nepal (Sebon), capital market regulator, last week, allowed promoters of financial institutions to convert promoter shares through the stock market.

Earlier, to convert promoter shares to ordinary shares, they had to sell the shares by issuing an offer letter.

“The fear that the market will be flooded with shares is baseless as there is no guarantee that promoters will be converting their additional 19 per cent shares to ordinary shares,” pointed out Ranabhat. “Even if promoters plan to

offload their shares the central bank needs to approve the sale of more than two per cent promoter shares so it cannot happen covertly at the stock market,” he added.

The share market had been bullish since mid-April 2012 after going through four years of a bearish trend. The index had even reached 555 points in February 17 — the highest in the last forty months.

In the last one year, the index has scaled up by more than 67 per cent after the political parties finally agreed on the integration of militants back in mid-April last year.

“The bull run had not matured enough to be sustainable and the fear of oversupply crushed investor sentiment and brokers are flooded with sell orders,” said Ranabhat who is managing director of Kohinoor Investment. Today, all the subgroups except for hotels ended up in the red. Hydropower and insurance subgroups also took a beating.

The insurance subgroup suffered a loss of 20.25 points as share prices of Nepal Life Insurance and Lumbini Life Insurance dipped by Rs 65 and Rs 11, respectively.

Likewise, the share price of Chilime Hydropower went down by Rs 20, while that of Butwal Power and Arun Valley Hydropower also slumped by Rs four and Rs five, respectively, and the hydropower subgroup plunged by 19.49 points.

Commercial Banks, development banks and finance companies went down by 9.36 points, 1.53 points and 1.3 points, respectively.

Soaltee Hotel’s gain of Rs five pushed the hotels subgroup up by 6.65 points. Today, 173,312 unit shares of 83 companies were traded in 1040 transactions.

The market capitalisation of the stock exchange today stood at Rs 480.5 billion.

Source: THT