Shares of real sector companies upbeat
KATHMANDU, MAR 28:
The cooling down of overheated share prices belonging to financial institutions has burnt the stock market since its peak while real sector firms have emerged unscathed.
Since the peak of 1175.38 points in August 31, 2008, the Nepse index has gone down by 74.1 per cent till last week’s closing of 303.7 points. The commercial banks subgroup has gone down by 76 per cent since the day. Finance companies and development banks have also sunk by 78.2 per cent and 84 per cent, respectively.
“The indices of financial institutions and the Nepse index are positively correlated due to their market share,” said share analyst and chairman of Securities Research and Services Center Rabindra Bhattarai.
“Moreover, the commercial bank and Nepse indices are positively and perfectly correlated since most of the time banking subgroup seems to be guiding the market,” he added. Shares of financial institutions comprise of 63.5 per cent of the total listed securities. On the other hand, indices of manufacturing subgroup, hotel subgroup and trading subgroup have gone up by 50.8 per cent, 24.13 per cent and 4.6 per cent since the peak.
“Despite the small presence, real sector companies such as Unilever, Soaltee Hotel, Oriental Hotel, Salt Trading and Bishal Bazaar have rescued the subgroups with their appreciating share prices,” pointed out Bhattarai, adding, “Improved tourism scenario has increased the profits of hotels making it a lucrative portfolio to invest in.”
However, the over-stimulated price of Nepal Telecom and hydropower companies resulted in their indices losing 70 per cent and 61 per cent, since August 31, 2008.
Though the number of shares listed has steadily gone up along with number of listed companies, market capitalisation could not pull itself up as share prices are dismally low.
Nepse’s market capitalisation has declined by 53 per cent since the peak of August 31, 2008. The day’s market capitalisation stood at Rs 612.5 billion which went down to Rs 285.6 billion last week.
The number of listed companies at present is 214 which stood at 159 then. In addition, the number of securities listed has more than doubled in the last three and a half years.
Investors are hopeful that current bearish mode of the market cycle will soon be over. “Normally, the Nepali market has a six-year cycle. Since we have already gone through more than three years of the bearish trend, technical analysis shows we will soon start moving up,” said general secretary of Nepal Stock Investors’ Association Prakash Rajoria.
Source: THT
