Stock market closes on a happy note

KATHMANDU, APR 12:

Investors experienced almost a yearlong bullish streak following three long years of a bearish trend as the stock market index surged by 63.5 per cent in the year 2069 BS.

The secondary market that had closed at 319.94 points in the last trading day of 2068 BS‚ reached 523.41 points by the closing of the last trading day of this year‚ gaining a whopping 203.47 points. This is first time in the last five years that the market has closed at such a high.

The surge‚ that had begun in the second week of April last year‚ continued throughout the year‚ even hitting 555 points in February.

Investors have a reason to be happy with the capital market after a long time. The appreciating share prices have increased market capitalisation of Nepal Stock Exchange (Nepse) by 38 per cent. Market capitalisation‚ that stood at Rs 368.9 billion last year‚ has reached Rs 508.3 billion.

As alternate investment avenues such as real estate and commodities market have dried up‚ investors have taken to stocks once again. Moreover‚ the moderating rate of interest offered by banks and the start of margin financing through a broker’s guarantee further helped the market boom. All the subgroups — except for trading‚ development banks and finance companies — performed well. Development banks and finance companies suffered as troubles faced by some of these financial institutions affected investor sentiment. “The trend of investors liquidating shares of development banks and finance companies

to buy shares of commercial banks has increased lately‚” said managing director of Securities Research Centre and Services Rabindra Bhattarai.

The insurance subgroup became the biggest earner of the year. Its index appreciated by more than 200 per cent in 2069.

“As this is the last year for insurance companies to increase their paid up capital as per regulation‚ expectations of rights and bonus shares drove their share prices up‚” said Bhattarai. The hydropower subgroup also recorded more than 100 per cent gain in its index. Share prices of Chilime Hydropower and Butwal Power Company surged by more than 50 per cent in the last one year‚ as power companies ensured guaranteed returns and handsome dividends.

“However‚ the share price of hydro companies is expected to be stable soon‚ as the growth in their returns and profits will be limited due to their static capacity‚” added Bhattarai. The number of shares listed has gone up by 35 per cent as about 1.7 billion shares are listed at Nepse.

Last year‚ the imbalance between the supply and demand of securities in the stock market was held responsible for pulling stock prices down. However‚ the increased number of stocks did not affect the market inversely as margin financing and relatively lower interest rates helped investors maintain the demand pressure.

Source: THT