Value of shares appreciates
KATHMANDU:
The value of shares with investors has appreciated by more than one third of its value in the last six months due to a surge in stock market capitalisation.
Nepal Stock Exchange (Nepse)’s market capitalisation surged by 36 per cent since mid-April 2012. The stock market capitalisation, that stood at Rs 302 billion in mid-April, has reached Rs 413.5 billion by October 27.
The surge in market capitalisation has also been accompanied by the bullish benchmark index that also scaled by 36 per cent during the review period.
On April 12, the Nepse index stood at 319.94 points, which kept travelling north on positive political cue, reaching 425.46 points in the next two weeks. Though the ascent did not continue at the same rate in the following weeks, the benchmark index though has not disappointed investors.
“Investors who entered the market before mid-April 2012 have benefited a lot as the index was hovering around 300 points then, and it will not go back to that level in the near future,” said general secretary of Nepal Stock Investors’ Association Prakash Rajaure.
The waxing size of market capitalisation has upgraded the asset values of shareholders. However, in the last two and a half years, plunging share prices had caused the market capitalisation of listed companies to decline by more than 25 per cent. Market capitalisation is the total value of the shares of the stock market.
Investors were attracted towards the secondary market mostly due to the availability of lucrative shares at historically low prices of companies such as Nepal Telecom, Chilime Hydropower, Bank of Kathmandu, Everest Bank, Nabil Bank, and Standard Chartered among others.
The performance of class ‘A’ companies as shown by the sensitive index has also appreciated by 33 per cent. In mid-April, the sensitive index stood at 84.5 points, which is now at 112 points.
Earlier, the higher interest rates being offered by banks used to be blamed for taking away investors from the stock market. But now as banks are offering less than eight per cent interest on fixed deposits, investors are returning once again to stock investing due to relatively increased returns.
“If the lending rate of banks for share purchase loans becomes more reasonable then the market will further go up,” pointed out Rajaure. At present, banks are providing share purchase loans or margin type lending at an interest rate that is higher than 14 per cent.
In the last six months, the number of listed companies has gone up to 225 from 215. The number of shares listed has increased to 1.6 billion units from 1.2 billion units six months ago.
The increased number of shares listing at Nepal Stock Exchange has also contributed in a surge in market capitalisation as it is calculated by multiplying a company’s shares outstanding by the current market price of one share.
Source: THT
