Nepse down 34.8 points; banks, insurers drag

- Post Report, Kathmandu
The biggest loser on the bourse last week was the insurance sector, which shed 120.32 points

Oct 30, 2016-Nepal Stock Exchange (Nepse) index slipped 34.8 points over the last week, as share prices of commercial banks and insurance companies took a beating.

The index opened at 1794.47 points on Sunday and lost 1.9 percent over the week to close at 1759.71 points on Thursday, the last trading day of the week.

The fall in Nepse index erased Rs35.1 billion off the stock market over the last week, with value of all the shares listed on the stock market falling to Rs 1,953.6 billion on Thursday.

“Nepse ended up in red last week, as share prices of banks and insurance companies took a dip,” Stockbroker Anjan Poudel said.

The biggest loser on the bourse last week was the insurance sector, which shed 120.32 points.

“Until several weeks ago, demand for stocks of insurance companies was high, as investors expected the insurance sector regulator to raise the minimum regulatory paid-up capital requirement of insurers,” said Poudel.

Call for hike in paid-up capital would have prompted insurance companies to float more bonus and rights shares to raise the capital stock, providing opportunity to investors to grab shares free of cost or at their face value of Rs100.

“But since the regulator has not made any move in this regard so far, many investors are not interested in holding on to those shares and have started dumping them,” said Poudel. “This exerted pressure on prices of insurance stocks.”

Like the insurance sector, the banking sector also ended up in red last week, as it lost 47.5 points. “Share prices of banks fell last week because of price adjustment in stocks of institutions that gave away bonus shares to shareholders,” said Poudel. “Also, demand for stocks of banks that have not closed their books has not gone up, which is exerting pressure on the banking sub-index.”

This is the time of the year when companies close their books and extend dividend to shareholders. Generally, share prices rise till the time books are closed, as shareholders expect listed companies to provide cash dividend or bonus shares.

This year banks are expected to offer more bonus shares and even rights shares, as they have to raise the minimum paid-up capital four-fold from Rs2 billion to Rs8 billion within mid-July.

“Despite this, demand for shares of banks has not gone up, as many investors are concerned whether banks can generate adequate business and, thereby, profit, once the paid-up capital is raised,” said Poudel. “This is the reason why the banking sub-index fell last week.”

The performance of the banking sector largely determines the fate of the entire share market, as it accounts for more than 50 percent of the stock market capitalisation.

Also, performance of other sectors was poor last week, with all sub-indices, except for manufacturing and production, and trading sectors, ending up in red.

Manufacturing and production, and trading sectors did not see any change in their sub-indices.

Last week, shares of 151 listed companies were traded on the bourse, generating turnover of Rs 4.1 billion-up 37 percent than in the previous week.

Published: 30-10-2016 08:41

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