Capital market leaps to record high

The capital market today broke all past records and closed an hour earlier than usual after registering a historic high of 1075.34. "The circuit breaker was imposed to halt transactions for the day after the index crossed 25 points," said Nepal Stock Exchange (Nepse). The market capitalisation also crossed Rs 4.15 trillion.

Trading on the Nepse floor opened at 1047.67 points this morning and kept rising, going up to post a 20-point growth. Nepse imposed circuit breaker (trading halt) for half an hour after the index went above the 20-point mark.

The largest gainer in today's trading that gained Rs 286 per unit share to Rs 3146, Nepal Investment Bank Ltd, has announced 3:1 bonus shares, 2:1 rights share and 7.5 per cent cash dividend. Chilime Hydropower, Everest Bank, Standard Chartered Bank Nepal, NIC Bank and Nabil Bank also pushed up the market today.

Experts opine that the Nepali stock market does not represent real economic growth of the country as it is dominated by financial institutions. "The decision of any financial institution will have an aggregate impact on the market," Rabindra Bhattarai, a share analyst said adding that the trend has been repeating itself every year, with the market zooming up whenever an institution announces bonus or rights shares and cash dividends.

Around 90 per cent of the shares traded on the Nepse floor are of financial institutions that do not justify the market fundamentals. "Neither any of the banks have tremendous growth nor do the share prices have any rationale. The profit-to-earning (PE) ratio that has to be below 15-20 is above 30. That's abnormal," said another marker watcher.Bhattarai added, "However, rise in the Nepse index is seasonal as this is the time that nearly all financial institutions declare their rights and bonus shares as well as cash dividends."

"Investors should be careful while choosing stocks," Dr Chiranjivi Nepal, chairman of the Securities Board of Nepal (Sebon) said, adding that the Nepali share market was not following a natural course. "Five to 10 per cent investors are exploiting the market," he said ading that the investors believe that Nepal Rastra Bank - the central bank - would rescue even the worst bank. "Thus, they go on buying shares of the worst bank also.

"Meanwhile, hydropower and commercial banks dominated the transactions today. The major market propellers in today's trading - hydropower group - surged by 53.11 points or 4.19 per cent to 1320.95 points and the commercial banks' group flared by 35.34 points or 3.23 per cent to 1130.98 points.

The only loser in today's trading - insurance companies' group - shed 15.45 points or 1.9 per cent points to 797.14 points.On December 17 last year, Nepse had touched 1064.09 points.Meanwhile, Nepal Telecom (NT) has applied for Nepse listing of its shares.