Tottering NT shares drag Nepse down

Nepal Telecom (NT) played a major role in the rise and fall of the Nepal Stock Exchange (Nepse) index this week. Nepse ended up losing 52.45 points to close at 1067.20 points from last week's closing of 1119.65 points. The week started with a record gain as Nepse surged by 55.73 points in a single day's trading to 1175.38 points from last week's closing of 1119.65 points.
But it faltered when the NT shares started losing, and plunged by 41.09 points to 1134.39 points on Monday. Tuesday also saw a fall of 32 points to 1102.39 points. Wednesday was no better for the NT shares which lost heavily pulling Nepse down to 1064.01 points. However, on Thursday, the last day of trading in the secondary market, Nepse gained 3.19 points to close at 1067.20 points.
Commercial banks, hotel, finance and development banks groups were winners this week whereas hydropower, insurance, trading and other groups were the losers due to the fall in NT shares price. NT, however, topped the chart in terms of monetary value with Rs 133.94 million this week.
According to the central bank, year-on-year (y-o-y) market capitalisation increased by 96.6 per cent to Rs 366.3 billion by the end of fiscal year 2007-08. Market capitalisation to GDP ratio also increased to 44.6 per cent from 25.6 per cent a year ago. "Of the total market capitalisation, banks and financial institutions constituted the highest share of 89.3 per cent," said the yearly record of Nepal Rastra Bank (NRB).
Total paid up capital of listed companies stood at Rs 29.5 billion in mid-July 2008, with an increase of 35.5 per cent over a period of one year. This increase was due to the additional listing of securities. Of the increased amount, the portion of rights shares was 55 per cent, bonus shares 31 per cent and ordinary shares 14 per cent, it said.
Monthly turnover to market capitalisation ratio stood at 0.72 per cent in mid-July 2008 compared to 0.77 per cent a year ago. The twelve-month rolling standard deviation stood at 104.5 during the period compared to 85.6 a year ago, reflecting an increased volatileness in the stock market.
Securities Board of Nepal (Sebon) permitted Rs 11.6 billion worth new issuance. These consisted of ordinary shares of Rs 1012.7 million to eighteen companies, right shares of Rs 7605.2 million to 49 companies and debentures of Rs 2950 million to five companies including Nepal Electricity Authority. "Likewise, Nepse listed bonus shares of Rs 2109 million to 50 companies in the review year," the yearly data stated.
The government issued fresh treasury bills worth Rs 12.5 billion, development bonds of Rs 6.1 billion and Citizens' Saving Certificates worth Rs 1.9 billion in the fiscal year 2007-08.

Nepse misleads capital market
Market capitalisation has increased to Rs 5.83 trillion — from Rs 4.14 trillion, a hike by Rs 1.69 trillion at closing of this week’s trading — after Nepal Telecom’s shares started trading in Nepal Stock Exchange Ltd (Nepse). But, it is high time Nepse changed its traditional system of calculation of market capitalisation because that does not reflect the capital market.
Market capitalisation swelled not because the trading increased, but due to traditional method of calculation. Nepse listed 15,00,00,000-unit of Nepal Telecom (NT) shares but tradable shares are only slightly more than 53,2000-unit. If there is a hike of Rs 10 per unit share, then the total market capitalisation will increase by Rs 15 million in a day, which is not real.
The remaining unit of shares that the government holds at present should not be counted in the real market capitalisation. Either the government should also start selling its shares at Nepse or Nepse should calculate only tradable NT shares for realistic market capitalisation. The government can also sell its remaining unsubscribed shares at Nepse.