Sunday, September 6, 2009

Commercial banks drag Nepse down

The good performance of others sub-group, development banks and finance companies sub-groups could not push Nepse up due to bad performance of commercial banks sub-group.
Nepse gained a marginal 2.17 points today due to a key market propeller's -- commercial banks sub-group -- negligible loss of 0.37 point. The float index -- the barometer of real transactions -- also lost 0.04 point, despite Nepse's gain.
The 2,650-unit shares of Nepal Telecom (NT) that were traded today at nine rupees higher than the last closing pushed the others sub-group up by 10.58 points to 656.77 points.
Develeopment bank sub-group gained 5.14 points and finance companies sub-group surged by 2.73 points to push Nepse up by 2.17 points to 662.57 points.
"It proves the dominance of commercial banks in Nepse," said Prof Dr Manohar Krishna Shrestha. "However, this dominance of banks and financial institutions is a temporary phenomenon," he said adding that in the long-run the real sector will dominate the secondary market for its existence.
"For the time being the concentration on banks and financial institutions will continue but it will shift slowly to the real sector," he added.
Investors prefer banks and financial institutions due to the greed for bonus and rights shares, and lack of investment in any other sector. "Investors are aware of the fact that from next year the banks and financial institutions will distribute less bonus and rights shares," Shrestha said adding that then the investors will also shift their focus.
Though the domestic secondary market is not following the fundamentals, it has started the correction. "Investors know that from next year the rate of returns will decrease and they will also not get rights and bonus shares of banks and financial institutions -- the key reason that has pushed market to its unbelievable high. The market has began the correction," confessed an investor, who preferred not to divulge his name.

The others sub-group
KATHMANDU: Of the nine sub-groups, the others sub-group has only two companies in its listing: Nepal Film Development Company Ltd (NFDC) and Nepal Doorsanchar Company Ltd (NT). NFDC has 491,285-unit shares at a face value of Rs 100 per share that makes a total of Rs 49,128,500 and NT has the largest number of shares in the seconday market of 150 million-units at the face value of Rs 100 per unit -- though it was auctioned at a minimum of Rs 600 per unit -- making it to a total of Rs 15 billion. The NT shares are traded on a regular basis, but NFDC's shares have never been traded on the Nepse floor.

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