Daily transaction amount drops to half

Nepal Stock Exchange Ltd (Nepse) registered a fall in daily transaction amount by almost half in the fiscal year (FY) 2009-10 from a fiscal year ago.

"Nepse saw Rs 42.4 million worth transaction daily in 2009-10, whereas a fiscal year ago, it used to transact Rs 92.6 million daily," according to the data.

Similarly, Nepse posted Rs 11.75 billion worth transaction during 2009-10 that is 45.80 per cent of the total transaction amount in 2008-09," the secondary market said adding that it had registered Rs 21.68 billion worth transaction during 2008-09.

The Nepse attributed its poor performance to various economic and non economic factors. "However, the over supply of shares, gloomy economic situation of the country and political uncertainty also pulled the Nepse down in 2009-10," it added.

The market capitalisation that was at Rs 5.12 trillion at the end of 2008-09 also plummeted to Rs 3.76 trillion at the end of 2009-10. "But the current market capitalisation is almost 28.59 per cent equal to the gross domestic product (GDP).

The Nepse data reveals that in 2009-10, Nepse listed 18 more companies for the secondary market transaction. "Among 18 companies, Nepse listed 11 development banks, two finance companies, two commercial banks, one hydropower and two insurance companies for the transaction in 2009-10," it said adding that the total listed companies now reach 176 companies that was only 159 a fiscal year ago.

"Two listed companies Narayani Finance and National Finance merged to form a company," according to the Nepse that has also listed Rs 19.92 billion worth ordinary shares including primary, rights, and bonus shares, Rs 227.7 million worth corporate debentures and Rs 9.80 billion worth government bonds.

However, the increasing number of securities -- in the secondary market -- coupled by low investors' confidence pulled the Nepse down to 477.73 points from a fiscal year ago's 749.10 points.

Though the secondary market has signed an agreement with CDSL India to establish the CDS, it failed to establish it within the targtted time frame. The budget for the fisca lyear 2009-10 has aimed to establish the CDS -- the scripless securities trading system -- within October.

"Nepse signed an agreement on January 15 with CDSL India for the establishment of the CDS system," according to the Nepse. Managing director of Nepse Shanker Man Singh and acting director of CDSL India P S Reddy signed the agreement on behalf of their respective organisations on January 15.

The Kathmandu-centric secondary market expanded to Biratnagar, Birgunj, Narayangath and Butwal in 2009-10, though the transaction outside the valley is not yet very encouraging. The Nepse still has many challenges like boosting the investors' confidence, making the OTC market functional, starting the bond trade, listing of more manufacturing industries to reduce the dominance of financial sector and increasing the number of brokers.