Nepse scales new high, transaction also nears Rs 2 billion

Liquidity surplus in the banking system, attraction of rights and bonus shares of bank and financial institutions and insurance companies to raise their paid-up capital, and bullish sentiment of investors pushed the share market today to a new record high with the benchmark index approaching near 1,600 points. Along with continuing its bullish run, the market also posted record intra-day transaction of Rs 1.96 billion.
The Nepal Stock Exchange (Nepse) index jumped by 31.26 points to close at the market at 1,597.96 points due to commercial banks that gained 47.47 points.
All trading groups, except Hydropower, ended on the green zone today.
However, today's growth was led by commercial banks. A surge in the transaction of Nepal Bangladesh Bank shares pushed the commercial bank sub-index 47.47 points higher.
Nepal Bangladesh Bank has proposed issuing 80 per cent rights shares, which boosted the demand for its shares, resulting in the transaction of Rs 355.86 million today.
The share market has been in bullish trend for the past few months also due to the full-fledged implementation of dematerialised form of share trading from January 15.
Last Thursday too, the daily transaction at the stock market had set the record of high single day transaction of Rs 1.89 billion.
The excess liquidity in banking system and less investment opportunity has made the stock market lucrative investment opportunity, according ot the stock market analysts.
They also say that investors are finding it beneficial to invest in the stock market rather than park their hard-earned money in banks and financial institutions that offer average interest rates of around 5.8 percent on fixed deposits, let alone savings accounts that attract the minimum interest rates.
According to former president of Stock Brokers Association of Nepal (SBAN) Anjan Raj Poudyal the banks are offering margin lending at 8 to 9 percent interest rate as the banking system is flush with excess liquidity.
According to central bank, banks and financial institutions have extended a total of Rs 35 billion against share pledges in the first nine months of the current fiscal year, a jump by nearly Rs 11 billion compared to the corresponding period of the last fiscal year 2014-15. They had floated Rs 24 billion in margin lending in first nine months of the last fiscal year.
Till last year, average daily turnover of the stock market used to be around Rs 350 million only. However, the increase in turnover today is also due to bulk trading of promoter shares of some listed companies.

Finance Minister denies price hike

Finance Minister Bishnu Prasad Poudel has denied reports of increase in inflation rate claiming that price hike was not possible without the endorsement of budget.
"How will the market price increase without the budget being endorsed,” he asked at an interaction programme in Kathmandu today. "This is false."
However, the market price had started looking up a week before as usual due to the budget leakage that the government employees are getting their salary hiked by 25 per cent. With the grade and salary hike, the government employees will pocket some 40 per cent hike in the current salary from the next fiscal year 2016-17, starting from July 16.
The budget leakage has also made the share market swell – propelled by the insurance companies – and it turned true as the fiscal policy a week later announced hosts of insurance programmes that will expand the insurance market and fuel their profit.
Likewise, let alone liquor and cigarette that get dearer every year after the budget, the prices of essential food stuff including rice, pulses and sugar has increased by Rs 10 to Rs 50 per kg, immediately after the budget announcement. Nepal Retailer's Association (NRA) president Pabitra Man Bajracharya accepted that the whole-sellers have increased the prices of the food stuff after the budget.
Unknown to the fact that the market won't wait for the budget to endorsed, the finance minister claimed that the government would not let the inflation rate go beyond 7.5 per cent. However, the inflation rate that has been around the double digit the whole fiscal year seems looking up only, also due to government's distributive and expansionary budget.
Paudel, on the occasion, also claimed that the budget will be fully implemented. "It is very natural that those who are habituated to the political practice of yesterday doubt its implementation,” he said, stressing that his budget will be implemented. But given the track record of all the political parties, which were in power, and bureaucracy, none of the budget in last one decade has been completely implemented, neither has the economic growth been achieved nor the price hike been tamed.
The finance minister also revealed that he would table the budget implementation proposal at the Parliament very soon.
He had announced the expansionary and distributive budget of Rs 1048.92 billion on May 28. "The budget, directed toward implementation of the new Constitution, will achieve the target of 6.5 per cent economic growth in the next fiscal year," he reiterated, adding that the revenue projection and foreign aid – both ambitious – would be achieved.

Security Board halts share trading of Nepal Life

Security Board of Nepal (Sebon) has halted Nepal Life Insurance’s plans Further Public Offering (FPO) temporarily. The board has today directed Nepal Stock Exchange (Nepse) to temporarily halt company’s share trading effective from June 10.
The life insurance company was planning to issue 3.96 million units of FPO. But the board said that the company made public its FPO plans without getting its permission from the board to influence the capital market. "The company has announced its decision to float FPO at a premium rate before getting the permission from Sebon," a press release issued by the board here today read. "The announcement can create price fluctuations, which can put investors at risk."
The Securities Registration and Issue Regulations-2008 requires a company to fulfill a resolution related to the further public issue passed by the company's general meeting too.
"If the price of the proposed issue is to be fixed higher than the face value, the methodology of fixation of price and basis and justification of the premium must be provided by the issuing company," the law also states.
“The company decided on its own, which is against the securities regulations,” according to the spokesperson of the board Niraj Giri.
Transaction of Nepal Life’s shares has been halted until further decision and also to warn other listed companies to refrain from making sensitive announcements on their own, he said, adding that the board is mulling to impose regulations that require companies to take approval from Nepse and the board at the same time to prevent such acts in future. "The board has also sought clarification from the company and the necessary actions will be taken after its gets clarification."
Nepal Life yesterday announced its decision to float 3.96 million units of share at Rs 2,951 per unit. The company plans to decrease promoter shareholding to 70 per cent from current 80 per cent through the Further Public Offering.
A board meeting of the company on Wednesday had decided to float the FPO, subject to approval from the Sebon. Due to the news, the company’s shares were trading at Rs
4,888 – Rs 240.50 more than a day ago – yesterday.

Nepse hits new all-time high

Propelled by the insurance companies sub group, Nepal Stock Exchange (Nepse) today gained 19.9 points to close the market at fresh all-time high of 1,566.7 points. The insurance sub group jumped by 595.43 points today – pushing the overall Nepse index to the all time high – though the movers and shakers of the share market banking sub group lost 1.04 points.
The share market also recorded its highest ever single-day transaction of Rs 1.89 billion breaking its previous record of Rs 1.44 billion of May 23.
Share market pundits attribute the rise in the transaction to increasing demand and supply of stocks, and also the impact of the budget. The budget announcement of hosts of insurance schemes has been supportive to the insurance companies' market expansion, thereby making huge profits which would ensure better returns for the investors.
On one hand the increasing number of new buyers is getting attracted towards the stock market, whereas on the other, a number of investors are booking profits, boosting the transaction volume. Likewise, the increasing liquidity – that helped margin lending – in the banking sector is also fuelling the share market.
After hitting 1,544.65 points on May 24, the market dropped slightly to 1,483.14 points last Monday on rumours about central bank's plans to introduce a stern policy on margin lending. However, the central bank clarified that it was only the rumour, which helped boost the investors' confidence.
The share market has been in bullish trend since last couple of months due to paperless transaction and also the leakage of budget's hosts of insurance schemes. The market has been witnessing transaction of over Rs 1 billion every day – breaking all past record transaction – since last one week after the budget was leaked. Earlier, the market used to see transaction of around Rs 500 million only. Transaction started increasing after Nepse started demat transaction – or popularly known as paperless transaction of stocks – from January 15.

'Economic growth, job creation global issues'

Economic growth, reducing poverty and generating employment are the global issues at present, according to Federation of Nepalese Chambers of Commerce and Industry (FNCCI) vice president Shekhar Golchha.
Addressing the 105th meeting of the International Labour Organsation (ILO) plenary in Geneva today, Golchha said though the promulgation of new constitution in Nepal is a historic achievement, its implementation is the key to economic growth.
Though the devastating earthquakes of 2015 and border blockade has pulled down economic growth, private sector is committed to boost economy and generate employment, he said, adding that inclusive economic growth and creation of better jobs are the common concern and challenges of all. "To address these concerns, growth and expansion of economy is a must. High growth rate and generation of more jobs is possible only through additional investment. It is evident that attracting investment requires suitable policy and environment. Efficiency and competitiveness of enterprises can help them to provide improved working conditions," he added.
A Nepali delegation led by labour minister Deepak Bohara is participating in the ILO meeting in Geneva. Along with Golchha, FNCCI president Pashupati Muraraka and representatives of trade unions are also taking part in the meeting.
"Majority of least developed and developing countries have been suffering from the vicious cycle of low growth, low investment and unemployment. They lack appropriate policies and resources to increase economic growth," Golchha, who chairs the Employers' Council under FNCCI, said. "People's expectations have increased manifolds and it is not for countries like Nepal to respond to their expectations."
Golchha also said achieving social transformation is a complex task. "Besides, it requires sustainable growth of economy and appropriate policy measures to extend the coverage of social protection," he added.
Briefing the meeting about the latest development in Nepal, he also said that Nepal, for some years, has been experiencing the problem of low investment, low growth and low job creation. "Many factors like political instability, poor infrastructures and lack of suitable policy environment are some of the major factors that have been hindering economic development in Nepal," Golchha said, adding that the government has adopted the strategy of employment-led growth. "But due to many reasons, it has not been possible to achieve the goal."
On the occasion, he also highlighted the plight of Nepali migrant workers. "However, the repatriated remittance money into the country has contributed to the growth of economy significantly," he added. "Mobilisation of remitted money in productive sector and re-employment of returnees, now, has become a matter of debate."
Pitching for investment friendly environment, Golchha said formulation of suitable policy and environment are keys to attracting more investment.

Nepal to ask India not to open Integrated Check Post yet

Nepal has started a diplomatic process to request India not to operationalise the Integrated Check Post (ICP) at Raxual on the Indian side as it could increase Nepal's cost of trade, and ‘complicate’ trade between the two countries.
“We wrote a letter on Sunday requesting India to wait for completion of the ICP on the Nepal side,” according to Commerce Ministry officials. The Customs Department, Commerce Ministry and the Supplies Ministry have discussed the implications of operationalisation of the ICP on the Indian side and its impact on Nepal’s trade. “Even the Office of the Prime Minister has been looking into the issue,” the officials added.
The Raxual-Birgunj customs is the key customs point for Nepal, accounting for over 60 per cent of Nepal’s international trade.
The unilateral operation of Indian side of ICP that is aimed at providing all the services required for export-import trade, including customs, immigration, quarantine and banking, through an integrated one window on either side of the border has made the trade more difficult for the Nepali traders.
The operationalisation of the ICP on the Indian side, which is some 13 km from the current customs office, is going to hurt Nepal’s trade, according to traders. They also have expressed serious concern over India starting operations at its new ICP at Raxual.
Claiming that trading through the new ICP may hit trade through the Raxaul-Birgunj customs point until such time as the ICP on the Nepal side is completed, they said, requesting India to wait for the completion of the ICP at the Nepali side. The Indian authorities have, however, already inaugurated the ICP on their side on Friday.
Some 30 per cent work on the ICP on the Nepal side at Sirsiya is yet to be completed. India has taken responsibility for building the ICPs on both sides. The Land Port Authority of India is responsible for operating the Indian ICP.
Birgunj customs, which was blocked for almost five months during the Tarai-Madhes protests, has not only created supply shortages in the country but also encouraged the black economy due to lack of formal channel for bilateral trade.

Budget to push more Nepalis into poverty

The expansionary nature of the budget for the next fiscal year is going to push more Nepalis into poverty, although the government has promised to reduce the percentage of people under the poverty line.
Currently, some 21.6 per cent of Nepalis are under the national poverty line, whereas the government aims to bring it down to 18 per cent, according to the budget for fiscal year 2016-17.
However, the government's distributive and expansionary budget is going to push more Nepalis under the poverty line, thanks to increasing inflationary pressure, said economist Prf Dr Bishwhambher Pyakuryal.
Finance Minister Bishnu Poudel yesterday presented a budget of Rs 1,048.9 billion for fiscal year 2016-17 in Parliament, with an aim of reducing poverty, increasing economic growth and preparing the base for a prosperous Nepal, apart from implementation of new Constitution.
But the hike in the salary of government employees by 25 per cent and grade – making it to around 40 per cent salary hike in total including increased grade – and various distributive programmes in the budget will push market prices up, he said, adding that while the salary hike could be justified as the cost of living is increasing, the impact of the hike on the market will hit non-government employees and daily wage workers hard. "People who earn their living from day to day wage are most at risk of falling back into poverty will be dragged below the poverty line."
The 13th periodic plan that had aimed to bring the poverty rate down to 18 per cent failed mainly because of the failure of successive governments to create employment in the country and also rising inflation over the last three years. "Likewise, inflation fuelled by expansionary fiscal policy will again thwart the government's poverty reduction target," he added.
The 'socialist-oriented budget' has doubled the social security blanket and placed an extra burden on state coffers. This may have been necessary, but the distribution of the budget across all the 'dream projects' would not contribute to capital formation and increased productivity, according to former finance secretary Rameshwor Khanal."This could be disastrous for the economy," he added.
Likewise, the budget – that claims to strive for a self-reliant economy but has been overly dependent on foreign grants and loans, and also revenue from imports – has also failed to enhance market monitoring capabilities and crack the whip on price inflation.
The deficit budget, which aims to mobilise Rs 565.9 billion from revenue – mostly from the imports like customs, excise and VAT – has failed to introduce any radical reform in the revenue administration. Citing the examples of economic crisis in Greece and Venezuala, Khanal claimed that the estimation of large revenue without any sustainable base could lead to disaster.
Similarly, the budget has estimated Rs 10 billion to come through principal repayment and Rs 106.9 billion through foreign grants. The resulting deficit will be financed through foreign loans of Rs 195.7 billion, domestic loans of Rs 111 billion and Rs 59.4 billion from savings of the current fiscal year.