Sunday, August 31, 2008

Time is ripe for economic revolution

It’s high time the Nepalis start thinking of an economic revolution. After a decade-long armed political struggle and more than two years lost in political transition to peace, the country badly needs economic projects to turn Nepal into a new and prosperous Republic.
“After the political revolution, we will the start economic revolution,” the Maoists used to say in the past whenever the entrepreneurs requested them to withdraw bandh and strikes. The last couple of years could not make significant headway as far as development and economic activities are concerned mainly due to the political tug-of-war in the run-up to the Constituent Assembly elections in April.
“We are more or less settled with the political agenda,” Prime Minister Pushpa Kamal Dahal 'Prachanda' said while inaugurating the Economic Summit today. The programme was organised by the Confederation of Nepalese Industries (CNI).
“The country is now ready for the economic revolution. A prosperous Nepal can guarantee a political stability,” he said.The Maoists now seem to have understood the limitation of running a coalition government. The Maoist leadership has all along tried to convince the international community that the party is not opposed to economic liberalisation and foreign capital.
“We will not swim against the tide. The foreign as well as domestic capital will be welcome in new Nepal. Though there are vast potential and resources, the country needs huge capital to harness them,” he explained.
The summit can be considered successful in terms of commitment from all the political parties that are unanimous about the very idea of an economic revolution. The movement — that will bridge the gap between the rich and poor — can also guarantee political stability.
“The objective of the summit is to bring in economic agenda to the centre-stage. How long will politics continue to dominate the national economic agenda? Several conflict-hit countries are faring well in terms of economic development. What we lack is commitment and vision. But, there could be no better time than this to work out on an economic agenda for a prosperous new Nepal,” said Binod Chaudhary, CNI President and a member of the Constituent Assembly.
Incidentally, Chaudhary is the first Nepali businessman to be featured in the Forbes magazine.

Govt committed to economic revolution
Prime Minister Pushpa Kamal Dahal 'Prachanda' said Maoist-led government was committed to an economic revolution along with the logical end to the peace process and drafting the constitution.
“We have three major tasks; logical conclusion of peace process, writing a new constitution and ushering in economic progress in accordance with rising people’s aspirations,” he said inaugurating Economic Summit-2008 organised by the Confederation of Nepalese Industries (CNI) here in Kathmandu today. The three-day long summit sought a commitment for Rs 12,000 monthly income of Nepalis.
“An economic revolution is the key to strengthening the political revolution. Without the economic revolution, a country cannot be politically stable,” the Prime Minister said, adding that Nepal has to keep pace with the changing times. “In the 21st century, no country could live in isolation and we will not ride against the tide but are more focused on our national priority.”
He also sought private-public partnership as well as more investment by domestic as well as international investors for greater employment opportunities.
President of the CNI and Constituent Assembly member Binod Chaudhary welcoming the guests said political ideologies have nothing to do with development and economic growth as our neighbours, China and India with different ideology has become the economic powerhouse in the world. Despite China and India — the rising economic powers — are being our neighbours, Nepal could not even get even a minimum benefit.
“Special Economic Zones (SEZs) in the bordering areas with India and China has to be developed to take benefit from the neighbouring markets,” he said, adding that industriesthat are a key to growth are hit hard. It has only seven per cent contribution in the GDP. In the last decade, the industrial sector’s contribution to the GDP was at 25 per cent.
The supply system has badly hit and the rich poor gap has been increasing, Chaudhary said, adding that Nepal — an agriculture-based country — is at present facing food shortage, and widening urban and rural gap due to wrong policies that has hit the livelihood of most of the Nepalis dependent on agriculture.
“Thus a radical change in agriculture is needed with commercial approach and proper focus,” he said. “A farmer has to pay 14 to 15 per cent interest rates whereas for a car one has to pay only six to seven per cent,” he complained, adding that only 25 per cent land is non-arable but rest of the land is also not productive due to lack of irrigation, proper seeds and fertilisers.
He suggested the government to think like an entrepreneurs and effectively manage the resources. Apart from agriculture, hydropower and skilled manpower export are some of the sectors that need immediate attention for the change. Another sector is tourism that can change the face of Nepal.
But its marred by inadequate infrastructure, airports, the mismanagement of Nepal Airlines Corporation and regular strikes. Trade unionism, and law and order problems are the major hurdles for the industrial sector, apart from lack of good governance and smooth service delivery, he said. He also suggested to create economically viable and well-managed states instead of caste, creed and community-based ones.
J N Khanal, general secretary of CPN-UML stressed on land reforms and agriculture revolution that can change Nepal.

Nepse breaks all past records

Propelled by commercial banks, development banks and others group, Nepal Stock Exchange (Nespe) index on Sunday touched a record 1175.38 points. It gained 55.73 points or 4.98 per cent — yet another record in a single day's trading — to 1175.38 points from last week's closing of 1119.65 points.
"It is the highest growth in a single day's trading," said Rewat Bahadur Karki, general manager of Nepse.
The market on Sunday halted twice — first, for 15 minutes and again, for half an hour — as it witnessed a three per cent rise in the first hour of the trading and a four per cent rise afterwards. Nepse has brought the new rule of market halt based on per cent change upwards or downwards — instead of point-based — after it listed the largest ever listing of Nepal Telecom's (NT) 1,50,00,000-unit of shares.
The others group that used to see no trading for months are the market propeller, at present, because of the NT shares. Though the market has been witnessing growth after NT's entry in the secondary market, on Sunday others also contributed to the growth.All groups except hydropower posted a rise in their indices. Hydropower group lost 7.83 points or 0.63 per cent to 1236.62 points from last week's closing.
Commercial banks posted a robust growth of 38.44 points or 3.69 per cent to 1078.86 points, after a couple of weeks. Development banks group also posted 14.91 points or 0.99 per cent to 1518.74 points. However, the winner was the group of others that gained 143.31 points or 9.96 per cent to 1582.37 points due to the trading of 34,910-unit of NT shares.
The sensitive index also rose by 7.7 points, or 2.86 per cent to 276.8 points, from last week's closing.
Meanwhile, though Nepse has changed the market halt rule it has not yet changed market calculation system nor instituted the floating index — two factors that are not reflecting the true face of the capital market. Market capitalisation has increased to Rs 6.12 trillion from last trading's Rs 5.83 trillion. It is yet another record that in a single day Rs 0.29 trillion market capitalisation increased. But the phenomenon is not real and needs immediate correction. Nepse should start calculating market capitalisation of only tradable shares. The NT shares that the government holds and promoters' shares of other companies that are not tradable should be excluded while calculating the market capitalisation.
"It's time Nepse introduce floating index and a new system of calculating market capitalisation," said shares analyst Rabindra Bhattarai.

HAN gets new president

Hotels’ Association of Nepal (HAN) said on the sidelines of HAN’s 39th annual general meeting here on Sunday elected Prassidha Bahadur Pandey as its new president.
"Tourism sector has the potential of speeding up growth within a short span of time in comparison to other sectors like hydropower that take longer periods to yield results. Within two years, tourism sector can help increase the GDP as it brings a spiral effect,” said the newly-elected president Pandey.
"The government should bring in a Tourism Act,” he said adding that it should also immediately announce ‘Visit Nepal Year 2010’. Once the Visit Nepal campaign is launched, the sector will feel encouraged and tourist arrivals would increase to more than a million."

Saturday, August 30, 2008

Nepse stance betrays real 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.
This week also witnessed unreal phenomenon as the number of companies trading shares and amount transacted decreased, Nepse registered a gain of 57.41 points to 1119.65 points from last week’s closing of 1062.24 points. But the sensitive index lost 24.51 points.
Nepse index itself is yet another problem that needs a rethink. Does Nepse reflect national economy is the question haunting every economist. Thus, the floating index — after real market capitalisation system — is yet another need of the hour to make the capital market realistic.
Although Nepse opened in the red on Sunday, the other three days it continued on a growth path, except for Wednesday when it shed marginal points. On Sunday, it plunged by 5.88 points to 1057.36 points from last week’s closing of 1062.24 points. On Thursday, the market gained 33.46 points to 1119.65.

Friday, August 29, 2008

Gold demand, price up

Fluctuation in gold price in the international market led to fluctuations in the domestic market also this week.
The market opened at Rs 19,460 per 10 gram last Sunday. Due to fluctuation in the international market, the day saw two prices. In the afternoon, Nepal Gold and Silver Dealers' Association (NEGOSIDA) fixed the price at Rs 19,375 per 10 gram.
"If the price changes by $10 upwards or downwards, NEGOSIDA reviews the price at around 2 pm," said Tej Ratna Shakya, NEGOSIDA president. However, NEGOSIDA does not change the price after 3 pm as it would be too late for the domestic market. Earlier, NEGOSIDA used to change the price if there was a fluctuation of $5.
On Monday, the price of the yellow metal went further down to Rs 19,120. But, on Tuesday the price picked up by Rs 170 per 10 gram to reach Rs 19,290. Wednesday witnessed no change in the price of gold in the domestic market. However, it surged to Rs 19,375 on Thursday and closed even higher at Rs 19,420 on Friday, the last day of the domestic market. There was a difference of only Rs 40 in the opening and closing price.
"The rise in the price of gold is due to the coming Teej festival of women," Shakya said adding that the price rose despite enough supply of gold. Demand has doubled from the usual five to six kg to around 15 kg this week. "Though there was a shortage last week, there is none this week despite increased demand as there was enough supply," he said.
Currently, Standard Chartered Bank Nepal and NIC Bank both import gold. Four others - ABC Enterprises, Nipesh Tail, Pawan Dharaniya and Shalimar Jwellers - also import gold. Some people, on their return from abroad, also bring gold but the quantity is negligible. The banks import gold after they get gold dealers' bookings because they do not want to take risks.
Weak US currency and fluctuation in the price of crude oil led to a lot of swings in international gold price too which started at $835 per ounce and closed at the same price on Friday, said NEGOSIDA.
Meanwhile, silver opened at Rs 351.50 per 10 gram last Sunday and closed at Rs 348, Rs 3.50 less than the opening price.

Wednesday, August 27, 2008

BIMSTEC meet to talk trade, terrorism

Terrorism is set to dominate the agenda when foreign ministers of seven South and Southeast Asian countries will meet here on Friday to firm up a plan for combating the common scourge and for boosting intra-regional trade and economic cooperation.
Senior officials of seven members of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) began their two-day discussions here today to work out recommendations that will be discussed at the foreign ministers' meeting.
They are likely to discuss a proposed pact on combating terrorism for approval by the foreign ministers, an official source said. The pact, which will focus on closer coordination and intelligence sharing on terror outfits active in the region, is expected to be signed at the BIMSTEC summit India will be hosting in November. Foreign ministers of India, Bangladesh, Bhutan, Nepal, Myanmar, Sri Lanka and Thailand will be participating in the Friday discussions.
The pact is being planned on the lines of the one signed by the eight-nation South Asian Association for Regional Cooperation (SAARC) at its summit in Colombo early this month. The pact has acquired an added urgency in view of a spate of recent terror attacks in India, escalation in activities of extremists and terrorists in countries like Bangladesh, Sri Lanka, Thailand, and increasing region-wide networking among terrorist outfits. Setting up a permanent secretariat for BIMSTEC, which currently functions from Bangkok, will also be high on the agenda. This issue is, however, likely to see some renewed lobbying by Bangladesh, Sri Lanka and Thailand who are keen to host the secretariat. A decision on this is likely to be taken at the foreign ministers' meeting here.
Increasing intra-regional trade and connectivity will be a major focus of discussions among BIMSTEC countries, that accounts for 21 per cent of the world's population.
The regional bloc is awaiting a study by Asian Development Bank on transport infrastructure and logistics to promote greater connectivity in the region. Energy security and issues relating to environment and climate will also be discussed. India is pushing for setting up a joint weather and climate centre and an energy centre - proposals that have found wide support in the regional bloc.
Nepal's newly appointed Foreign Minister Upendra Yadav will be representing his country at the BIMSTEC meeting that will mark the first high-level contact between New Delhi and Kathmandu after the new elected government came to power.
BIMSTEC was formed by five countries - Thailand, India, Burma, Bangladesh, and Sri Lanka - in 1997. Nepal and Bhutan later joined the group as members.

Tuesday, August 26, 2008

Budget to bridge rich, poor gap

The government is bringing the budget before mid-September, said the newly appointed finance minister Dr Baburam Bhattarai.
"The aim of the budget will be to bridge the gap between rich and poor," he said while addressing a team of Nepal Chambers of Commerce here today.
He also assured the business community that the new government will help build confidence of the business community. "We will continue the programmes of the previous government based on their usefulness," he assured the NCC team led by its president Surendra Bir Malakar.
The business community urged to bring a public oriented budget. "Public private partnership (PPP) will be one of our major modus operandi, he said answering them.
NCC president Surendra Bir Malakar said, "There are many potentials in agriculture, water resource, tourism, herbs and minerals in Nepal."
"The government should provide subsidy for the agriculture sector to boost it," he said adding that effective implementation of Minimum General Programme will help solve many problems.
However, Bhattarai said "Without peace development is not possible and now with new government people will try to maintain peace and provide security."
Complaining about the regular strikes, banda and syndicate system, Malakar said that the business community is hopeful that they do not have to face any more of such hassles. "Business and industrial areas should be declared politics free area," he suggested

Monday, August 25, 2008

Nepse brings new market-halt rule

Nepal Stock Exchange Ltd (Nepse) has set a new rule for market-halt from today.
"Instead of the point-based system, we have formed a percentage-based system for smooth operation of the market," Nepse general manager Rewat Bahadur Karki said adding that after the listing of 15,00,00,000-unit of NT shares, the market trading halt policy needed change.
"Nepse was already thinking of changing the rule according to market growth, and with the entry of a huge volume of NT shares it was the right time," he added.
Now, market trading will halt for 15 minutes during the first hour of trading if the Nepse index changes by three per cent upward or downward from previous day's index.
Also, if the index changes by four per cent either way after the market reopens the market will halt for 30 minutes. If the Nepse index changes five per cent upwards or downwards, the market will close for the day, according to the new rule.
The new policy will stabilise the secondary market and help it grow, Karki said adding, "It's almost a year since Nepse brought a market halt policy based on points. Earlier, the growth of 15, 20 and 25 points were the base markers of market halt."
NT's 15,00,00,000-unit shares are listed under the others' group, which has only one company Nepal Film Development Company (NFD) with its 4,91,285-unit shares with a face value of Rs 100 per unit. The others' group saw no trading since the last some months. However, after entry of NT shares the others' group has begun posting significant growth since yesterday.
Today, 16,190-unit of NT shares were traded at Nepse between Rs 900 and Rs 950 per unit. It has pushed the overall market capitalisation to over Rs 5.53 trillion.

Sunday, August 24, 2008

Broker in dock for false info

Securities Board of Nepal (Sebon) has suspended Shilpa Securities Pvt Ltd (broker No. 20) on the charge of providing false information.
Dhrub Timilsina, deputy director at the survillence department of Sebon, saidShilpa Securities Pvt Ltd provided wrong information to a Sebon survelliance team during inspection.According to the rule, the broker must have a separate room from where to trade shares through Wide Area Network (WAN). “No client is allowed to enter the trading room, because it will hamper the interests of other clients,” says the Sebon rule.
However, when the survelliance team reached the broker’s office for inspection, the trading room was crowded. “On top of that, the broker provided false information to the regulatory body when asked about the presence of clients in the trading room,”it said. Sebon has suspended its trading from today and asked for a written explanation. “Until the agency furnishes a written explanation, the broker’s trading is suspended,” said Sebon.
Meanwhile, Nepal Telecom shares began trading at Nepse. The first day, 10,930 units of NT shares were traded at a minimum of Rs 883 to a maximum of Rs 910 per unit. Nepse had fixed minimum price Rs 536 and maximum Rs 893 for first day trading of NT shares.

Real Estate boom on borrowing

Real Estate sector has witnessed a highest ever growth in borrowing from the commercial banks in the first 11 months in comparison to the same period last fiscal year.
It has seen a growth of 295.7 per cent growth from Rs 61.3 million to Rs 7.35 billion. Second comes construction sector that has a share of 58.4 per cent in the total borrowing.Commercial banks' deposits also went up by 20.2 per cent to Rs 402 billion — current Rs 50 billion, savings Rs 209 billion and fix Rs 140 billion and margin deposits of Rs 3.1 billion during the period.
Despite the political instability, frequent bandhs and a slowdown in the economy, most of the commercial banks managed to post increase in their net profit — Rs 10.63 billion, according to the unaudited report — in the fiscal year 2007-08, compared to the previous fiscal when 19 commercial banks posted a total of Rs 7.83 billion net profits.
However, the unaudited net profit would have variation, when the audited report will be published after around four months. In the last fiscal year 2006-07, there was a variation of upto 31 per cent in the unaudited and audited reports of a commercial bank.
Non-performing assets (NPAs) on the other hand declined to 8.47 per cent from 9.65 per cent of the total loan in the last fiscal year.During the fiscal year, the commercial bank's advances grew by Rs 20.4 billion to Rs 410 billion and the gross non-performing assets (NPA) declined to Rs 23.99 billion from Rs 22.18 billion in the last fiscal year.
"Similarly, the benefit of increased lending earned from loans and adbvances is higher at Rs 28.81 billion while the average cost of deposits is around Rs 23 billion," said Nara Bahadur Thapa, director at the Research Department of Nepal Rastra Bank (NRB).
The urban-centric commercial banks have started moving closer to the rural areas and shifting their focus to the semi-urban areas — where there is a vast untapped market — pushing their deposits and borrowing both up.
In the fiscal year 2007-08, the commercial banks added 81 new branches making it to a total of 663 branches from Pashupatinagar in the east to Mahendranagar in the west.
Moving closer to the rural areas is a timely strategy of the commercial banks as the rural Nepal has a regular cash flow in the form of remittance that is increasing. According to the Family Budget Survey recently published by the Nepal Rastra Bank, 16 per cent of the income is generated from the remittance.
"However, still around 20 per cent of the total population has the access to the banking system," he said.
Within the fiscal year 2007-08, four new commercial banks Sunrise, Global, Bank of Asia Nepal and Citizens' International came into existance. NMB Bank upgraded to commercial bank from finance company and Development Credit Bank upgraded from development bank making it a total of 25 commercial banks.

Tuesday, August 19, 2008

Nepalis spend more in recreation

Nepalis spend more in recreation and cultural activities than in education.According to the fourth Household Budget Surveys (HBS), out of the total expenditure, 8.7 per cent was in recreation and cultural activities (urban 8.7 per cent and rural 8.9 per cent) and 7.6 per cent in education (urban 8.3 per cent and rural 6.4 per cent).
The survey also revealed that the average household size in rural and urban Nepal stood at 5.21 per cent and 5.49 per cent respectively. For the country as a whole the average household size stood at 5.36 per cent.
The survey has manifested the changes emerged in the consumption pattern of the Nepali households. It revealed that there is a downward shift in the expenditure pattern of the Nepali households in Food and Beverages group compared to the earlier studies. It has declined to 38.90 per cent from 66.78 per cent of the first survey that was done in 1973-75.
Similarly, its share during the second (1984-85) and the third survey (1995-96) was respectively 62.63 per cent and 53.20 per cent. The fourth survey has also disclosed the fact that the consumption pattern of Nepali households is shifting to non-food and service group (61.1 per cent). Thus, the expenditure on non-food and service sector in urban area was increased remarkably at 64.2 per cent. The highest percentage of expenditure on the non-food and service group was occupied by housing and furnishing group (urban 30.2 per cent and rural 23 per cent).
It also revealed that 87.6 per cent of total household possessed their own dwelling unit, 10.5 per cent lived in rented house and 1.9 per cent lived in rent-free house. "Out of the total household, 91.9 per cent has access to electricity and 42.6 per cent has access to telephone," states the survey conducted by the Nepal Rastra Bank (NRB).
Like wise, 7.9 per cent household were engaged in agriculture, 12.8 per cent in business/industry, 10.9 per cent in service/teaching, 21.1 per cent as housewives, 28.5 per cent as student, 3.9 per cent as wage earner, 1.5 per cent as domestic worker and 13.5 per cent were engaged in other types of occupation.A new series of Consumer price Index (CPI) will be planned on the basis of the findings of this survey. It is expected that the new index representing both urban and rural market centre will be instrumental in drawing a more robust monetary policy. The survey aims to provide information on various socio-economic aspects of the urban and rural households like employment pattern, literacy ratios, income distribution pattern and housing characteristics.
The reported average monthly household income stood at Rs 27,391 (urban – Rs 31,935 and rural – Rs 22,225) of which, 7.3 per cent was contributed by agriculture, 28.1 per cent by salary, allowance, wages and pension, 29.5 per cent by business/service, 16.1 per cent by remittance and 10.2 per cent by imputed rent, according to the survey.
Similarly, the average monthly expenditure of the household stood at Rs 15,130 (urban – Rs 17,896 and rural – Rs 11,982), of which, 39 per cent to food expenditure and 61 per cent to non-food expenditure.
The present study — conducted during 2005-2006 — is the fourth in the series of Household Budget Surveys (HBS). It was conducted amidst a sample size of 5,095 households from 48 market centres (23 urban market centres and 25 rural market centres) during mid-November 2005 to mid-November 2006.
The results of the survey will benefit the policy makers and other related persons/institutions for conducting additional studies and framing the policies regarding the economic and social aspects of the country.

Monday, August 18, 2008

NEA mulls power tariff hike

Nepal Electricity Authority (NEA) might increase the electricity tariff to gradually recover accumulated losses, loss reduction, creation of fund for hydropower development and for addressing future inflation.
"A 15 per cent hike in electricity tariff may balance the losses," Arjun Kumar Karki, managing director of NEA said adding that NEA is yet to be allowed to adjust the tariff to make up for the increased cost of operation.
According to a provisional analysis, NEA power system endured a loss of 25.15 per cent in the fiscal year 2007-08. In the preceding year, the final loss figure stood at 26.71 per cent. "NEA earned Rs 15,405.03 million from sale of electricity in 2007-08, which is 6.61 per cent higher than last year's figure. Similarly, NEA earned Rs 655.24 million as other income," he added.
NEA has incurred a net loss of Rs 1312.16 million after deducting interest, foreign exchange loss and provisions. However, it has earned a profit of Rs 314.19 million the preceding year. "Accumulated loss by the end of 2007-08 has reached Rs 7133.77 million," Karki said.
Analysis shows that NEA's cost of service per KHh stands at Rs 7.4 against Rs 6.7 per KWh revenue rate. After adjustment of the contribution of Rs 0.28 per KWh from miscellaneous sources of income, NEA suffered loss of Rs 0.42 for every KWh of energy served by it.
Presenting NEA's brief accounts during its 23rd anniversary, Karki regretted that there were long spells of load shedding. Energy demand over the fiscal year totalled 3,490.12 GWh. As this amount of energy was not available with the system, the deficit amounting to 309.46 GWh, had to be offloaded to keep the electricity service running.
"At present, there is a growth of 11.31 per cent during peak power demand and 10.76 per cent growth in the energy demand last year aggravated the situation," he added. In dry months, NEA imposed 48 hours a week load shedding.
At the end of fiscal year 2007-08, NEA has 1,524,610 customers, an increase of 9.07 per cent over that of the previous year. Of the total customers, 95.66 per cent belong to the domestic category accounting for 40.52 per cent of total energy sales that earned NEA 40.66 per cent of the total revenue.
Industrial customers represent only 1.67 per cent of total customers, but contributed 38.81 per cent of the total energy sales that is 35.93 per cent of total revenue earned by the NEA.
Power and energy demand grew by 11.31 per cent and 10.76 per cent respectively in the reviews period, he said.
During the period, major overhauling and maintenance works like servicing of turbines at the Marsyangdi, Trishuli, Sunkoshi and Puwa Khola hydropower stations were also done. The damaged generator of unit 1 of Kulekhani-II hydropower station was repaired under the supervision of experts from Fuji Electric Sytems Co Ltd (Japan) and brought into operation since the last week of March. Overhaul and repairs at Kali Gandaki, the biggest power station of Nepal, was also completed successfully by the NEA engineers.
"Though our present is troubled with supply shortage, the prognosis for the future is not bleak," Shankar Prasad Koirala, water resource secretary said, adding that NEA would be able to undertake a number of generation, transmission and distribution projects. It has also intensified efforts to develop an internal system with backbone at 220 KV. Elimination of existing transmission bottlenecks will be NEA's first priority. It is also planning cross border transmission links.
"Within five years, NEA plans to produce 525 MW electricity that needs a total of Rs 65 billion cost," Karki said.

The future is bright
Future projects that are in different stages of development are expected to be commissioned within five years, so that by the time 592 MW power will be inducted into the system.

NEA projects on anvil
Upper Tamakoshi (309MW)
Chamilya (30MW)
Kulekhani-III, Rahughat (27 MW)
Upper Trishuli-3A (60 MW)
Upper Trishuli (40MW)
Upper Modi-A (42 MW)

From subsidiary Chilime
Sanjen Upper (11 MW)
Sanjen (35 MW)
Middle Bhotekosi (80 MW)
Rasuwagadhi (75 MW)
From private sector
Kableli-A (30 MW)
Upper Marsyangdi (50 MW)

Upper Seti (128 MW)
Nalsyagu GAD (400 MW)
Budhi Gandaki storage projects (600 MW)

Export-oriented projects
Upper Karnali
West Seti

Sunday, August 17, 2008

Second batch of Nepalis leave for Korea

The second batch of 66 Nepali migrant workers will leave for much sought after South Korea to work under the Employment Permit System (EPS) system on Monday.
"Every week, a group will leave for South Korea," said Keshar Bahadur Baniya, director general at the Department of Labour and Employment Promotion (DoLEP). The majority of the workers are assigned to the manufacturing sector, according to the roster.Last Monday, the first batch of 55 migrant workers left for South Korea. Nepal Airlines Corporation took them to Bangkok and from Bangkok, Korean Air flew them to South Korea.
The department had called the airline companies for a bid asking which airlines could fly the selected ones at a cheaper rate to South Korea. Universal Tours and Travels, the GSA of Korean Air, bid the lowest.
After receiving HRD-Korea's final letter with the names of job aspirants, the department began flying them to Korea from last week. The name-list that HRD-Korea sent was according to the certificate of conformation of visa issuance (CCVI) list.
Earlier, job aspirants underwent a 15-day orientation after they sailed through the medical tests. As per EPS rules, the first step for employment in South Korea under EPS is the Korean Language Test (KLT). Candidates passing the language test are then required to undergo a stringent medical test.

Market guru mouths mantra

Are you planning to buy shares? If yes, wait a while and don't invest in haste. Before taking any decision to buy shares of a particular company it is always wise to go through the companies', past and present financial performance.
Securities Research Centre and Services (SRCS) has brought out a book — Financial Indicators — that can give you the appraisal of the financial performance over the past five years of financial institutions.
Editor of the book, Rabindra Bhattarai, who is also a lecturer and capital market analyst, has compiled most of all the financial reports available of companies and wrought it into a book for investors' benefit.
The book has indicators of all those financial institutions that are the market leaders. Had there been the indicators of all the listed companies, the book would have been really a mirror of the Nepali capital market. It would have been even more useful for investors and researchers.
However, any shortcoming is not Bhattarai's fault as the listed companies, except for financial institutions, are not transparent and rarely publish their financial reports like financial institutions. Thus, our capital market is financial institutions-dominated and does not reflect our economy.
The new listing regulation is bringing a strict rule about providing financial details of all listed companies every three months to make things transparent. Hopefully, the editor will be able to add them in the next edition.
In any case, the book is the first of its kind and should have been published by the Nepal Stock Exchange Ltd (Nepse) or the Securities Board of Nepal (Sebon).
Every two rupees from the sale of each book will go to the school — Narayani Madhyamik Bidhyalaya at Sanghu VDC in Taplejung district — where the author was educated.

Saturday, August 16, 2008

Xiaoyu new ADB vice-president

The Board of Directors of the Asian Development Bank (ADB), acting onthe recommendation of president Haruhiko Kuroda, approved the appointment of Zhao Xiaoyu as vice-president (Operations 1).
He succeeds Jin Liqun who retired from Asian Development Bank service on July 31, states a press release.As Asian Development Bank vice-president for Operations 1, Zhao will be overseeing the operations of the South Asia Department, the Central and West Asia Department, and the Private Sector Operations Department.
Zhao is currently the deputy governor (CFO) of the Export-Import Bank of China. He served as the executive director for the People’s Republic of China at ADB from March 1999 to September 2002.

Friday, August 15, 2008

Nepse fixes NT's first day trading price: min Rs 536 - max Rs 893

The shares of much-awaited Nepal Telecom (NT) is going to be traded in between Rs 536 and Rs 893 from next week at the sole secondary market, Nepal Stock Exchange (Nepse).
After the signing ceremony between NT and Nepse here today, Rewat Bahadur Karki, general manager and chief executive officer (CEO) of the Nepse, said, "Though its against the free market practice to fix price of any company's share, the Nepse has fixed the minimum and maximum price of NT's shares to protect the investors from being fooled by manipulators."The minimum price could be three times the net worth and maximum price could be five times the net worth, said Karki, adding that the present networth of the company is Rs 178.63.
After the first day's transaction, the price could increase or decrease by 10 per cent in a day. If it crosses the 10 per cent limit upward or downward, Nepse will impose circuit breaker to the transaction of such company's shares trading, according to the rule.
Nandan Hari Sharma, executive director of Citizen Investment Trust (CIT), the issue and sales manager of NT shares, said, "This is the largest ever share listing worth Rs 15 billion after Butwal Power Company (BPC) that had listed its 84,00,000-unit shares worth Rs 840 million. "After the listing of NT shares, the financial institution dominated capital market will be diversified, apart from giving option to the investors," he added.
Rupak Halder, managing director of the NT and Rewat Bahadur Karki, GM and CEO of the Nepse signed the agreement on behalf of their respective companies here today. Nepal Telecom is the 143 company to be listed at the Nepse.
According to the agreement, 150 million unit shares worth Rs 15 billion has been listed as ordinary shares at the Nepse. Now it could be traded after a week.
NT has according to the finance ministry's divestment plan, floated 75,00,000-unit of shares — that is five per cent of the total — in the first phase. But due to various reasons, it was under-subscribed to only above 53,00,000-unit shares.
"The decision to float the remaining units of shares and second phase of five per cent is solely of government," Halder said, adding that the NT cannot decide on its own as the shares belong to the government.
After the listing of NT shares, the number of share at the secondary market has increased by 45 per cent to 482.1 million-unit shares and paid up capital has increased by 49 per cent to Rs 45.56 billion.Similarly, market capitalisation has also increased by 25 per cent from the present four trillion to the 60 per cent of Gross Domestic Product (GDP).

Sebon suspends Nefisco
KATHMANDU: Securities Board of Nepal (Sebon) suspended the Merchant Banking licence of Nepal Finance Ltd (Nefisco) for the time being due to investors' complaint against it. According to new Merchant Banking regulation, Nefisco has applied for the licence to work as a merchant bank. Sebon, after receiving complaints from investors, has been investigating the company on its alleged fraudulent transaction of promoters's shares of Lumbini Bank. "According to the Securities Act-2063, Clause 58 (2)(D) and Clause 60 (C), Sebon has suspended Nefisco's application for merchant banking licence," said the regulatory authority of the capital market. "However, it can continue its earlier assignments," it added. Meanwhile, Sebon has granted licence to six financial institutions — National Finance Company Ltd, United Finance Ltd, Ace Development Bank, Nepal Share Markets and Finance Ltd, NIDC Capital Markets and NMB Bank — for Merchant Banking, according to the new Merchant Banking regulation.

Thursday, August 14, 2008

Nefisco may lose its licence

Securities Board of Nepal (Sebon), the capital market regulator, might suspend the licence of Nepal Finance Ltd (Nefisco) and stop it operating as Merchant Bank due to its alleged ‘fraudulent’ transaction of promoters shares.
“After suspension, it can not continue its work as a merchant banker; issue manager, underwriter or share registrar,” a source at the board said, adding that the board is taking a bold step to safeguard the investors’ interest, after the board got the complaints.
“However, Nefisco can complete its old assignments,” the source added.
Nefisco has sold promoters’ shares of Lumbini Bank — to the investors as ordinary shares — without declaring the status of the shares. The investors have been since last six months urging it to either give the share certificates they have bought or the money they have paid.
“The investors bought the shares thinking it an ordinary share. They have been accusing Nefisco of cheating them by not disclosing the status of these shares,” Anoj Agrawal, broker No 6, who had bought 3,500-unit of the promoters’ shares of Lumbini Bank Ltd from another broker said.
Though promoter’s shares can be sold and bought at the secondary market like ordinary shares, it has separate status. However, the seller must disclose the status of shares, submit necessary documents and get permission from the central bank before selling the promoter share.
Apart from that, the pricing mechanism is also different, it will be less than the market price.
Nefisco is blamed to have not followed the central bank’s directives. “We have been holding dialogues with the Lumbini bank and investors both,” Nefisco’s chief executive officer (CEO) Sudhindra Lal Pradhan said, adding that the brokers knew of the status of the shares before they traded. Despite several meetings of investors with Nefisco, Sebon, Nepse, Lumbini Bank, the case has not moved forward,” Agrawal said.
While, the blame game between the brokers and Nefisco is continuing, it is not the only case of ‘cheating’ investors by selling promoters shares in the price of ordinary shares, some other financial institutions have also sold promoters shares at the price of ordinary shares.
Last year, Kathmandu Finance Ltd sold its promoters’ shares to the public without declaring the status that those were promoter shares.
Ajay Siwakoti and his group of 10 friends bought 7,000-unit of shares at Rs 270 to Rs 250 through broker No 10 last August. At that time the price of the per unit share of the company was at only Rs 170.
Some of the buyers even sold 500-unit of shares at a price of Rs 330 through another broker No 29. Some of the high ranking government officials, who according to the law cannot hold promoters’s shares, also bought these shares.
When they came to know of the rule, they went to Nepal Rastra Bank (NRB) to complain of the ‘fraudulent’ transaction,” one of the investors said.They have lodged their complaints at Sebon and Nepal Stock Exchange Ltd (Nepse).

Wednesday, August 13, 2008

Nepal needs Rs 400b annual investment for double digit growth

Nepal needs Rs 400 billion investment every year to achieve the double digit growth continuously for another decade.
“At present, the investment stands at Rs 176 billion, including the private sector,” Binod Chaudhary, president of Confederation of Nepalese Industries (CNI) and the Constituent Assembly (CA) member, said adding that the increase in investment and vision, both is need of the hour.
The CNI is planning a major international investment summit in Kathmandu next year after the Economic Summit-2008.
However, it has postponed the Economic Summit that it had planned for August 14-16. Now the summit is scheduled for August 31 to September 2.
“The summit is postponed due to the election of the Prime Minister on Friday the date of summit and the participating CA members will be engaged in the electoral process,” he said adding that though CNI has already completed all the preparations for the summit, there was no alternative than to postpone the summit.
The objective of the summit is to help the CA to include economic agenda in the Constitution that is going to be written. “It is high time our leadership own economic agenda for the development of the country,” he added. "Political stability and writting a new Constitution are not the only challenges that Nepal faces today. Building a prosperous Nepal is more important.
"The three-day long CNI Economic Summit-2008 with the theme of ‘Rs 12,000 per month income for every Nepali — a national commitment’ will see a host of intelligentsia and experts. Various working papers on key issues like rapid economic growth and its associated issues, trends, constraints and impediments in selected sectors like labour relations, economicvision in the new Constituent will be discussed during the summit.
'Rs 12,000 per month income' is possible only if the GDP is above 10 per cent and CNI had since 2004 advocating a double-digit growth as an effective tool for addressing the socio-economic disparity.
"The summit will have various brainstorming sessions as various members of the CA including sectoral and functional experts and professionals, members of civil society and representatives of the private sector will actively participate in this summit,” Chaudhary said, adding that the Prime Minister might inaugurate the summit that will see six working papers.
“Nepal has a huge potential,” Tek Chandra Pokharel, senior entrepreneur, said adding that except hydropower, we also have various sectors like mines and minerals, and commercialisation of agriculture that could help generate employment and develop the country.

Tuesday, August 12, 2008

Call to put an end to syndicate system in transport

The business community of Western and far-Western Development Regions has blamed the political parties and local administration for not being serious to the problems they have been facing for the last one-and-a-half month.Speaking at a meeting of all the stake-holders against syndicate system organised by Federation of Nepalese Chambers of Commerce and Industry (FNCCI) here today, they even blamed police for being a mute spectator while the business community is living under life-threats.
“We are here in Kathmandu to tell the government about the illegal activities going on in our region,” Damodar Acharya, president of Nepalgunj Chamber of Commerce and Industry, said adding that it is the height of government’s apathy towards its people.
To transport a truck-load of goods from Butwal to Rolpa costs Rs 75,000 at present, whereas it will be reduced to Rs 25,000, if the syndicate system is put to an end. The syndicate system has been declared illegal by the court in 2063 BS. But it is still in practice in the region that is the most backward region.
“We are now compelled to stage a protest and sit-in in Kathmandu due to the state’s failure in protecting us from such illegal activities,” Hem Raj Pandey, president of Kanchanpur Chamber of Commerce said.
“Our major concern is security,” Gopal Hamal, president of Kailali Chamber of Commerce and Industry said, adding that 13 entrepreneurs have been attacked till date. “To delivery goods we need protection, and police and administration both failed us,” he added.
They urged the Constituent Assembly (CA) members to help them raise their voice in the house also. “We urged the representatives to speak on behalf of us in the CA and force the government to provide security,” Ishwor Acharya, president of Rolpa Chamber of Commerce and said.
The government is not serious to protect the transport sector that has Rs 45 billion investmentand employed around 0.1 million people. “A question has been raised on capital utilisation of such a huge sector,” Kush Kumar Joshi, president of FNCCI said, adding that the syndicate system has hit the whole Western and Far-western Development Region. “There is a scarcity of food and medicine but the government is behaving like it knows nothing,” he added.
To draw the attention of the government members of the different chambers of commerce from various districts are staging a sit-in at Maitighar Mandala in Kathmandu from yesterday in support of FNCCI. The umbrella organisation of private sector has also filed a case in the Supreme Court last week against it. “The syndicate system, queue system and the dial system are adversely affecting the business environment,” Joshi added. “Though the present law does not allow the syndicate system or monopoly it is being flagrantly violated.”
Various organisations like district chambers, NCC and National Consumers Forum have also called to end the illegal syndicate system.

Monday, August 11, 2008

NAC Boeing refused refuelling in Dubai

Nepal Airlines Corporation’s Boeing 757 failed to return to Kathmandu from Dubai last night because its fuel supplier did not refuel the aircraft.
Though the NAC is supposed to pay Shell every week, it failed to make timely payments for the third time, said a source at the NAC.According to the contract, the NAC must make payments to Shell every week to ensure smooth supply of fuel.
“The Gandaki aircraft (call sign 9N ACB), carrying around 55 passengers, was stuck at Dubai airport,” captain YK Bhattarai, who was to fly the aircraft back to Kathmandu last night, confirmed, adding that he stayed in Ramada hotel because the aircraft had run out of fuel.As they were not allowed to go out of the airport, the passengers spent the night in the airport lobby.
“The aircraft was scheduled to fly to New Delhi this morning, but could not,” the source said, adding that it landed at Tribhuvan International Airport in the afternoon and flew to New Delhi at 8pm.
Gandaki had returned in March after C-check in Dubai. Before the return of Gandaki, NAC had only one Boeing to operate on international routes.
As technical problems developed in Karnali, the other Boeing 757, the national flag carrier had no aircraft to operate on international routes.
NAC had bought Karnali on lease in 1987 and Gandaki in 1988.

Sunday, August 10, 2008

Nepse suspends brokers

Nepal Stock Exchange (Nepse) has suspended the transactions of two brokers — broker No 5, Market Securities Exchange and broker No 8, Ashutosh Brokarage and Securities — for manipulating the rules.
The Nespe has also suspended broker No 5 for three days and broker No 8 for a day.
“Broker No 5 was found manipulating the All Or None system on Thursday,” states a press release.
Similarly, broker No 8 has been suspended for a day after it was found guilty during electronic surveillance.

Saturday, August 9, 2008

Nepse in grip of bullish trend

Nepal Stock Exchange Ltd (Nepse) this week scaled historic highs for three days in a row — Monday, Tuesday, Wednesday before settling down at 1101.36 points on Thursday, the last trading day. Nepse gained 67.34 points to 1101.36 points from last week’s closing of 1034.02 points.Commercial banks group — a key player in Nepse —gained the highest of 85.93 points to 1166.98 points, pushing Nepse to new highs every day as it’s the beginning of new fiscal year when they have to publish their unaudited accounts. The investors judge the company’s performance — before buying the shares — from these unaudited reports but they may have huge variation and investors might be fooled.
The equities market is going to be on a roll the next week too, hoped market watchers. The financial institutions have started to announce the bonus and rights shares, and cash dividends encouraging investors to buy shares at high prices in the secondary market. However, investors should be careful not to be fooled though the bullish trend may continue for some time.
On December 17 last year, Nepse had touched 1064.1 points.
The market opened on Sunday by adding 13.65 points to 1047.67 points from the last week’s closing of 1034.02 points. On Monday, it surged by 27.67 points to 1075.34 points, a record high since the inception of the stock market some 15 years ago.
Led by the growth in the commercial banks group’s index on Tuesday also, Nepse hit yet another record high of 1102.10 points. Similarly, on Wednesday Nepse scaled a new high of 1128.13 points. However, on Thursday, the Nepse settled down to 1101.36 points hinting at yet another record the next week. The secondary market ended in the green zone on four days of the five days trading.
The contribution of companies listed under ‘A’ category is more than the past couple of weeks’. It contributed to 71.10 per cent against last week’s 62.78 per cent to the total transactions. The sensitive index also gained 20.35 points to 295.19 points from last week’s closing of 274.84 points.
In terms of monetary value, NCC Bank (with Rs 48.95 million), Bank of Kathmandu (with Rs 37.86 points), Nepal Investment Bank (with Rs 27.52 million), Cosmic Merchant Banking and Finance (with 23.17 million) and NIC Bank (with Rs 23.12 million) are this week’s top five gainers.
NCC Bank topped the chart in terms of monetary value and number of transactions, with 224 transactions. In terms of shares traded this week Cosmic Merchant Banking and Finance topped with 2,25,000-unit of shares transacted.

Friday, August 8, 2008

NOC promises smooth petrol supply in three days

Nepal Oil Corporation (NOC), the sole importer of petroleum products, today promised that it would supply petrol smoothly from Monday.
Acting on the suggestions of a group of Constituent Assembly (CA) members, NOC also agreed to collect advance from petroleum dealers by Sunday and supply the petrol from Monday.
At an interaction with the CA members at the Nepali Congress’ parliamentary party office today, NOC managing director Digambar Jha promised to ensure that petrol was supplied without hitch from Monday. “Cash-strapped NOC also got a letter today from the Finance Ministry saying that the corporation would be given Rs 540 million loan by Sunday,” Jha said.
NOC is earning a profit of Rs 4.11 per litre in petrol. Thus, it would be profitable to import more petrol, as that also help recover the losses in kerosene and diesel, NC leader and CA member Nabindra Raj Joshi said, adding that the government was getting Rs 27.22 revenue through the sale of every litre of petrol. He said alternative to price hike should be seriously explored.
“The price hike is governed by the international price,” said supplies secretary Purushottam Ojha, who is also the chair of the NOC. He admitted that it was imperative to restructure NOC and that it had been unable to implement the suggestions of several committees formed in the past to improve and systemise fuel supply.
The CA members also accused NOC MD and secretary of poor market monitoring as the market was awash with adulterated petroleum products. “How come petrol pumps are out of stocks while shops in the marketplaces are selling bottles of petrol at higher rates?” they questioned.
A group of around 20 young CA members headed by Nabindra Raj Joshi has been holding a gamut of interactions with all stakeholders since a week to solve the petroleum crisis.

Wednesday, August 6, 2008

Nepse hares past yet another high

Nepal Stock Exchange Ltd (Nepse) today hit yet another historic high of 1128.13 points, a rise by 26.03 points or 2.36 per cent from yesterday's closing of 1102.1 points, which also was a record.
Today is the third consecutive day that Nepse has been scaling new highs. It saw trading for only about half an hour today and suspended trading two-and-a-half hours before the normal trading duration of three hours.
Led by Nepal Investment Bank Ltd (NIBL), the commercial banks group pushed Nepse to its new high. NIBL gained Rs 327 per unit share today followed by Everest Bank with a Rs 172 per unit share increase. The commercial banks group added 36.51 points or 3.13 per cent to 1204.79 points.
Despite Securities Board of Nepal (Sebon) and Nepse's regular warning to them, investors are not fearful of the sustainability of the increase in Nepse. A fresh rise is expected tomorrow also.
Meanwhile, Nepse suspended trading of Siddhartha Development Bank Ltd's (SDBL) shares due to its contradictory report. "Earlier, the annual general meeting of SDBL had decided to give 1:5 rights shares to its investors, but now the Board of Directors (BoD) has decided to distribute only 1:1 rights shares to its shareholders," states a Nepse release.

New Sebon directives
KATHMANDU: Sebon has directed investors to mention their bank accounts, if they are applying for an initial public offerings (IPOs) worth more than Rs 10,000. "The directive will come into effect from Wednesday," said Dr Chiranjivi Nepal, chairman of the board. The money — when returned to investors after the allotment of shares — should be paid through account payee cheques, the new directive said. Similarly, money collected by the collection centres and deposited at bankers to the issue should be deposited in an account in the Nepal Rastra Bank (NRB) within five days of the closing of IPOs for a minimum of six days, Nepal said adding that the capital market is expected to be more transparent after the new directive.

Tuesday, August 5, 2008

Nepse crosses 1,100-point mark, still looks up

Nepse does it again.
In two days time, it posted another historic high and is 'still' looking up. Propelled by commercial banks group, Nepse crossed 1,100-point mark today to register 1,102.1 points from yesterday's record of 1,075.34 points.
The three-hour session of the market today suspended its transactions within one hour at 12.48 for the day as the Nepse registered an increase by more than 25 points. The financial institution-dominated Nepse witnessed only 191 transactions with a turnover of Rs 423.72 million in a day's trading today.
Nepal SBI Bank Ltd took a lead with its per share unit price increasing by Rs 166 followed by Standard Chartered Bank Nepal Ltd's per unit share increase by Rs 139.
Commercial banks group registered a growth of 37.13 points or 3.28 per cent to 1168.28 points, whereas development banks group gained 12.57 points or 0.85 per cent to 1497.96 points to push the the sole secondary market, Nepal Stock Exchange Ltd (Nepse) index up by 26.76 points or 2.49 per cent to 1102.1 points from yesterday's closing of 1075.34 points.
The sensetive index — a barometer of the A-class companies — has also posted a growth of 7.82 points or 2.72 per cent to 294.91 points. The total market capitalisation has also crossed the past records reaching Rs 4.25 trillion.
"The bullish trend is going to continue for some time," Nanda Kishor Mundada, president of Brokers' Association of Nepal said adding that it will continue for another three to four months with little corrections here and there. "But the Nepse will float above 1000-point mark," he claimed.
This is the begining of fiscal year and all financial institutions are making public their accounts. "Normally, Nepse posts growth this time of the year. Nepal Investment Bank Ltd has shown a good results yesterday pushing the market up," he said, adding that other companies are also posting good results."The major correction will come in December-January after the settlement of rights and bonus shares, and cash dividends," Mundada added.
"Apart from that when the 19 per cent promoters' shares will come to the market being converted into public, it will increase the supply of shares and market might react in a different way, then," he added.
At present, retail buyers are increasing pushing the index up. The new investors should be very careful not to be fooled.
Meanwhile, Securities Board of Nepal (Sebon), issuing a press statement has urged the investors to be very careful while investing. "Be careful of the noise creators, who can mislead," states the press note. Investors might find themselves on the road over night, if they do not look at profit and loss accounts, management, income per share, book value, risk factors and financial health of the company, warns the board, the regulatory authority of the capital market.
"The financial statements published by all the financial institutions at present is unaudited that may have a high variation in real terms," cautious the board. Last year, a bank's unaudited and audited reports showed a variation of upto 31 per cent in its net profit.

Monday, August 4, 2008

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.

Sunday, August 3, 2008

Bank bites off more than it can chew

Should investors believe the unaudited report of a financial institution and invest in it if there is a huge difference of detail between the unaudited report and balanced books of the institution? There is a 31.52 per cent variation between unaudited and audited accounts in the net profit shown by a bank's fourth quarterly report for 2006-07.
All financial institutions — commercial banks, development banks, finance companies and others — have to publish their unaudited balance sheet at the end of the fiscal year, according to the Nepal Rastra Bank's (NRB) directives in order to maintain transparency in the financial sector and inform investors of the financial health of the company.
Based on the unaudited report of a particular company or financial institution, investors decide whether to buy or sell the shares of that institution as the audited report takes a longer time to be published.
Commercial banks, a major propeller of the capital market, follow NRB directives 'ritually' but not seriously, shows a report. According to a variation analysis on net profit in the unaudited report in the fourth quarter and audited report in the fiscal year 2006-07, prepared by Securities Research Centre and Services (SRCS), one of the commercial bank's loss has even increased to 10.74 per cent in the audited report.
"The bank has shown Rs 104.6 million loss but according to its audited report the loss increased to Rs 115.9 million, a huge difference of Rs 11.24 million or 10.74 per cent," states the report.
However, Standard Chartered Bank Nepal (SCBN) and Laxmi Bank Ltd (LBL) are two banks which have nominal difference in their unaudited and audited reports. SCBN showed Rs 692.06 million net profit in its unaudited report while its audited report showed Rs 691.66 million, a difference of Rs 0.39 million or 0.06 per cent.
Similarly, Laxmi Bank showed Rs 655.08 million net profit in its unaudited report while its audited report showed the net profit standing at Rs 655.79 million — a minimal difference of Rs 71,000 or 0.11 per cent only.
Of the total 14 commercial banks analysed, most of these have differences in unaudited and audited reports ranging from 1.09 per cent to 5.40 per cent. However, Lumbini Bank reportedly has the highest variation of net profits — 31.52 per cent or Rs 71.18 million difference between its unaudited and audited report for the fourth quarter of 2006-07.
"That is because of the loan-loss provisioning," acting governor Krishna Bahadur Manandhar said adding that a bank may think its loan a good one or medium-risk and provision accordingly but NRB may differ on the quality of loan and the ensuing loan-loss provisioning may punch holes in its profit sheet.

Saturday, August 2, 2008

Brouhaha over promoters' share sale

Allegations of 'fraudulent' transaction in promoters' shares of Lumbini Bank has exposed the not-so-pretty face of the stock market that has been growing steadily over the recent past days.
A group of investors with their brokers today went to the office of Nepal Finance Company (Nefisco) to ask its chief executive officer (CEO) Sudhindra Lal Pradhan either to give them their share certificates that they have bought some six months ago or return their money.
They accused Nefisco of having cheated them by not disclosing the status of the shares that it sold them. The promoters shares have separate status and they can be bought and sold like ordinary shares also. "But the pricing mechanism is different," Anoj Agrawal, broker number 6, who has bought 3500 units of the disputed promoters' shares of Lumbini Bank Ltd said. He added that these have to be disclosed before selling. "But Nefisco did not disclosed the status of these shares," Agrawal said.Earlier, Nefisco had tried to sell its 1,00,000-unit of promoters' shares. But it could not sell these as its share certificate was marked promoters.
"Then they split the shares and this time they were successful in selling it at the market price," Agrawal said adding that due to non-disclosure of the promoters' share they 'fraudulently' sold these like ordinary shares.
However, Nefisco CEO Pradhan countered that Nefisco had not cheated any of the buyers. "In fact, we came to know after a long time that Lumbini Bank did not transfer the shares into the buyers' names," he said. Pradhan added that when Nefisco inquired of the bank it replied that the name transfers could not be done as the sold shares were promoters' shares.
"Lumbini Bank has to give in writting that the promoters' shares are not transferrable," Pradhan claimed.He also blamed the brokers for creating the commotion saying that they knew the status of the shares but did not take the investors into confidence.Agrawal said, "We also had several meetings with the Securities Board of Nepal (Sebon), Nepse, Lumbini Bank, Nefisco that sold the shares and also those investors who bought the shares." He added that Nepse had clearly told the finance company to return the money to the buyers but it was not showing willingness to do so.
Shovan Dev Pant, chief executive officer of Lumbini Bank Ltd said that Nefisco was required to come according to Nepal Rastra Bank's (NRB) regulations to sell promoters' shares. "As a commercial bank, we can not entertain any request that falls outside the purview of the NRB's rules and regulations," he said.

Friday, August 1, 2008

Revenue on rise, govt goes ga-ga

The government collected Rs 107.53 billion revenue in the fiscal year 2007-08 - a 23 per cent increase in comparison to the fiscal year 2006-07, according to the Nepal Rastra Bank."Such impressive growth of revenue was on account of substantial increase in import of merchandise goods and resulting increase in customs duties, VAT revenue and excise duties, increase in income tax and non-tax revenue," states the central bank.
Revenue mobilisation soared by 25.5 per cent amounting to Rs 90.17 billion in the first 11 months of 2007-08, compared to an increase of 20.8 per cent in the corresponding period last fiscal year.
Of the total revenue mobilisation, VAT revenue grew by 18.8 per cent to Rs 28.7 billion in mid-June 2008. In the review period, customs revenue rose by 21.2 per cent to Rs 18 billion compared to an increase of 11.4 per cent in the same period the previous year. Reforms in customs administration, increase in import of high tax yielding vehicles and spare parts as well as rise in the amount of Indian excise refund contributed to such a high growth of customs revenue.In the review period, excise revenue increased by 24.6 per cent to Rs 9.41 billion compared to an increase of 35.8 per cent in the same period of the previous year. Reforms in excise administration, identification of new excisable goods and increase in imports of high tax yielding vehicles accounted for such high excise revenue in the review period.
Income tax revenue increased by 29.8 per cent to Rs 14.54 billion in the first 11months of 2007-08. The evolution of corporate culture on account of growth in banks and financial institutions contributed to such a high growth of income tax collection. Last year such revenue had risen by 31.4 per cent.
In the review period, non-tax revenue grew by 41.7 per cent to Rs 15.55 billion compared to an increase of 19.7 per cent in the same period the preceding year. The increase in non-tax revenue was on account of increase in dividend paid by some public enterprises including NRB as well as the amount received by the government in the form of principal repayment from Nepal Telecom (NT), Nepal Electricity Authority and Civil Aviation Authority of Nepal.
In the last 11 months of the fiscal year 2007-08, the government received foreign cash grants of Rs 14.68 billion compared to that of Rs 13.38 billion in the corresponding period the previous year. In the review period, major assistance included support provided by Asian Development Bank (ADB) for the Rural Reconstruction and Rehabilitation Sector Development Programme (RRRSDP), Germany for Middle Marsyangdi Hydroelectric Project, World Bank for Poverty Alleviation Fund, Road Sector Development Project, Irrigation and water Resources Management Project and Education For all Projects,the UNICEF for Decentralised Action for Children and Women, Health and Nutrition, and HIV/AIDs programme and Finland for Rural water Supply and Sanitation project.

Rise in Revenue
*12 months -- rose by 23 per cent to Rs 107.53 billion revenue in comparision to the last fiscal year
*11 months -- rose by 25.5 per cent amounting to Rs 90.17 billion compared to an increase of 20.8 per cent in the corresponding period of last fiscal year
*10 months -- rose by 24 per cent ammounting to Rs 78.99 billion compared to an increase of 22.5 per cent in the corresponding period of last fiscal year.
*Nine months -- rose by 25.1 per cent amounting to Rs 70.85 billion compared to an increase of 22.2 per cent in the corresponding period of the last fiscal year
*Eight months -- rose by 26.2 per cent amounting to Rs 60.61 billion compared to an increase of 16.4 per cent in the corresponding period of the last fiscal year