KATHMANDU, Sept 21: Nepal Stock Exchange (Nepse) index fell marginally over the week as selling pressure caused stocks of banks and insurance companies to move lower.
The benchmark index which stood at 420.83 points on Sunday fell to 420.44 points when the market closed down on Thursday, the last trading day of the week, following drop in banking and insurance sub-indexes, Nepse report shows.
This decline erased Rs 370 million in market capitalization from the stock market over the week.
The Nepse report shows that banking sub-index fell to 366.42 points when the market closed on Thursday from Sunday´s 370.15 points. This was due to drop in share prices of honchos like Standard Chartered Bank Nepal, Nabil Bank, Himalayan Bank, Nepal Investment Bank and Everest Bank.
Among these major banks - that together make up 27 percent of the total market capitalization - Standard Chartered lost the most over the week, with its stocks dipping Rs 76 to close at Rs 1,764 on Thursday.
Nabil Bank also lost Rs 15 over the week to close at Rs 1,470, while Himalayan Bank made a marginal loss of Rs 2 and closed at Rs 719 on the last trading day of the week. Other major banks, Nepal Investment and Everest also shed Rs 13 and Rs 18, respectively, and ended the week at Rs 539 and Rs 1,135, respectively.
“Stocks of banks took a beating this week, as dividend declared by most of them fell short of expectations of investors, spurring dumping of shares. As the selling spree began, others, who were previously planning to continue holding stocks, changed their mind and joined the bandwagon, causing the entire banking sub-index to slide,” Anjan Poudel, a stock broker, said.
Since commercial banks command more than 50 percent of the total market capitalization, any movement in the banking sub-index affects the benchmark index as well.
Another reason that pushed the Nepse index in the red territory was losses made by insurance companies. The insurance sub-index dipped 1.6 percent, or 10.84 points, to close at 658.8 points on Thursday, as stock market favorites like Life Insurance Company and Nepal Life Insurance Company shed Rs 49 and Rs 128, respectively, to close at Rs 1,201 and Rs 1,141 for the week.
“Shares of insurance companies fell after share transaction of Everest Insurance was halted following its tussle with Insurance Board (the insurance sector regulator),” Poudel said. “This event had a negative impact on stocks of all insurance companies.”
Before Everest Insurance entered into head-on collision with the regulator - by partially halting its business, interest of investors on stocks of insurance companies was increasing. One reason behind this was the regulator´s instruction to raise paid-up capital of life and non-life insurers to Rs 500 million and Rs 250 million, respectively, by mid-July next year. This had raised the prospects for distribution of bonus shares by these companies.
“Besides, investors, who were not able purchase share of banks and financial institutions due to restriction on cross-holding, were eyening shares of insurance companies as they were cheaper than those of other alternatives like hydropower companies and telcos like Nepal Telecom,” Poudel said. “But this enthusiasm evaporated quickly due to Everest´s case, which pulled down the entire insurance sub-index this week.”