NEPSE index hits all time high, Gains Rs 68b in a year

NEPSE index hits all time high, Gains Rs 68b in a year
eKantipur.com, 6-Jun-2007
BY KRISHNA REGMI

The stock market rose to a historic high Wednesday amid soaring speculative buying and investors' expectations that the economy will gain momentum with the ending of the 11-year old conflict.

The Nepal Stock Exchange (NEPSE) rose 5.82 points to close at 549.96 points at today's transactions, supported by growing share prices of commercial banks. The new record beats earlier all-time-high of 545.82 points registered in the fiscal year 2000/01.

The stock market today gained nearly two billion rupees in its market capitalization -- the value of listed shares. It reached over Rs 148.84 billion.

After Janaandolan-II which overthrew the King's direct rule 13 months ago, the market has continued to stay on an upward trajectory. Since then, the stock market has gained a staggering 200 points in its index. Likewise, market capitalization has expanded by over 68 billion rupees.

This means investors who bet their money in shares immediately after the installation of democratic government have already earned a return of 85 percent over what they invested.

“I earned more than Rs 100,000 from my petty investments in shares in a year,” said Mohan Rai, a small investor. But, he says he does not know why the equity market is doing so well.

“I put money in shares just because others are earning from it. And I am happy that share prices of Everest and Investment Bank, where I have invested, are on the rise,” he said.

In an attempt to quell the unnecessary rise, the stock market today halted the trading of the National Hydro Power shares, immediately after its share prices began to cross over 10 percent mark.

Nepal's stock market is dominated by commercial banks and movement of their share prices largely cause the market to go up and down. Of the listed 133 companies, 15 banks make up around 70 percent of the total market capitalization.

Ishwori Rimal, a broker, said that investor confidence has grown with the return of peace in the country. “In addition, there are still no other good investment opportunities. So, people are increasingly locking their money in equities,” he said.

He said the recent policy of the central bank which requires commercial banks to raise their paid-up capital to two billion rupees has heightened investors' expectations to get more bonus shares. This has driven share prices upward.

However, Radhesh Pant, president of Nepal Bankers' Association said that it was not a reasonable cause to justify the rise in share prices.

“I do not believe share prices should go up when paid-up capital of banks is raised. When the banks provide stock dividend, the value of company does not ramp up, it declines rather,” said Radhesh Pant, president of Nepal Bankers Association.