Market lukewarm despite healthy indicators

The Nepse index consistently shed points (-1.03%) since the first trading day of the week and closed at 709.82 points. Sunday saw a sudden surge in investor confidence backed by Standard Chartered Bank´s (-Rs.8) declaration of 50% each of bonus share and cash dividend. However the optimism waned out promptly as investors remained lukewarm despite robust profits announced in the latest quarterly reports, lucrative returns in the form of bonus and cash dividends, and liquidity offered by money returned from IPO allotments of Public Development Bank and Arun Valley Hydropower. [break]



This can be attributed to investor anticipation of a supply pressure in the market in the near future due to rights issues and promoter share conversions. Consequently market turnover (Rs 63,65,74,824) saw a 1.90% drop in daily average turnover from last week -- though total weekly market turnover increased as there were only three trading days last week -- despite bulk-trading observed of Butwal Power (-Rs 173 ), National Hydro Power (-Rs 3), Laxmi Bank (+Rs 26), and Nepal Investment Bank(-Rs 45).



Of the six sectors that were active this week, all but the Others sub-index (+0.71%) were in the red. Commercial banks comprised Nepse´s top five turnover chart in spite of which the sub-index (-0.99%) declined consistently, fueled further by the price adjustment post book closure on rights issue of Lumbini Bank (-Rs 48). The Development Bank and Insurance sectors shed 1.57% and 0.42% respectively while Hydropower (-8.18%) suffered major losses due to Butwal Power´s (-Rs 173) price drop. The Finance sector´s (-1.27%) losses can be attributed to the price adjustment of Kaski Finance (-Rs 570) and Fewa Finance (-Rs 436) post book closure of their 1:2 rights issue.



Amongst other news, Annapurna Finance started issuing 1:1.6 right shares for which it had its book closure on July 31, while Malika Development Bank started issuing 1:3 rights shares from August 17 and Lord Buddha Financial Institution is issuing 2:1 right share from September 4.



Nabil Bank´s proposal of 35% cash dividend and 50% bonus shares, announced on August 21 has pleasantly surprised investors, which may temporarily buoy the market. However, investors seem to be uncertain -- as also demonstrated by conflicting technical analysis indicators -- and have longer term concerns with regard to whether companies will be able to provide similar returns in the coming years, and over an impending supply pressure which is reflected in the reduced daily volume.

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