The benchmark index closed at 499.99 points, a notch below the psychological 500-point level, on Thursday, the last trading day of the week, as investors regained confidence following Securities Board of Nepal´s clarification that the new provision that allows conversion of additional 19 percent promoter shares of banking institutions into public shares through stockbrokers will not flood the market with shares and cause stock prices to drop. [break]
“The benchmark index was slipping ever since the new provision was introduced couple of weeks ago,” Stockbroker Anjan Poudel told Republica. “But it seems the press conference organized by the regulator to allay market fears worked.”
The benchmark index, which had crossed 520-point mark in mid-April, had started retreating after the Securities Board of Nepal (Sebon) introduced a new provision that allowed banks and financial institutions to float up to 49 percent of promoter shares on the stock market, as against 30 percent in the past.
Although this provision was introduced in the past, promoters, previously, were allowed to offload these shares through offer documents, which cost couple of hundreds of thousands of rupees to produce.
The provision to sell promoter shares using offer documents is still intact. But in additional to this, promoters can now sell their shares through stockbrokers.
At a press conference held on May 6, Sebon Chairman Babu Ram Shrestha had said: “So far we have not seen huge number of shares being dumped and we probably won´t see such development taking place unless new investment avenues open up.”
During the week, all sub-indices, except trade and hotel, made considerable gains. But the biggest gainer was the insurance sector, which added 72.99 points, or 9.27 percent, to its sub-index.
“Insurance companies have so far been giving good returns to shareholders, which has been the biggest motivating factor to purchase shares of insurance companies,” Poudel said.
Over the week, share price of Nepal Life Insurance Company gained Rs 190 to close at Rs 1,310 on Thursday. Share price of Life Insurance Company also jumped Rs 132 to end at Rs 1,100 on Thursday, while stock price of National Life Insurance Company ended the week at Rs 555, up from Sunday´s opening of Rs 534.
Shares of major commercial banks also performed better during the week. Stock price of Nabil Bank gained Rs 65 to close at Rs 1,750 on Thursday. Everest Bank also closed its weekly account 37-rupeee higher at Rs 1,556. Similarly, Nepal Investment Bank added Rs 43 to its share value to end the week at Rs 733, while Himalayan Bank ended the week at Rs 728, up from Sunday´s opening of Rs 695. The only exception was Standard Chartered Bank which saw its share prices slip Rs 5 to close at Rs 1,755.
Despite modest optimism shown by investors, the share trading amount fell 34.07 percent to 337.16 million over the week. “This is largely because of surge in previous week´s transaction amount due to heavy trading of shares of Nepal Bank Limited,” Poudel said. “The transaction of state-run bank´s shares surged in the previous week in the run up to halt in their trading prior to distribution of rights shares.”
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