Daily market commentary

Nepse extends gains as micro finance shares surge

Published On: August 1, 2019 02:45 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 1: Local equities traded flat in the morning trading on Wednesday. Consequently, the Nepal Stock Exchange (Nepse) index wavered along its opening in the first half of the trading session. However, a surge in the afternoon saw the index climb more than 8 points. After retracing slightly in the remaining trading hours, Nepse ended the day with a gain of 6.20 points at 1,265.57 points.

Stocks continue to post moderate gains recouping most of the losses that came on Sunday. With the day's gain, market activity also saw some improvement as daily turnover grew by 26 percent to Rs 370 million.

Investor sentiment was also lifted on the day following the meeting between government and other stakeholders regarding the much disputed capital gain taxation method in the secondary market which was introduced at the start of this fiscal year. The meeting concluded that the cost of any share for gain calculation will be based on historical weighted average of its prices giving some respite to shareholders.

Earlier, shareholders had to provide the details of their purchase transactions and calculate the respective weighted average cost to submit to the broker office in written form. In case of inability to present such details, the buying cost would be set as the face value of the underlying share making investors liable to pay significantly high taxes in many cases.

The broad rally saw all sectors close higher, barring Development Bank segment which closed marginally lower. Microfinance stocks continued to lead the advances. The group's sub-index notably outperformed the broader market with a 3.49 percent surge. Strong financial performance reported by most of the companies, among others, is one of the main reason for the advance. Further, Trading and Non-Life Insurance sub-indices also registered gains of over 1 percent each. Mutual Fund and Life Insurance sub-indices, meanwhile, added around 0.8 percent each. All other sub-indices ended the day in green.

Microfinance stocks dominated the list of top advances. 14 micro sector lenders surged over 9 percent on the day. Among others, Civil Laghubitta Bittiya Sanstha Ltd, Vijay Laghubitta Bittiya Sanstha Ltd and Laxmi Laghubitta Bittiya Sanstha Ltd closed 10 percent higher each.

On the other hand, Union Hydropower Ltd and Radhi Bidyut Company Ltd's scrips suffered. Both fell 4 percent on Wednesday. Shrijana Finance Ltd closely followed with a loss of 3.77 percent. World Merchant Banking & Finance Ltd, Shree Investment Finance Co. Ltd and Arun Valley Hydropower Development Co. Ltd, subsequently saw modest declines.

Vijay Laghubitta Bittiya Sanstha Ltd and Mirmire Laghubitta Bittiya Sanstha Ltd published their fourth quarter financials. Both microfinance's saw their respective earnings grow by more than 100 percent on year to year basis. Meanwhile, earnings of Hathway Finance Ltd and Kalika Laghubitta Bittiya Sanstha Ltd slumped by 56 percent and 20 percent, respectively.

ARKS technical analysis indicates the market forming three small bullish candlesticks in a row recouping Sunday's losses. Hence, technical indicators suggest a neutral sentiment with Relative Strength Index (RSI) resting exactly at middle of its spectrum and Moving Average Convergence Divergence (MACD) line trending flat at neutral line. Hence, further confirmation with bullish candles in the forthcoming sessions might indicate a possible movement to the upside in the short run.

This column is produced by ARKS Capital Advisors Ltd

(Views expressed in the article are those of the producer and do not necessarily reflect those of this publication)


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