The index, which opened at 496.92 points on Sunday, rallied 20.95 points, or 4.21 percent, over the week to reach the height last scaled in January 2010, driven by bank stocks.[break]
This led the banking index, which contributes to 50 percent of the total market capitalization, to rise 6.72 percent, or 31.43 points, over the week to close at 499.12 points on Thursday -- the last trading day of the week.
Stock market experts, however, cannot give specific reasons that are triggering the bank stocks to take a leap.
For instance, it has already been a month since commercial banks came up with their first quarter balance sheets and investors will have to wait for at least a month to see their second quarter results. At the same time, the recent scam on good-for-payment checks at H&B Development Bank has shaken the foundation of the banking sector, which has once again raised the question on integrity of bankers.
“Despite these reasons, commercial banks are considered relatively robust in nature than other listed companies, as they are replete with capital and can absorb minor shocks easily,” Stock Broker Anjan Poudel said. “Because of this reason stocks of banks are highly traded these days.”
The Nepse´s weekly report shows that the list of top five companies in terms of trading was dominated by commercial banks during the week, with Nepal Investment Bank leading the pack with share transaction amount standing at Rs 95.38 million. Everest Bank was next in the list, recording share transaction of Rs 64.77 million. Next in the line was Bank of Kathmandu, which witnessed shares worth Rs 61.15 million changing hands.
These transactions played contributory role in raising total share trading amount to Rs 758.59 million during the week, up 121.46 percent from that of previous week.
Although the hike in trading amount reflects upbeat investor sentiment, share market analysts again cannot provide specific reasons that are boosting investor confidence.
For example, the political situation has not improved much, with the ruling parties still hesitating to step down to pave way for creation of the national consensus government. At the same time macroeconomic indicators are also not encouraging.
The country´s total trade deficit widened by 36.3 percent to Rs 152.38 billion in the first four months of the current fiscal year. This caused the current account - the difference in the country´s earnings and expenses on goods and services - to post a deficit of Rs 1.77 billion in the four-month period, as against a surplus of Rs 20.73 billion reported in the same period last year. Because of these reasons, the country´s surplus in balance of payment - the total transaction in the economy - shrunk to Rs 140.7 million in the four-month period as against a surplus of Rs 46.31 billion in the same period last year, causing the money supply growth rate to shrink to around four percent.
“Still, investors are flocking the share market because there are no investment avenues,” Poudel said. “In addition, reductions made by banks and financial institutions on both deposit and lending rates have also attracted people to the stock market.”
This decision made by banks and financial institutions, on one hand, has made credit cheaper for those wanting to invest in stock market, while, on the other, discouraged depositors to park their money in bank accounts, as returns are now higher on stock market.
“Besides, introduction of facility on margin loans - credit extended by financial institutions on guarantee extended by stock brokers - at relatively affordable rates of 13 to 14 percent around three months ago has also encouraged investors to turn to the share market,” Poudel said.
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