Optimism boosts investors' sentiment

The market (+3.76 percent) continued its positive trend this week as optimism prevails amongst investors regarding the current political situation. The Nepal Stock Exchange (Nepse) index closed at 479.4 points and the surge in stock prices for three consecutive weeks indicates that the market participants are beginning to embrace investments in the secondary market.



A positive tone permeated most of the sub-indices. The strongest move was by the Commercial Banking sector (+5.93 percent) as the prices of Nabil Bank (+Rs. 170) and Bank of Kathmandu (+Rs. 45) appreciated. Pashupati Development Bank (+Rs.98), which closed its book on 28 May for 1:2.5 right shares, and NDEP Development Bank (+62) were the top gainers of the week lifting up the Development Banking sector (+6.18 percent). [break]



Similarly, the Finance sector (+2.80 percent) also gained points as the prices of Pokhara Finance (+Rs. 53) and Api Finance (+Rs.44) went up. The Hydropower sector (+2.86 percent) also ended the week at a stronger point as the stock prices of Butwal Power Company (+Rs. 60) and Chilime Hydropower (+Rs. 45) increased.



Asian Life Insurance (-Rs. 104) topped the losers´ chart this week. Nevertheless, the Insurance Sector (+1.29 percent) recovered due to the rise in the share price of Rastriya Beema Sansthan (+178). However, value of Nepal Doorsanchar Company (-Rs.9) tumbled dragging down the ´Others´ sub-index (-1.88 percent).



Amongst other highlights, Nepal Stock Exchange has suspended the trading of Madhyamanchal Grameen Bikas Bank until further notice and Nepal Rastra Bank has taken over the management of the bank due to the alleged involvement of the board members with Unity Life International.



A new provision was introduced by Securities Exchange Board of Nepal (SEBON) that now allows companies to go public before they begin operation. This provision hopes to encourage Manufacturing, Hydropower, and the Real Estate sector to get enlisted in the secondary market. News has surfaced that margin lending has actually gone up despite the fall in the market.



On the declaration front, Chimmek Bikas Bank announced 1:1 right shares. Yeti Finance is selling undersubscribed right shares on auction. On the IPO side, application for Western Development Bank and Suryadarshan Finance starts on June 1 and June 7 respectively.



Forecast



Technical analysis signals a short-term uptrend and the market has achieved a new support and resistance level. However, volume has not yet observed a significant advancement which questions the strength of the rise. In addition, lingering concerns on the political scenario is a factor to consider in regard to the sustenance of the uptrend.

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