Weekly Commentary

Stocks close week higher despite Thursday’s losses

Published On: August 14, 2020 08:35 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 14: The stock market opened the week on a firmly upbeat note with the Nepal Stock Exchange (Nepse) benchmark index adding 11.3 points on Sunday, followed by a gain of 37.73 points on Monday.

Stocks retraced slightly on Tuesday with a loss of a modest 6.6 points. Further, Wednesday witnessed a flat close with the benchmark eking out a gain of 1.51 points, while the index erased some of its early week gains on Thursday registering a loss of 16.53 points. Consequently, the index closed the week 27.42 points, or 1.98 percent, higher at 1,408.79 points.

After some firm correction in the prior week where the index tumbled almost 60 points, the index has now found its footing at around 1,400-point mark. The index, which saw significant upward momentum after lockdown, has lost some steam in the past couple of weeks. With the coronavirus pandemic taking its toll on lives and the economy, investors seem relatively less enthused to take heavy buying positions in the current juncture. Besides, a number of banks and financial institutions (BFIs) published their unaudited yearly financials in the week where most of them have reported a drop in their earnings. While a knock on the performance of BFIs was already expected, buyers are now approaching the market with much caution. Meanwhile, the Nepalese bourse continues to see active participation with average daily turnover standing at over Rs 1 billion in the week.

Sensitive Index, reflecting the performance of Class ‘A’ stocks, also closed 1.48 % higher. Among sectors, most of the major sub-indices ended the week in positive territory, barring Hotels and Trading segments which inched marginally lower. Non-Life Insurance stocks saw significant strength with the sub-index shooting up by 5.68 percent. Its counterpart Life Insurance sub-index also jumped 2.86 percent. Mutual Fund, Banking and ‘Others’ sectors followed the suit with advances of Rs 2.69 percent, 1.85 percent and 1.83 percent, respectively.

Nepal Reinsurance Company Ltd has been one of the most active stocks since its listing. The reinsurer has continued to lead the weekly turnover chart with over Rs 466 million worth of its share traded in the review period. Nepal Life Insurance Company Ltd also saw a turnover of almost Rs 400 million. Ajod Insurance Ltd, NIC Asia Bank Ltd and NMB Bank Ltd were the other active stocks of the week.

On Friday, a number of the heavyweight banks published their fourth quarter earnings results. While NIC Asia Bank Ltd’s net profit saw a modest increment, few other major banks saw a drop in their earnings. In spite of the declines in their profit after tax, banks have witnessed improvement in terms of their core business as many have reported decent year-on-year growth in deposit and lending.

In terms of ARKS weekly technical analysis, the market formed a bullish candlestick with long wicks on either side signifying notable volatility in the equity market. The market tested 1,350 to 1,360 points’ zone in the week but witnessed a notable rebound from that point making the aforementioned level a crucial area of support. On the other hand, the index also could not beat its previous weekly closing high at around 1,440 points. Hence, the market is likely to consolidate around this range making a breakout beyond these levels crucial for determining possible course of the index.

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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