Weekly Market Commentary

Stocks extend losses as Nepse sheds 100 points in 4 weeks

Published On: December 8, 2018 03:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 8: Stocks witnessed a turbulent week as the Nepal Stock Exchange (Nepse) index fell further stretching the prolonged downturn since more than two years. Stocks tanked on the first trading day of the week with the index dropping more than 17 points.

The sell-off eased slightly on Monday with the market adding a single point. Stocks clawed back further on Tuesday with the Nepse index posting a gain of more than 10 points, only to give up 24 points on Wednesday. The last trading day of the week saw the index recover slightly and climb almost 3 points. Ultimately, Nepse ended the volatile week firmly lower at 1,120.84 points, a drop of 27.52 points against the week earlier.

The sentiment remains fairly bearish as Nepse continued to tumble losing more than 100 points in four straight weeks. The skepticism was further fueled by few banks providing high interest rates following the Nepal Bankers' Association (NBA)'s decision to dismiss the interest rate cap on deposits which was in effect since the last two months.

Hence, substantial selling pressure was seen in some of the sessions of the week. Meanwhile, weekly turnover increased by more than 46 percent to Rs 2,228 million compared to the preceding week.

Sensitive Index, which measures the performance of Class 'A' stocks also closed the week significantly lower and fell 2.38 percent. In terms of sector-wise performance, microfinance stocks posted significant move to the downside. The group's sub-index tanked 4.42 percent. Further, hydropower stocks continued its downward rally with the respective sub-index slumping 3.61 percent.

Similarly, non-life insurance sub-index posted a loss of 3.56 percent. Sub-indices of hotels, life insurance and development bank scrips followed suit with losses of over 2 percent each. Market bellwether banking sub-index also shed over 2 percent.

Among major announcements in the week on review, Nabil Bank Ltd declared 34 percent total dividend to its shareholders, including 12 percent bonus shares and 22 percent cash dividend. Likewise, Global IME Bank Ltd also announced 16 percent stock dividend to its shareholders.

Meanwhile, Sahayogi Vikas Bank Ltd will be distributing 17 percent cash dividend. Nonetheless, all declarations are pending approval from their respective annual general meetings (AGMs).

In other news, Joshi Hydropower Company Ltd and Chautari Laghubitta Bittiya Sanstha Ltd floated their corresponding initial public offerings (IPOs) worth Rs 169 million and Rs 56 million in the week. While the energy sector company has closed its issuance on Wednesday, the latter will close its issuance on December 9.

As per the ARKS technical analysis, the index formed a bearish candlestick on a weekly timeframe stretching losses to almost hit 3-year weekly low. Weekly Relative Strength Index (RSI) has hit the oversold zone, while Moving Average Convergence Divergence (MACD) is tilted downwards after forming a dead cross.

Technical indicators suggest that the equity market is not likely to recover from its sustained downtrend in the present context. Nonetheless, a short retracement can be expected after the Nepse's free-fall in the past month.

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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