Nepse Targeting 500
By Rabindra Bhattarai
The NEPSE index has hit a seven-year high. It not only exceeded the psychological mark of 400 but struck 424 on November 7. It is now targeting to reach the 500 region in the near future as impressive progress was being reported in the peace negotiations between the seven parties and the Maoists.
The recent growth in NEPSE is, however, not solely due to political developments. The banks are announcing bonus and right share issues to increase their paid up capital. Most banks reported better performance in the first quarter of the current fiscal year as compared to the corresponding quarter the previous year.
During the two months from September to early November, NEPSE index has gone up by over 40 points. And so have the foreign bourses. In the same period, the Indian blue chip index Sensex and American Dow Jones Industrial Average (DJIA) have also recorded their historic new highs.
At the same time the market prices of the many Nepali companies have recorded new high. The examples are not only in banks. Apart from banks like Standard Chartered Bank Nepal (SCBNL), Siddhartha Bank Ltd (SBL), Nabil Bank Ltd., Kumari Bank Ltd (KBL), Lumbini Bank Ltd (LBL), non-banking companies such as Chilime Hydro Power Company, have registered new highs.
The up-trend in the NEPSE index is continued since last several months. In this rally, the NEPSE index crossed 400 points after Tihar. The increasing uncertainties of the negotiation for the political settlement before Tihar had slightly affected the market. However, as one company after another started announcing dividend and right share issues, the market quickly started its upward journey. SCBNL, Bank of Kathmandu Ltd (BOK), Nepal Investment Bank Ltd (NIBL), Nepal Housing and Development Finance Ltd, NIDC Capital Markets announced bonus share as well cash dividend whereas Everest Bank Ltd (EBL), Nabil Bank Ltd, Bishal Bazar Company, Uniliver Nepal Ltd, Butwal Power Company, Prudential Bittya Sanstha Ltd. announced only cash dividend. Similarly, Laxmi Bank Ltd (LBL) and Siddhartha Bank Ltd (SBL) each announced plan to issue 20 per cent right share to increase the paid capital. After the right issue, the paid up capital of LBL will reach Rs. 630 million and SBL Rs. 600 million. Development Credit Bank Ltd (DCBL) has that it will distribute 12 per cent bonus share in its aggressive quest to be a commercial bank very soon. After this issue, the total paid up capital of DCBL will increase to Rs. 260 million.
After 35.46 per cent bonus share issue for the fiscal year 2005-06, NIBL will be the first bank to meet Rs. 800 million paid up share capital requirement of the Nepal Rastra Bank.
Everest Bank has proposed to issue convertible preferred stock at premium to increase the paid up capital. If it is approved in the AGM, it will probably be the first convertible preferred stock issue in the history of the Nepali capital market. At the same time, it is also the first security to be issued in premium here. Convertible debenture was already issued by Shree Ram Sugar Mils Ltd in 1998. Investors are likely to be attracted to the preferred stock from the Everest Bank due to its sound financial performance as well the high market price of its common stock. Currently the market price of the company is Rs. 1,475 per share. After the conversion of the preferred stock, the control position, earning per share and dividend per share of the existing shareholder will be diluted.
Chilime Hydropower Company is also trying to issue 23 lakh shares to the general public. This company has already issued 24 lakh shares to its employees and currently its market price is over Rs 500.
