Market fall: An Investor's Perspective

Rajesh Sharma

I had a long conversation yesterday with a friend of mine who is also an investor - not so big, but not so small either. The following text is direct quote from him. Yes, the text I have written but being as true to his words as possible. This may represent the reality, I am not sure, but after getting his permission, I have put his perspectives below.

"It started with "hunting down SCB" strategy of a few investors , when SCB made it public that it will issue FPO and will capitalize the funds generated through FPO to meet its capital requirement. This was one of the most attractive proposal for investors. So, this "hunting down" strategy was crafted to grab SCB shares. Hence, confusion was created by magnifying the ambiguity due to the * used in clarification in its notice.

It worked well and new comrades joined the chorus raising the 'nationalist' slogan against a foreign companies' loot through FPO. There were others who raised the banner of anti-FPO. Hence, the "hunting down brigade" became successful attaining a level of SCB price beyond their target of below 3500.

I also had sold already SCB at around 3700. When it came around 3500, I bought using my all resources thinking that the target of "hunting down" team has been achieved and the price, now, will stabilize or will increase. The "hunting down" team also purchased but I am not sure in what scale they did.

In between, a few big investors seen in panic guessing that after 1000 and 500 Rupees notes demonetized by India, Nepal may do some investigation on money invested in the market where it is not that possible to show the source. The SEBON initiated investigation was already a terror to some. They started to sell in a big way.

When EBL made its dividend public, the fearful big shots got a good opportunity to offload EBL shares in big scale. Market started to go down and down when the fear across investors, traders whether they were big or small run as a tempest.

Mutual Funds were apprehensive already. They manage small savings and it is natural if they become defensive. They are not market makers. They stopped buying shares. This fact contributed to already running negative sentiment to accelerate.

Hence, market moved beyond the expectations of the people who initiated "hunting down SCB" in a small way. Many traders are already out of market, may be they may not return for long. Personally, I am also in a big loss. But for me, there is hope as the market may rebound within a few months. At least, it will reach the same level during next dividend season. I hope you will also hold your shares."

Market Fall and Experience

Rajesh Sharma

For them who have seen market down and down and down from 1175 to 292, this fall is digestible. We saw darkness, and afterward we saw light. After that heavy Earthquake in the market, we have reconstructed our emotional state of being with light Japanese construction materials.

Market and forum participants

Rajesh Sharma

Many friends have been seen desperately trying to pass their opinion in the form of news or message that due to some this or that reasons market has been down and it will bounce back.

Other set of friends are passing their message that market will go further down.

There is a third set of people who are predicting doomsday in Nepalese share market.

I think, this is basically a free market and everybody will do what they like to do. When demand dominates, price increases and when supply dominates, price decreases. The market over rules all other factors.

The optimists including myself will hold, enthusiastic optimists will buy. Fearful people will sell though with heavy heart and reluctantly. They are compelled to sell due to their need of funds, fear of further down of the market, strategy to buy when the market decreases more etc.

Let's accept the reality that we have no power to control the flow of supply or increase in demand. Rather than blaming the sellers for decrease in Nepse, let"s firmly take our positions be it buy, or sell or hold.

Yes, I agree that the third set of people are vagabonds or paid agents or sadists. They are irritating and allergic. Hence, I also blocked a few reluctantly. I agree with the great French philosopher Voltaire, when he says, " I Disapprove of What You Say, But I Will Defend to the Death Your Right to Say It," But, allowing barking street dogs at the middle of the night was too much and I were not Voltaire. I am only a tiny follower of his.

Market Turmoil and We Investors

Rajesh Sharma

Market fall down sharply. Today, it closed in nominal green zone.

I was surprised seeing market down for several days. I tried to understand the reasons. People discovered many reasons but for me, there are no convincing reasons. Yes, there are many peripheral reasons, and some speculative reasons.

Hence, I have come to the conclusion that the market movement was due to demand and supply factors contributed by several peripheral reasons including India's demonetization of 1000 and 500 Rupees notes, which triggered on speculation about probable investigation on black money injected into Nepali share market. The fear among a few big investors expanded and spread like wild fire that engulfed even small investors. Moreover, this was not a single reason and other many small-impact news, greed, hurry, crowd mentality, intrigues, rumors all played small or big role. Hence, we all were in confused state of mind. In this cloudy state, some of us sold, some bought and many hold.

Now, the dust seems starting to gradually settling down. What we did during the days of turbulence was right given the situation. Profit and loss are part and parcels of any business. So, happened that way. We might have accumulated profit or we might have incurred loss; that all is past now. We can not change the past, nor we could guarantee the future course. Hence, the most important responsibility for us for now is making peace with ourselves.

Still, the turmoil in the market has not been over, nor that would be over infinitely. Hence, we should sell or buy or hold according to our situation and choice. However, in any case we should not forget our roots and we should not loose hope. Beyond investment also there is a beautiful life.

Disclosure: I hold all my shares during the days of recent market turbulence. I had loss in paper of about 9% in the last two months.

Buyers, Sellers and Onlookers

Rajesh Sharma

There are three types of people in a market on day to day basis, who often use media interestingly.

1. Buyers: In forums, portals, newspapers, TV etc. they propagate "Market Down", particularly they project the company of their choice as "Red" like blood. So they are "bloody Buyers".

2. Sellers: They do exactly opposite of sellers. They project the company they are going to sell as green as sky. Hence, they are "Sukulgunda sellers".

3. Onlookers: They are simply Ramite, but pretend in all above mentioned media as "Analyst Par Excellence". They lecture shareholders as if they are here from heaven to distribute free expertise so that investors/traders could earn money in a single transaction of 100 Kitta shares of NHPC, which they could keep in safe deposit vault and could spend without any personal responsibility whole of their life as that is gift from heaven for them. In reality, they are "Rubbish Ramites.".

May be, there are exceptions, I do not know. Yes, the good investors/traders do business silently and coolly. So, they are absent from media as mentioned above may be with some exception.

P. S. Please do not ask, which category I belong to.

Market: Bear Phase?

Rajesh Sharma

Some people have started to open the discussion that the market has entered into the bear zone. Is it so?
Let's see when market enters into a bear phase?

"A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases. Although figures vary, a downturn of 20% or more from a peak in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over a two-month period is considered an entry into a bear market."

http://www.investopedia.com/terms/b/bearmarket.asp

The keys here are 2 months time and 20% down in index.

We had highest index in 27.7.2016, which was 1881. Two months ago, in 18.9.2016, the index was 1804. Now, yesterday on 17 December 2016, the index was 1658. The Index is down by 12% from the peak in July 27 and 8% from two months ago that is 18.9.2016. Hence, by definition it is simply correction and not a bear phase. It is too far from bear as such.

The forums are full of people with high voltage energy, hence they generally magnify the facts and over play with reality. When it starts moving up they start saying it will reach 2500 and when it starts falling down they bring it to 1200. This is only reflection of amateurism and over reaction of the amateur participants. .

Bear Market

A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20\% or more...

INVESTOPEDIA.COM|BY ROOT

Tapartuiyanbad in share market

Rajesh Sharma

People in share market generally feel happy when market moves up and become sad when that comes down. This happens as many have been holding shares of different companies and the balance sheet gets affected.

"Buy high, sell even higher and make money" is a bull market phenomenon. Generally amature traders follow this strategy, though they also may parrot "Buy in bear and sell in bull. Or buy low, sell high"

However, when market goes down it offers tremendous opportunities to make money. "Buy low, sell high and make money" or "Sell high, buy low, sell high and make money". These practices could be seldom seen in our market.

For traders, the choice of strategy is risky as they have limited period of time to hold. But for investors waiting is worthy as they could hold for comparatively a long period of time.

Hence, crying when the market goes down and laughing when it moves up are amature behaviors.

Market moves up and down, down and up, we should move as per our analysis and choices. Sometime it works and sometimes it does not. We should remember, there is next day always, there is next time always. To utilize this next day phenomena, we have to buy in installments and have to sell in installments. Still, risk is there and that is in all areas and also in other facets of life.

P.S. The problem with us is that we make Uttanos and Hariyalis as celebrities rather than acquiring skills and knowledge ourselves. We have became the victims of TAPARTUIYANBAD,

P. S. Definition of Tapartuiyanbad: This is a phenomenon that reflects mental state and behaviriol pattern that combines shallow and superficial knowledge, practice of decision points based on peripherals and serving uncooked meal leballing as tasty one

No share is equally good for everybody

Rajesh Sharma

No food does equally good for our stomach. We have difference in make, quantitative difference in presence of chemicals and bacteria in our stomachs. We should carefully, so, need to select food items.

Similarly, it depends on our own assessment, existing portfolio, investment strategy and risk mitigation approach while making investment decisions.

Cash Dividend

Rajesh Sharma

From next year, mostly the high right/bonus years particularly of BFIs would be effectively over till another season starts after 5/6 years or more.

May be, one more year for insurance sector after that.

Another year could be for hydro-power.

In between, there could be flood of IPO shares, in premium, of real sector companies.

Finally, we will be back to basics - cash dividend.

Hence, when we buy shares today, we should consider future prospects and probability of comparative advantages.

The world is dynamic, so we should be having dynamism in thinking and deeds.

EBL

Rajesh Sharma

My answer to a friend's question in my message box

I was apprehensive of EBL till it fall down to around 500. I waited a long time. When it reached 2100, then I started to buy. Now, I have a few hundred shares and I think still at around 3750 plus, it is an attractive investment. It may fall also as market is in correction phase. Hence, I do not feel comfortable if it is for trading purpose. But for investment, it could be a gem share.

SICL

Rajesh Sharma

About SICL: My answer to Utsab Shrestha ji.

SICL has had biggest jump since last FPO issue. Recently too, it moved from 3400 to 4100 plus. Hence, large part of the cream has been stolen already by BAL SHREE KRISHNA ji. Still, it is a good company with lot of potential to grow. With 60% dividend waiting, makes it attractive. Now, it depends on your existing portfolio, strategy, choice and risk assessment.

Market: Jealousy and Greed

Rajesh Sharma

Jealousy and greed make people negative. Yesterday, National Life proposed 100% right. Some 'analyst' started to throw stone targeting it. Overt motivators regarding negative comments, they have stated, 1. No final decision yet, 2. Not a good company, 3. All company shares have decreased after such announcements, and so on. And, they have advised not to buy.

However, the covert motivations seem jealousy and greed. It is certain that they do not have NLICL shares and so, they are in mood to throw all negatives against it.

Market down, November 17, 2016

Rajesh Sharma

Today, it was one of the most fearful day to watch market falling down continuously. It was a day when I had nothing to buy or to sell and I just watched the movement and felt that way perhaps.

Even high bonus/right did not help EBL and NLICL. Peer pressure created a situation of decrease in nearly all companies.

Big investors sold shares. Similarly, big investors bought shares in large number. In single transactions, 500 (even above 200) to 5200 kitta EBL shares are both sold and bought by big investors. Hence, as many love to say big vs small, it is not big selling-small buying game. 5200 kitta shares selling and buying in single transaction at a price of 3695 each are not the tasks done without giving lots of thought and without going through rigorous analysis. Hence, there is equilibrium of actions.

Therefore, I am not much alarmed. Decrease in price motivated buyers and increase in volume significantly may help investors to keep hope alive and optimism intact.

Personally, I will HOLD my shares.

Market: Buyer, Seller and Onlookers

Rajesh Sharma

There are three types of people in a market on day to day basis, who often use media interestingly.

1. Buyers: In forums, portals, newspapers, TV etc. they propagate "Market Down", particularly they project the company of their choice as "Red" like blood. So they are "bloody Buyers".

2. Sellers: They do exactly opposite of sellers. They project the company they are going to sell as green as sky. Hence, they are "Sukulgunda sellers".

3. Onlookers: They are simply Ramite, but pretend in all above mentioned media as "Analyst Par Excellence". They lecture shareholders as if they are here from heaven to distribute free expertise so that investors/traders could earn money in a single transaction of 100 Kitta shares of NHPC, which they could keep in safe deposit vault and could spend without any personal responsibility whole of their life as that is gift from heaven for them. In reality, they are "Rubbish Ramites.".

May be, there are exceptions, I do not know. Yes, the good investors/traders do business silently and coolly. So, they are absent from media as mentioned above may be with some exception.

P. S. Please do not ask, which category I belong to.

Creating wealth base, increasing it and utilizing judiciously

Rajesh Sharma

Creating wealth base, increasing it and utilizing judiciously

In investment, there are three tasks - creating wealth base/foundation, increasing wealth qualitatively as well as quantitatively and utilizing wealth judiciously.

In share market also the same principal is applicable. When we buy shares some wealth has been created. We may be in loss, but the foundation will continue to be with us. We have now some basic learning about shares, we know about IPO or secondary market, we contact broker and get registered, we open Dmat account and gradually become familiar with the whole process of transaction. All this education is part of that wealth creation process and by now we have a foundation to take off.

If we survive the first stage, we will add wealth by mobilizing resources by equity finance or loans. We start to know about companies much better, worth of shares far better and learning goes on together with increase in profit in case of success or loss in case of part failure.

If we fail completely, we will not attain the third level and disappear from the market. If we succeed, we will have added wealth and we need to utilize it properly. I do not believe in all accumulation. Personally, I like to put reasonable percentage of added wealth in three baskets - a. consumption for improving quality of life of a person/family, b. savings for travel, medicals, old age, and emergencies and c. contribution in helping suffering humanities.

Hence, it is though driven by profit, businesses including investment/trading in shares has a complete package. We should have courage, wisdom, patience and energy while creating the wealth base, we should rightly educate ourselves. We should take calculated risk in investment while increasing wealth and should strive for excellence. And, finally while utilizing wealth, we should see entire package of consumption, saving and giving.

This sounds idealistic, but I think, this is what makes participation in business meaningful, provides broad operating framework and drives us around a mission to succeed, which may bring peace, wisdom and human values around that success.

Gem shares/Companies

Rajesh Sharm

I read a comment of Amit Deo ji where he has mentioned a word, "Gems". I use to receive several messages in my message box asking which are gem shares. I have not replied anyone till now.

However, knowing growing interests about gem shares in Nepali share market, I thought to write something. For me, the company may be a gem but its shares sometimes could be gem and sometimes not so. Interpretations of gem shares vary person to person, particularly among traders and sometimes among investors too. 

Many people consider shares of high value companies as gems. Mostly, for many investors this applies perfectly. Many friends ask in forums why EPS of X company and Y company is so close but price gap is so big? This is due to perception difference, credibility difference and imagination of big investors is different than traders. They pay for a share price many times more if that company meets credibility criteria of a particular investor. If that is his or her gem company, they go after it even other companies are available at lesser price. As an investor, I pay some more percent in case a company has high standing in its management including vision, growth prospect and culture. I have met a few investors who even overlook present performance of a company if they see its future sounds shinning. However, several others go by present performance of a company. I have met a few who dig background and past performance of a company before investing for long time.  

Traders buy and sell milk and do not raise cow or buffalo. Hence, milk delivering  cow is is a gem company for them. When, they buy 100 NHPC shares at 139 and sell at 190 in a fortnight or so, that is gem share for them. I had once asked a big trader what company is valuable for him. He answered a sick company suffering from treatable disease is a gem company for him. This was strange interpretation. However, following his way of doing things, I bought a diseased  H&B Development bank at Rs 93 and made 40% surprisingly in short span of time. Internationally also Laxmi Mittal made a few billions Sterling pounds by buying sick steel plants. 

Hence, gem companies differ according to the nature of market participant - investor or trader, temperament, risk taking ability and perceptions. They are different for different people. However, in the market, there are blue chip companies and many consider them as gem in a very generalized context. 

Market Projection: Tuesday November 08, 2016

Rajesh Sharma

Market Projection, Tuesday November 08, 2016.

1. Market Movement: relatively stable (+ - 5 points).

2. Transaction Volume: May increase to around 90 corer (+ - 10%).

3. Companies to watch: MNBBL, LICN, CBBL and SCB.

4. Companies under selling pressure (Good for investment for long term): Nabil, NIB, SBL, BOKL, NLIC, NLICL, SBI, RMDC, FMDBL, SKBBL, HIDCL, etc.

5. Attraction: EBL, SIL, NIL, LGIL, PIC. 

6. High risk: NBBL

7. Low risk: UNL

Market Projection, Monday 7, 2016, Projection Revisited

Rajesh Sharma



1. Market Movement: Today, I failed in this key indicator.
2. Transaction Volume: Not too close, deviation of about 14%, but not bad either.
3. Companies to watch: The confusion continued in MNBBL, LICN, CBBL and SCB.
4. Companies under pressure to move up: Pressure continued in Nabil, NIB, SBL, RMDC. Despite fine first quarter report, SBL and NIB could not move up.
5. Attraction: Yes, CBL, EBL and NIL were top 3 companies. LGIL was one of the top 10 and SIL was not far behind.

Practice of negation

Rajesh Sharma

Practice of negation

Negation has become the guiding philosophy in Nepal. Even in share market it has made grand entry. Rather than putting shares they hold positively, they are busy in destroying other shares bombarding against them. The comparison they make has less logic and more negation. Sometime, they bring EPS, sometime, price, sometime bonus and sometime rights shares to prove the shares they do not hold are worthless. They know, perhaps, these indicators are not the company, though they talk little bit of a company in the context of a little bit time and space. The company operates in a dynamic realm with a much longer time and wider space than the indicators the practitioners of negation use.

Nabil Equity Fund allocation

Rajesh Sharma

I appreciate the allocation modality followed for Nabil Equity Fund. It did justice to small investors.

I like to request SEBON that the maximum limit for Mutual Fund be made two hundred thousand only. So that small saving could be invested in Mutual Funds. Big cats could go to secondary market. When this limit is set, people investing 50 thousand be categorized as small and more than 50 thousand plus 1 as big. This is reasonable for mutual funds.  This may justify the privileges including reserve in IPOs Mutual Funds get.

Monday Market November 07, 2016

Rajesh Sharma

My Projection:

Market movement: Up
Transaction Volume: Around 80 Corer

Companies to watch: MNBBL due to confusion in right shares/bonus shares, LICN due to confusion in investment income and premium income, SCB due to FPO confusion, CBBL due to higher than expected bonus share on one side and pressure on MFIs due to Governors' negative opinion. Stocks in this category may be highly profitable or may nose dive. Being wise and being careful are the keys while selling or buying these stocks. They are vulnerable to rumors and you should wear rhino-skin jacket.

Companies under pressure for upward movement: Nabil, NIB, SBL, RMDC etc.

Attractions: Low to medium price range general insurance companies, EBL CBL etc.

Best learning shares for a beginner

Rajesh Sharma

My personal experience at the beginning of investment was unique. I bought SCB at 7900, which jumped to 9000 within a couple of days. I was thrilled.

SCB started to fall down and within a couple of years, it reached to 1300. Though, in-between, I learnt several lessons and bought some more SCB shares for averaging. Loss makes you lot more inquisitive and you learn deep and fast. Now, SCB price at above 3400, I have made quite a fat profit by averaging, bonus shares and holding nearly all I had bought.

With this experience of troubling time and rosy days, I think, I am qualified to advise to friends who are in a beginning phase tat includes from take off stage to a year of investment/trading.

1. Please go with good companies. You may not get great return but you will learn much better and much faster with profit or minimal loss.

2. Please select low price range companies.

3. Put money in installments. If you have decided to invest One Lakh, buy now of 50,000 only, see and invest further.

4.  Rather than keeping a company for long, better roll on. Increase the number of transactions. It will expose you to new risk ventures and also give you opportunity to learn about new companies with limited amount of same money.

The above points will lead me to some a bit dull companies like NIBL and Nabil to start with. These companies may not give you higher profit instantly, but will not let you down.

LICN shares under atack

Rajesh Sharma

LICN is under attack now. Who is behind such attack?

There is concerted media campaign that has been magnifying its decrease in investment income and profit. Yes, that has been down but that is not the primary source of profit/loss of life insurance companies. That investment income is peanut comparing to premium income. When actuarial valuation is complete, only then the premium  income could be determined. Rather than informing about this critical piece of information, the media and portals have  been busy projecting LICN as a severely wounded bulldog.

However, this sounds part of strategy of a few share lords to grab shares from them who have not much idea how to read life insurance companies balance sheet.

Companies to be cautious about

Rajesh Sharma

Sometime quite good companies also could be over blown by the speculators and they reach to a danger zone from where they could stagnate for a long time or fall much below.

In Nepali market, two very good companies are taken to high altitude. They are SICL and MNBBL. Both these companies are good but their shares have jumped quite high in a very short period of time. Now, these companies' shares may be in stagnation zone or could face heavy correction. Hence, there needs to have cautious approach while buying or selling these shares. No company is immortal in a dynamic market.

Bonus and right shares

Rajesh Sharma

In the market, there seems confusion about bonus share if there is right shares too issued.

I think, if book has been closed already for bonus shares, then the holders of new right shares will not get bonus. But, if book has been closed already for right shares and bonus share book close is done after that, the holders of new right shares will get the bonus share.

The notice issued already regarding % of bonus share will stand but the same will also be distributed to holders of new right shares. Hence that % will be adjusted and will come down.

Key: The share holders in the day of book close will get share - bonus or right.

LICN

Rajesh Sharma

Would be better if you have reported that it's actuarial valuation is not completed. When that is done, the profit will be so different, you might have difficulties to control your heart bit. We expect from you real info and complete info not half cooked meal that may invite diarrhea.

My comment on Arthiknews.com about LICN profit

P.S. Many investors, traders, journalists and commentators may not read insurance companies balance sheet properly. Neither they differentiate between the investment income and premium income of a life insurance company. Moreover, in this strange world of casualness, trying to clarify the issue also becomes an unnecessary burden.

Market opens after Tihar: what to expect?

Rajesh Sharma

Today, the market opens after several days. The sellers and buyers both would be in a wait and watch mode. Hence, volume may be below normal - may be around 50-60 corer. Index may remain stagnant with 4-5 points either side.

Today, hence, is neither a selling day nor a buying day for many.

With bonus at higher side, CBBL could get some attraction and there could be more buyers for the early hours of business, but in the second half, seller pressure may pull down its price. It is MFI and people are reluctant to hold MFI shares recently.

SCB price may fall further slightly but when it becomes clearer that FPO money will be distributed as bonus shares, its price may start moving up from next week.

The prime meat of SICL has already been eaten when it jumped from 3500 to 4100 or more. Hence, its phase of fast movement has been effectively over for sometime. Its volume also may not be that high now. Still, there will be some attraction and average sell at average price range may continue.

Overall,  banking may remain subdued and index may fall down slightly today but may start moving up next week. MFIs will stay where they are for sometime and hydro-power may remain unattractive. After a big jump in general insurance companies already and still continuing, life insurance companies may get some attention. Hence, both general insurance and life insurance companies may see upward trend, particularly from next week. Others sector including NTC may generally stay at the same level where the are now.

For trading, small and medium caps with rosy news/reports are better in all sectors and for investment well managed companies could be far beneficial. For the investors who buy now and plan to disappear for another 5 years, companies like Nabil, NIB, CHCL, LIC, SIL and SHL could be better as they are less risky and are at good price range. This is just my opinion based on experience and observation.

Companies to watch out today: CBBL and SCB

Occasional posting about companies

Rajesh Sharma

Here in the public forum, it is too difficult to name companies, I think, which are not so profitable in near future. Friends may feel sad as they have invested their hard earned money in those companies. My opinion may not matter at all; still psychologically it may have some effect. Hence, from now on, I have decided to write about such issues on my blog: www.stocksofnepal.blogspot.com.

Posted: Nepalese Investors Bandstand

Who to invest/trade and where

Rajesh Sharma

I have some advice to share market investors/traders to invest/trade on businesses/sectors/companies according to the level of their understanding/ choice/interest.

1.       Novice/beginners with no idea about share market: IPO and mutual funds

2.       Only understand basics such as EPS, Net Worth, P/E:  IPO, Mutual Funds, BFIs other than MFIs, Hydro, Hotel, Telecome/HIDC etc.

3.       Understands complex nature of business: All mentioned in no. 2 above plus insurance and MFIs.

Expectation and Market

Rajesh Sharma

It is all about expectation when the dividend has been declared. If it is more than what was the expectation, the price increases, if it is less, the price decreases. SICL gave bonus beyond expectation, the price increased. SBI also gave comparatively good dividend, but the price decreased as it did not declare rights share as that was expected. For investors, it is no big deal, but for traders it makes lot of difference.

IPO

Rajesh Sharma

Leave IPO for first timers. It is too draining physically, unprofitable financially and frustrating emotionally.

Economy and Market

Rajesh Sharma

My answer to a friend's questions sent in my mail box

It may be right, remittance could decrease and BOP deficit may increase. Both, decrease in number of outbound workers and lower oil price may decrease remittance. The dollar exchange rate may go up. Due to increase in consumption and need of construction materials for infrastructure, the import bill may go further up. However, we may not move to bad or worst economically.

The conventional interpretation of economy may not fully reflect the new situation. The paradigm has been shifted. The internal export through service sector, particularly tourism and other related hospitality businesses, expansion of agri-business and its contribution to employment and economy, and harnessing water resources for electricity generation, irrigation and drinking including processed water for drinking are some of the major activities going on in Nepal presently.

Politics has been freeing labor force each day. We could see several former Maoist fighters taking initiatives for production/cultivation/service activities. The more politics generates negative energy, the more workforce will start being engaged in value adding endeavors. The cadres at local level are different than what they were a few years back. Many among them are either outside of the country or in some type of value activities. It is still, perhaps, small number but is increasing day by day.

Politicians at the top are still a rotten lot but they are highly discredited and may lose their grip on power and new generation will have bigger say. Gradually, political stability could be a reality. Though, it may take time but the process has already begun. This will provide a launching pad for economic Bull Run. In that situation, decreased remittance may not stand as a valid negative factor.

However, it could be difficult for now and for a few years, if remittance decrease and BOP goes further negative. But, from long-term perspective, we have resources and we have basic ingredients and skills acquired through experiential learning or formal/informal education and so, our future is, I hope, bright.

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Comment

Investing/Trading

Rajesh Sharma

Investing/Trading

When company is good and it is resting in regard to market price could be a better buy. Similarly, when a sector or a sub-sector is promising and it is resting that could be a good buy for the investors. I think life insurance companies, wholesale MFIs and sleeping giants in BFIs could also be good to consider from long term perspective. But for trading, I think, still non-life, rosy BFIs and some interesting MFIs could be better profitable. Hydro-power also could be highly beneficial in long term but for them with a thick skin like that of rhinoceros.

Note: Posted on www.equitynepal.com

Again, SCB FPO

Rajesh Sharma

After going through several posts and inbox messages (including from Chandra Prasad ji and Santosh Raj Bajgain ji), interpretations (including on sharesansar) and news items, I have reached to the following conclusions:
1. SCB will bring down its promoter - ordinary shareholder ratio to 70:30 from 75:25.
2. It will issue FPO equal to 5% of the final paid up capital till the date of FPO issue with premium. This could be around 26 Lakh kitta shares.
3. The premium amount collected, which will be about 3.6 Arab will be issued as bonus shares and, thus, will be added to paid up capital
4. Another about one Arab will be added to paid up capital by providing bonus shares from the profit of this year. 
5. Hence, SCB shareholders may get 33.33% bonus shares as declared already, about 75% bonus shares from the premium amount collected and another 12-15% from this years profit in one year starting now.
6. However, to get this windfall gain, NRB and SEBON have to give approval to SCB capital plan.
7. Because of this probable bonanza, there were all sorts of rumors in the market today and many fall victim.

Buying Opportunity

Rajesh Sharma

The market has offered a great buying opportunity. However, it is still quite risky to buy for trading. It is absolutely great opportunity to buy for investment. For investors, a ten percent down in a cycle of heavy correction does not hurt. If it goes beyond that and reaches to bear phase, then they may have some concern. Now, seeing political and economic fundamentals improving at macro level and a large number of companies performing well at micro level, there is just not much probability of market entering into bear phase.

Hence, investor friends, enjoy the buy time and add or increase valuable stocks. Friends in trading also could get several good company stocks at bargain price. However, you should be extra cautious, while buying as market may hang like the Garden of Babylon for Quite sometime..

Buying SCB Shares

Rajesh Sharma

My comment on Adhikari Bodhraj Ji's post on Nepse Discussion Forum. He was willing to know who bought so many SCB shares.

I am one among the buyers of a small number of SCB shares. Interesting! It is RED and it is buy time. Hence, many dared to buy. I have a plan to make 100 shares into 267 in one year as Dilip Munankarmi ji in some forum has suggested. Number may differ, but I really believe on his analysis.

SCB, FPO and comments regarding 'foreign', 'loot' and 'nationalist' emotions

Rajesh Sharma

SCB, FPO and comments regarding 'foreign', 'loot' and 'nationalist' emotions

Recently, SCB FPO has generated lots of debate. I have to say the following.

1. Famous Chinese leader Deng said that the cat could be red or black, it should kill the rats. Hence, he freed economic production from ideology and New China scaled new heights. We need foreign investment, technology transfer and managerial know how to progress fast.

2. SCB is just decreasing promoter's holding by 5%, so did NIBL and SICL. This is complying to NRB directive. The FPO pricing would be determined by criteria set by SEBON and applicable to all. Hence, we should listen to business logic and the legal framework. Emotions could generate energy not wealth.

3. We are free to sell, hold, buy or do nothing of SCB shares as we wish. However, there are always others with other wishes, preferences and actions. Market moves on due to this diversity.

FPO

Rajesh Sharma

FPO

Now FPO has become the talk of the town. Many are talking as if it is a means of loot and any company could issue FPO. This is not the case. No commercial bank other than SCB has this privilege anymore as all others have 70:30 ratio. EBL, SBI also could not issue FPOs.

Yes, shares could be issued adding premium in several foreign countries. However, as of now we have no such legal provision. If new act comes into operation or NRB does something using its regulatory power to formalize/legalize this issue is different. So, the guesswork/speculation is not true.

In insurance sector, it is not specifically clear where the ratio is 70:30 or lower. Hence, there is room for ambiguity. May be, new Insurance Act will make it clear. In case if it is 70:30, companies like NLIC, PICL, LICN etc could issue FPOs.

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7Bastola Baburam, Maharshi Shrestha and 5 others

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Ratna Kumar Badal Sir, i feel fortunate that I'm being able to read your views which are very informative and logical.
Sir, there are some banks which have 51:49 promoter to public share holding ratio. Therefore, my question is why other banks could not issues FPO to raise money and decrease their holding to 51 from 70?? I hope your kind insight.

Like · Reply · Yesterday at 05:25

Rajesh Sharma They could convert their 19% promoter shares into ordinary shares to bring the ratio to 51:49 as per the directive of NRB. This is already in existence. Hence, this is done without injecting new capital. So, no FPO.

Like · Reply · 1 · Yesterday at 06:13

Ratna Kumar Badal Thank you so much sir.

Like · Reply · Yesterday at 07:10

A few notes published on FB forum - Nepalese Investors' Bandstand from September 21 to October 5, 2016

Rajesh Sharma

1.    1. It is all about expectation when the dividend has been declared. If it is more than what was the expectation, the price increases, if it is less, the price decreases. SICL gave bonus beyond expectation, the price increased. SBI also gave comparatively good dividend, but the price decreased as it did not declare rights share as that was expected. For investors, it is no big deal, but for traders it makes lot of difference.

2.    NLIC and NLICL

Now, NLIC's FPO and NLICL's bonus shares are the talk of the discussion forums.

The FPO pricing method is very clear in alphabets but is vague in sentences, paragraphs and directive. Hence, it is only natural to guess with big differences. Some speculate 1000 and some others believe that that will be above 2500. However, it will not directly benefit current shareholders as that additional premium money will go to reserve fund and sometime in distant future the amount will be distributed, probably in the form of bonus shares. Yes, it will make the financial position of the company strong. Hence, current debate will have limited significance for current investors of NLIC but will be useful for them who are planning to apply for FPO. Anyway, by rejecting NLIC's first proposal SEBON tried to make the management accountable and transparent.

Regarding NLICL's 30%, many have passed the judgement that it is too little too late. Yes, it is too late but not too little. This bonus share is just for FY 71/72. As reported by sharesansar.com, yes it is from the earning of 2071/2072. (http://www.sharesansar.com/c/national-life-insurance-propos…) For 72/73, there will be next offer may be this year, may be next year.

In case of FMDBL, they played trick by just declaring 15% bonus initially and added 50% right afterward. Their strategy failed flat as pessimism run high and also the market started falling down. The same trick may have been played by NLICL management. Such activities need to ban by SEBON to discourage insider trading.

3.    The market is moving towards stabilization. In this process, B. K. Shrestha and his associates played significant role. Particularly, B. K. Shrestha checked the pace of downward journey of the market by playing master stroke of "increasing greed among others" strategy. Some people use rumor for this pleasant phrase . But, I think, this is greed manufacturing strategy.

He presented already beautiful EBL with bride-like make over using some cosmetics with magnetic field. In the false or real hope of high bonus shares, many investors lined up to grab EBL shares. This led the market to optimism and gave relief to thousands of investors.

Although, B. K. Shrestha and his associates minted, perhaps, millions of rupees in this process but their contribution to market stabilization was too greater than the profit they made.

The pace of fall has already been checked to single digit and may start the upward journey though insignificantly but confidently. When the festivals of Dashain and Tihar would be over, the market may increase its speed for forceful upward journey. The positive first quarter reports of companies and money coming back to financial system once again, when festivals would be over are some indications of such possibility.

4.    The companies' performance during last year was by and large commendable. Notwithstanding the severe impact of the devastating earthquake and the blocked, a large majority of companies performed well and offered attractive dividend. The fundamentals of the companies and their growth prospects are strong. The overall economy also is expected to grow comparatively better than last year. In political front also there is relative stability. In such situation why market has been falling continuously down?
The market had jumped high in a short period of time. Hence, a major correction is not an abnormal phenomenon at all. Therefore, a normal major correction was underway. In the mean time, the central bank Governor's opinion about the price of microfinance companies' shares and the NRB's caution about difficult days ahead added fuel to fire by inducing FEAR factor. Many investors, particularly traders hear loud, listen less and understand far less. Hence, FEAR gripped the market and free fall ruled the day. 
Now, when FEAR has taken over the market sentiment, it may take time to stabilize. However, there are no strategically influencing negative factors that lead to a prolong bear phase. Hence, after a short period of major correction or shallow bear phase, the market should stabilize and upward movement of strong bull may commence once again with full force. However, the market may be in nominally red or in weak green till the major festivals are over.

5.    When the market goes down, it offers opportunities. Only because many among us follow the crowd and panic, and so fail to exploit the opportunity. We should simply buy and if we have no resources ready, we should hold. If the down trend continues and mass investor psychology is at panic mode, we have to sell even some good shares to increase the same shares within a week or month.

There are two ways to build resource base for good profit - increased price or increased number of good shares. We have to generate new ideas to survive or even flourish when the market is in panic mode.

We can not change the course of the market, but could change our investment behavior. There is always risk in the share market. This is a given fact. Hence, we should calculate not only dry figures but also risk involved.

When, have free resources and we could take heavy risk, it is fine to go for any charming but risky company. But, if we are in a situation of risk saturation, companies with far less risk such as NIBL, GBIME, NTC or even Nabil could be best. Slow moving shares have comparatively less risk than fast moving shares like NLIC, CIT etc.

Now, the market has been continuously moving downward. May be this trend will continue in slower pace. Or, will start the reversal. Even objective and historically sounding correct analysis are not passing the test. Now, it seems that only demand-supply factors have been dominating the market. Hence, we should plan accordingly.