Rajesh Sharma
1. Quite
a good number of friends have asked me if I was serious in regard to selling
insurance shares selectively. My logic system has told me to sell insurance and
move to banking. But, my motivation to maximize profit asks me to stay with
insurance.
To
balance both scenario, I finally decided to HOLD both at least for the next one
week. However, it is also due to the spread of my portfolio that is heavy on
banking side.
A
friend has asked me what I mean by "selectively". Without going by financial logic, I had used this term
thinking to sell shares of 2 insurance companies, which grew in price by more
than 100% within a few months. (Now, I have shares of 5 insurance companies.)
We should see our portfolio, risk
taking capacity and conditions, health and prospect of the company the shares
we have and the trend that is related to the company, etc and such factors
could influence our decision. Hence, buying or selling or holding is a unique
individual phenomenon and it differs like the faces of human being - total more
than 7 billion but all different.
2. The
heavy volume of transaction and large spread of companies present daily in the
market have been signaling the increase in nepse index significantly, till it
reaches another landmark, say 2000.
The
heard mentality of we Nepali people also has been contributing to this
increase. Once, we were after boarding schools, and they mushroomed all over
Nepal. We moved to co-operatives and they are too many now. Even our
enterprising ladies started a few beauty parlors and we have signboards hanging everywhere.
The crowd seen in the IPO queue,
perhaps, heard about secondary market and it gate crashed to several brokers
chambers. Now, we old and experienced fellows are busy minting money.
However, everything has its
life and so is moving market - up or down. We should keep this bitter truth
somewhere at the sense of reasoning center in our brain. Good luck, Nilesh
Manandhar ji.
FPO: Fooling Public Overtly. FPO has become the instrument of
fooling public at large that too overtly by saying even a lousy company also
will issue X% of FPO. We should know that, for now, FPO will be issued only to
correct the promoter and ordinary share ratio at 70:30,Top of Form
3. Issuance
of Rights shares has become one driving factor to take the market steep up.
However, without a sustainable growth plan, the increased capital will be a
burden for the company and its profit could fall down. A healthy profit making
company also could fall in a trap of high capital burden and dividend may fall
sharply.
For
traders, the day is most important followed by a week and a few months. They
could afford enjoying the benefit created by the sentiment of higher Rights
Shares. However, for investors, even one year period is nothing as they invest
for far longer period of time. Hence, they should examine the issuance of
Rights Shares of a company against its realistic as well as sustainable growth
plan.
4. Market has been in galloping mode. Optimism
is so strong, yesterday, there was not much negative impact of nlic case even
in insurance sub-index. In insurance, there was only marginal decline, whereas
banking glittred.
The
market has been expanding. The volume has been going up daily generally.
Everything sounds great and growing.
However,
market is unpredictable and it balances itself during bull or bear or
in-between.
Hence, we should remain alert and
should go by individual company and the prevailing trend.
We should keep in mind when
a strong bull gets succeeded by equally or even greater bear, several investors
loose their sense of judgement, assets and social standing. This is high time
to be aware of and carry out business as usual not being overly excited. We
should have our feet on the ground and temperature of the body and mind as cool
as possible but not freezing.
5. As things sound murcky and the act of disclosing the FPO
price most unethical; it would be strongly desirable and compatible with
prevailing sentiment of the investors to derecognize all transactions of NLIC
done last Thursday.
6. Banking
now is an active sector, insurance is super active and hydropower is dull.
Manufacturing and hotel sectors are guest participants. Other or ntc is a
partcipant that is always invisible.
Among
the active banking sector too, some are good but relatively dull like gbime and
some are supper active like nbb. Hence, we have choices - dull sector and
companies are less risky and also less profit making, whereas the super actives
are highly risky and could bring higher profit.
In
present market, risk takers could move to insurance, moderate risk takers could
assemble around banking and low risk takers could be with hydropower. In
general, this sounds better. However, when we actually move to companies, we
have to do the risk assessment.
7. There
is no guideline/regulation to govern FPO/Premium issues in Nepal. Generally
talked about practices are three times of net worth and average base price. In
absence of clear governing regulations, anybody can interpret in any way.
Now,
NLIC FPO has raised issues, which may settle many absent/unsettled/ambiguous
practices/provisions/rules. Hence, till it is approved by regulators like
Insurance Board/SEBON, the proposed price is just a proposal. All investors
should understand that this could be different in
its final phase.
There could be two ways to address this
issue - X times of net worth or free pricing. Both for FPO and premium shares
could be governed by the same regulation/guidelines/rules. Or for FPO, it could
be X times of net worth and for premium share that could be free pricing
method.
Moreover, FPOs and premium
shares could be sold through auction.
This is high time for
regulators - NRB/Insurance Board/Energy Department(?)/SEBON to address this
issue promptly to safeguard the interests of all - investors, companies and
regulators themselves.
Till the dust settles down,
better we be cautious in running for shares of companies, which are issuing or
planning to issue FPO/premium shares
8. My
reply to a post by Bhola Subedi in Share Bazaar: Political, Social and Economic
Environment about CHCL
As
the company was very good, I hold its shares the whole period of its journey
from 2700 to 1200. When it fell below 1200, realizing that mass investor
preference had moved away from chcl, I sold most of Chcl shares and moved to
other companies. I did course correction with great reluctance. It helped me to
recover partly. Hence, sticking to good company also sometime becomes
unhelpful.
Please
analyse once and make decision.
