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.