CGT dispute weighs on benchmark index

Kathmandu, June 9

Negative investor sentiment due to the dispute related to the recently imposed capital gains tax on share transaction caused Nepal Stock Exchange (Nepse) to plunge by 3.87 per cent or 50.59 points to over a two-month low in the trading week between June 3 and 7.

“It seems high-handedness of the government is discouraging investors to invest in the secondary market,” said Uttam Aryal, chairman for Nepal Investors Association.

According to him, the change in the method of calculating capital gains tax (CGT) in transaction of bonus and rights shares seems to be aimed at promoting the primary market.

“Our only hope is that the study committee formed by the government will come up with an amicable solution to our (investors) grievances.”

The benchmark index, which had opened at 1,307.66 points on Sunday, had plunged by 33.71 points by the day’s closing to retreat below 1,300 points as the circular issued by the Inland Revenue Department instructing change in the calculation method of CGT came into force. Nepse shed 5.11 points on Monday, as share investors scrambled to talk to government officials. But as the meeting with Ministry of Finance officials ended inconclusively, share investors announced protests starting the next day.

Consequently, Nepse witnessed zero trading on Tuesday, even though the brokerage firms, secondary market and CDS and Clearing Ltd had remained open. However, after the government announced that the method of calculating CGT had been put on hold till the study committee formed to look into the issue submitted its report in two weeks, trading resumed from Wednesday afternoon. Though Nepse was open for only two hours that day, the local bourse rose by 13.91 points to 1,282.75 points. However, the optimism could not sustain and the benchmark index dropped by 25.68 points to close the week at 1,257.07 points.

The last time Nepse had closed at the current level was back on April 5, when it had rested at 1,250.39 points.

Sensitive index, which measures the performance of class ‘A’ stocks, was down 3.93 per cent or 10.82 points to 264.46 points. Float index that gauges the performance of shares actually traded also shrunk by 4.03 per cent or 3.80 points to 90.47 points.

In the review period, manufacturing was the sole subgroup to land in the green, with the sub-index inching up by 0.98 per cent or 22.77 points to rest at 2,333.75 points. This was on the back of Unilever Nepal’s share price rising by Rs 1,028 to
Rs 26,500.

The insurance subgroup plummeted by 5.64 per cent or 386.35 points to rest at 6,452.68 points. Prime Life’s share value went down by Rs 25 to Rs 640, that of National Life by Rs 86 to Rs 1,290 , among others.

The hotels subgroup plunged by 5.05 per cent or 99.42 points to 1,866.45 points. Soaltee’s share price went down by Rs 15 to Rs 244, Taragaon Regency’s slipped by six rupees to Rs 275 and Oriental’s by Rs 29 to Rs 541.

Similarly, microfinance sub-index dropped by 4.93 per cent or 86.76 points to land at 1,670.31 points and hydropower subgroup also plunged by 4.43 per cent or 71.31 points to 1,538.33 points.

Meanwhile, banking — the subgroup with the highest weightage in the share market — fell by 3.74 per cent or 41.45 points to 1,064.78 points. This was due to commercial banks like Nabil and Standard Chartered both losing Rs 25 to
Rs 975 and Rs 780, respectively, among others.

Finance subgroup also descended by 3.04 per cent or 19.65 points to 626.69 points, and development banks went down by 2.96 per cent or 44.84 points to rest at 1,469 points.

Nepal Telecom’s share price dipping by Rs 15 to Rs 741 dragged others subgroup down 2.33 per cent or 17.41 points to 728.5 points.

Likewise, trading sub-index shed 1.39 per cent or 2.87 points to rest at 203.03 points.

Altogether, 4.02 million shares of 179 companies worth Rs 1.68 billion were traded through 20,662 transactions during the week. The traded amount was 19.30 per cent lower than the total weekly turnover of the previous week, which was recorded at Rs 2.08 billion. In the past week, 4.74 million shares of 183 companies had changed hands through 23,548 transactions.

Mega Bank Nepal took the lead in all three categories — trading volume, number of transactions and weekly turnover — with 407,000 units of its shares changing hands through 1,392 transactions that amounted to Rs 72.78 million.

Rastriya Beema Company (Promoter) with Rs 67.3 million, Nepal Bank with Rs 62.93 million, Nepal Investment Bank (Promoter) with Rs 54.8 million and Nepal Life Insurance with Rs 52.4 million rounded up the top five companies in terms of weekly turnover.

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Source: Nepse