Market posts a marginal decline; NEPSE restructuring plan advances; Suspicious transaction grows by 30% in 2024/25

Among the major sub-indices, finance emerged as the top performer, surging 2.25%. Trading followed with 1.66% gain, while hydropower advanced 1.1%. These sessions reflect selective sectoral patterns.

Other indices posted modest gains. The mutual fund index rose 0.53%, non-life insurance gained 0.47%, and the other index increased by 0.65%.

On the negative side, the banking sector, which marks the market backbone, fell by 0.22%. Manufacturing and processing declined the most, down 0.66%. Losses were also seen in microfinance (0.26%), life insurance (0.18%), and hotel and tourism (0.17%).

Stock in focus: Gainers and losers

This week, the hydropower sector dominated the gains. Notable performers include Super Madi Hydropower Limited (SMHL), which appeared as a gainer on Tuesday and Wednesday. Alongside this, Three-star Hydropower Limited (TSHL), Dordi Khola Hydropower Limited (DORDI), and Rashuwagadhi Hydropower Company Limited (RHPL).

Other gainers include SY Panel Nepal (SYPNL), Shreenagar Agrotech Industries (SAIL), NMB Laghubitta Bittiye Sanstha (NMBMF), Goodwill Finance Company Limited (GFCL), 10.30% Standard Chartered Bank Limited Debenture (SCBD), and others.

On the losing side, SMHL appeared among the decliners on Monday. Other notable losers include Bottlers Nepal Limited (BNL), Narayani Development Bank Limited (NABBC), Wean Nepal Laghubitta Bittiyasanstha (WNLB), Bungal Hydropower (BUNGAL), Bandipur Cable Car and Tourism Limited (BANDIPUR), Kalika Laghubitta Bittiye Sanstha (KMCDB), and others.

Market watch: News, policies, and listings

Economy grows by 3.2% in Q1

Preliminary data from the National Statistics Office (NSO) reports that Nepal’s economy expanded by 3.02% in the first quarter of FY 2082/83, driven by gains across 18 industrial sectors. 

Electricity and gas led the growth at 14.91%, followed by financial and insurance activities (7.07%), technical activities (5.5%), and administrative activities (5.5%). The agriculture, forestry, and fishing sector also recorded a modest growth of 1.36%, supported by higher livestock, vegetable, and fruit production, despite the decline in rice output.

However, compared to the last quarter (Q4 of 2081/82), the economy contracted by 1.7%, shows the data, with 13 sectors registering contraction.

NRB eases rules on non-performing loans to support banks

NRB has shortened the period for upgrading non-performing loans (NPLs), allowing banks and financial institutions to reclassify loans as performing after just three months of regular repayment. Previously, loans had to be closely monitored for six months before being upgraded.

Under the revised directive, loans classified as substandard, doubtful, or bad can now be upgraded once the borrower clears all overdue principal and interest and maintains consistent repayments for three months. Until these conditions are met, banks must continue recognising losses on such loans.

NEPSE Restructuring report finalised; Recommends capital hike and partial privatisation

A five-member committee, led by Prakash Jung Thapa, former Chairman of Nepal’s Accounting Standards Board (ASB), including former SEBON and NEPSE officials, has completed its study on NEPSE restructuring and proposed short, medium, and long-term reform measures.

Key recommendations include raising NEPSE’s paid-up capital to NRs three billion, issuing 30% of its shares to the public, attracting foreign strategic partners, and mobilising additional investment from institutional investors.

NEPSE currently has a paid-up capital of NRs one billion. The government holds 58.7% of the shares, followed by Rastriya Banijya Bank (11.2%), the Employees’ Provident Fund (10%), Nepal Rastra Bank (9.5%), Laxmi Sunrise Bank and Prabhu Bank (5% each), with the remaining held by others.

The committee has outlined two possible approaches to changing government share ownership. One option would see the government retain a 25% stake while selling the remaining shares. The other option would allow for the full divestment of the government’s shares.

To implement the committee’s recommendations, the current NEPSE board of directors would need to be dissolved and a new board formed, the committee has advised. It has further recommended that the government not allocate more than 5% ownership to any single local institution, while prioritising commercial banks among local institutions.

The study committee was formed following a decision by current interim Finance Minister Rameshwor Khanal on November 2 and was mandated to submit its recommendations within 50 days.

FIU records 9,565 suspicious transactions amounting to NRs 42.5 billion in 2024/25

In last week's review, we updated how the government introduced several rules on money laundering and terrorist financing.

This week, NRB released its annual report for the 2024/25, highlighting trends in suspicious financial transactions within Nepal’s formal financial system. 

A total of 9,565 suspicious transactions were made in the FY 2081/82, a 30.35% increase from the preceding year. The FIU has warned that this rise is not a positive sign, particularly as Nepal remains on the global AML grey list and faces enhanced international scrutiny.

• Commercial banks accounted for the bulk of reporting, filing 7,303 reports worth Rs 38.88 billion.
• Development banks reported 780 cases involving Rs 759.6 million, while finance companies submitted 355 reports worth Rs 839.2 million.
• Share broker companies filed 491 reports involving Rs 1.91 billion, indicating increased monitoring of capital market transactions.
• Payment service providers submitted 252 reports worth Rs 165.7 million, and insurance companies reported 244 cases involving Rs 498.8 million.
• Remittance companies reported 100 suspicious transactions worth Rs 285.6 million, a sensitive area due to cross-border fund flows.
• Other sectors also came under closer monitoring, including cooperatives (36 cases worth Rs 65.6 million); casinos (2 cases worth Rs 6.1 million); hire-purchase companies (1 case worth Rs 390,000); and microfinance institutions (1 case worth Rs 1.1 million).

945 cases were forwarded to law enforcement agencies for investigation and possible prosecution in 2024/25, says the report. 

Trading spotlight: IPO and listed companies 

Solu Hydropower opened its Initial Public Offering (IPO) to the general public on January 13, offering 8.2 million shares worth NRs 8.2 billion. Earlier, the company allocated shares to project-affected residents and Nepalis abroad.

The application period runs until January 18. Nabil Investment Banking and Himalayan Capital are managing the issue.

The IPO funds the 82 MW lower Solu hydropower project in Solu-Dudhkunda-11, one of Nepal’s largest hydropower projects. Informatics Credit Rating Nepal has assigned an IRN BB rating, indicating average risk for investors.