Forex 3 month high against the US dollar

Rupee hits three month high against dollar

KATHMANDU, FEB 03, 2012

Nepal Rastra Bank (NRB) has fixed the exchange rate for the US dollar at Rs 78.76 for Friday marking a three-month high for the Nepali rupee. The rupee had dropped to a historic low of Rs 86.37 on Dec 16.

Nepali currency is pegged with Indian currency, and the Nepali rupee has risen along with the appreciation of the Indian rupee. The Indian rupee rose on strong inflows of the US dollar and recovery in India’s capital market that was once plagued by outflows.

Statistics from the Securities and Exchange Board of India show that overseas investors have bought Indian stocks worth US$ 2.1 billion so far this year and invested US$ 3.2 billion in debt instruments, according to Indian media.

Earlier, foreign investors had lost confidence in the Indian market as the projected annual growth rate of the Indian economy at 8 percent was revised to 7.5 percent. Various Indian media quoting different players from the private sector had also reported chances of the rate going below 7 percent.

This led foreign investors to pull back their investments from the Indian market, and the market saw high demand for the greenback raising its value sharply.

The Reserve Bank of India (RBI) also played a crucial role in bringing down the exchange rate. The RBI imposed a limit on buying and selling of the US dollar and even injected dollars indirectly into the market.

NRB spokesperson Bhasker Mani Gnawali attributed the appreciation of Indian currency to a fall in demand for the dollar in Mumbai’s money market. “Quick fluctuation in the exchange rate does not last very long,” said Gnawali.

A weaker dollar is good news for Nepali importers as prices of goods imported from third countries, including vehicles and IT related goods, will fall, stimulating their demand.

On the negative side, a strong dollar was instrumental in boosting remittance inflow, which will fall slightly at the current rate.

“However, as remittance has also grown in terms of dollars, it will not go down that notably,” said Sashin Joshi, CEO of NIC Bank.

Source: Kantipur

Sebon plans to bring guidelines for underwriters

KATHMANDU, FEB 3, 2012

Securities Board of Nepal (Sebon) is bringing the guidelines to provide functional clarity to the underwriters in case they have to purchase the shares, if the issue goes unsubscribed.

“At present there is not much details in the regulations regarding undertakings of the underwriters so the functional clarity will be brought in the new guidelines,” informed director of Sebon Niraj Giri.

The Securities Businessperson (Merchant Banker) Regulation 2064 that governs underwriters does not have provisions explaining for how long the underwriters can keep the shares purchased and what is the exit mechanism.

As the secondary market has cooled down, primary issues are also not being well-received by the public like before.

The Initial Public Offerings (IPOs) of recent times had difficult time getting subscribed unlike the earlier days, when the issues used to be oversubscribed by over 10 times.

Underwriting — that used to be only a formality for the issuers have now become an obligation to ensure the shares will be sold — are the merchant bankers that guarantee to buy unsold shares when an issue is offered for sale to the public.

If the issue goes unsubscribed, the underwriter has to buy the unsold amount of shares to ensure the public offering gets minimum rate of subscription. At present there are seven merchant bankers that have license to work as underwriters.

In August 2011, Bhargav Bikas Bank’s primary issue worth Rs 4 million did not get subscribed completely compelling its underwriter NMB Capital to purchase the shares.

“If such cases increase in the future, regulator has to prepare a concrete framework on how to divest from the share purchased due to underwriting contract,” Giri added.

Sebon is holding talks with other regulatory bodies like Nepal Rastra Bank (NRB), Insurance Board and Company Registrar’s Office so that holding and divestment of shares by merchant bankers will not create any regulatory clashes.

Since numbers of merchant bankers are the subsidiary arms of financial institutions cross holding of stakes is going to be a problem, if underwriters hang on to unsubscribed shares of other financial institutions, according to the central bank regulations.

“NRB does not allow one financial institution to hold more than one per cent of shares in another,” he said, adding that the Board needs to frame the regulation that will not violate the regulation.

“We have been asking Sebon to bring in guidelines that will direct how the unsubscribed shares have to be unloaded and how much shares should merchant bankers be allowed to trade in,” expressed president of Merchant Bankers Association of Nepal Bhishma Raj Chalise.

In the coming days, the market has to gear up for more shares with the upcoming Initial Public Offerings of some four commercial banks that will be offering bigger issues like that of commercial banks and hydropower companies needing more capacity from the side of underwriters, he added.

Source: THT

Nepal Bank plans to issue 1:9.5 right shares

KATHMANDU, FEB 3 2012

The much needed recapitalisation of the oldest commercial bank is finally underway as Nepal Bank’s proposal to issue rights shares has garnered approval from the regulator.

“We will soon be issuing right shares to the existing shareholders in 1:9.5 ratio to raise capital,” said coordinator of the management committee of Nepal Bank Maheshwor Lal Shrestha. To increase its paid up capital to Rs 4 billion, it will raise funds worth Rs 3.62 billion by issuing rights shares to the existing shareholders, including the government.

The government holds 41 per cent stake in the bank while 50 per cent is owned by public shareholders and the remainder belongs to different financial institutions.

The recapitalisation plan — forwarded to the central bank in November 2011 — was recently approved by Nepal Rastra Bank (NRB) and also by the High Level Financial Coordination Committee.

“NBL is required to increase its paid up capital to Rs 2 billion by the end of next fiscal year and if the plan is executed well on time, the bank will also be able to improve its capital adequacy framework,” Shrestha pointed out. Currently, the bank’s paid up capital stands at Rs 830 million.

However, more than half a century of bad loan and bad corporate governance has left the bank’s net worth negative by Rs 4.22 billion as of the end of last fiscal year.

Increasing paid up capital by Rs 4 billion will still fall short in making the bank’s capital adequacy ratio sufficient. The 75 year old bank that is going through almost a decade long Financial Sector Restructuring Program since 2002, has improved its performance, but the bank’s core capital is still negative.

A comprehensive audit of the bank in 1999 discovered that the bank was on the brink of insolvency due to a large number of willful defaulters. “Nepal Bank will sell the fixed but unproductive assets to raise the remaining funds,” spokesperson for NRB Bhaskar Mani Gyanwali informed, adding that the central bank is in agreement with NBL’s plan.

Earlier, the government had been suggested to inject the required deficit capital or provide loans worth the deficit amount.

Source: THT

Chilime Hydro Power Limited is distributing 30 percent cash dividend warrant.

Chilime Hydro Power Limited is distributing 30 percent cash dividend warrant to its shareholders from 19th Magh 2068 in the following dates according to shareholder number..

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Standard Chartered Bank Nepal turns 25

Standard Chartered Bank Nepal (SCBN) has completed 25 years of operation.

The bank was established in 1987 as a joint-venture. Standard Chartered Group holds 75 percent stake in the bank, while Nepali public hold 25 percent.

SCBN enjoys the status of being the largest international bank in the country, as the global network of the group gives it an opportunity to provide international banking services, read the bank’s statement. “It is the relationship that the Bank shares with its various stakeholders that has enabled the Bank to reach so far and where it is today.”

Source: Kantipur

Gold import drops by three times

Gold import has plunged by almost three times in last three years.

“The country imported Rs 9.87 billion worth gold in the first five months of the current fiscal year compared to Rs 25.54 billion in the same period of fiscal year 2009-10,” according to the central bank.

However, in the same period last fiscal year, the precious yellow metal has seen a whopping drop to Rs 1.33 billion due to government ban on the import that has hit the dollar reserve due to cross border flow at the cost of import duty difference.

Currently, the domestic market is witnessing a shortage of the gold fuelling the price despite the price in the international market has been decreasing.

“The banks are not been able to supply according to the market demand fuelling the price in the market,” Nepal Gold and Silver Dealers Association president Tej Ranta Shakya said, adding that Nabil Bank’s 50 kg gold was sold out in an hour on Wednesday and Prime Commercial Bank’s 50 kg was also sold out on Thursday and on Friday there was no gold in the market that has put pressure on price today.

The precious yellow metal was traded at Rs 54,000 for a tola (11.664 gram) today.

“Despite rising price, the domestic market’s appetite has started to increase also due to marriage season,” he added.

Similarly, gold had another positive year in the international market, ending nine per cent higher in US dollar price terms and rising even further in most currencies, according to World Gold Council report 2011.

In spite of an interim increase in volatility, which affected all financial markets, gold outperformed a large number of asset classes – reinforcing its role as a foundation asset in portfolio construction, it said, adding that gold provided liquidity when investors needed it the most, acting as a risk management vehicle and also served as a currency hedge throughout the year, in particular against the US dollar.

While such inverse relationship pushed gold prices down toward the end of 2011, in part driven by profit taking and portfolio rebalancing, it is believed that gold fundamentals of supply and demand remain robust, according to the report that expect it continue to support its demand.

After a tumultuous year in financial markets around the world, gold was one of few asset classes to deliver positive returns.

Gold’s price appreciation was generally higher in currencies other than the US dollar, especially in developing markets, with the exception of China, as they saw marked declines of their currencies against the US dollar in the latter part of the year.

True to its role as a vehicle for diversification and risk management, gold outperformed a large majority of assets, including oil, on a risk-adjusted basis during a year of marked uncertainty and increased volatility. However, gold’s performance was not all smooth sailing throughout the year, particularly during the latter months.

Many investors saw gold as one of the few assets able to preserve capital and protect against tail risks, increasing their participation in the market especially during the summer and by early August, gold had broken the $1,800 per ounce level and reached a record high of $1,895 per ounce on the London PM fix on September 6, having traded as high $1,921 per ounce intra-day.

In all, gold’s price pullback of 15 per cent was labeled by some commentators as a break in gold’s multi-year trend. On the contrary, a careful analysis of gold’s historical performance shows that it has experienced various pullbacks over the last 10 years.

Source: THT

Facebook IPO filing next week

Facebook may finally be ready to go public.

Facebook is planning to file IPO registration papers next Wednesday, according to the The Wall Street Journal. Few additional details so far, except that Morgan Stanley (MS) is expected to be lead underwriter with Goldman Sachs (GS) "also likely to play a major role.
[Update: WSJ is now hedging a bit on that specific date, saying that "timing is still being discussed."]

The social network would be looking to raise around $10 billion at a valuation of between $75 billion and $100 billion. That would make Facebook the largest tech IPO of all time, so long as you exclude telecom companies like AT&T Wireless ($10.62 billion in 2000). There also were a pair of foreign telecom companies -- Germany's Deutsche Telekom and Australia's Telstra -- that priced larger IPOs in the U.S.


 Overall, a $10 billion offering would be the seventh-largest IPO ever to price on a U.S. exchange, and the largest since General Motors (GM) raised over $18 billion in November 2010.

Source: Fortune

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