“Nepse is working to streamline the capital market”

Chandra Sing Saud has been acting as General Manager of the Nepal Stock Exchange (Nepse) since October 11, 2017. In his exclusive tete-a-tete with ceotab.com, he divulges his views on myriad aspects of Nepal’s secondary market in a concise manner. Excerpt.  

  1. After assuming the post of General Manager of the Nepse, what steps has the Nepse taken to help streamline the country’s capital market?

Firstly, the Nepse started removing microfinance institutions from the sub-index of development banks and created a new sub-index for the microfinance.  The very move was intended to detect the real value of development banks as well as microfinance institutions.

After that, we segregated life insurance and non-life insurance into two separate sub-indices. It was also meant to detect the real value of life and non-life insurance companies separately.

Similarly, the Nepse initiated the process to amend the old acts and regulations which no longer address the changing dynamics of the share market. The share trading in the local bourse has already seen an upgrade from open outcry system to semi-automation one. However, the legal framework vis-a-vis the stock market was still the same.  That is why the Nepse has been making efforts to make timely changes in such a framework.

Likewise, we have adopted a new strategy to effectively and efficiently mobilize the employees working in the Nepse. In fact, this strategy is being implemented to boost the overall productivity of the organization by receiving professional human resource consultancy from outside.

Another major taken by us is identifying a group of investors genuinely interested to pour their bucks in the local bourse. This is important since the capital market is in need of bone fide investors interested in its long-term well-being.

Meanwhile, the Nepse is also having discussions with such investors while undertaking any move regarding the capital market. On the other side, we have prepared a roaster of 30 experts, which will help the Nepse to deal with the derivative market, over-the-counter market and small and medium enterprises effectively.

Under my leadership, the Nepse also introduced an online trading system on November 7 last year by making YCO Pvt Ltd-software vendor company- to complete its tasks on time.

 

  1. How properly is the online trading system being managed?

In the initial days of the introduction of the online trading system, there were, of course, some technical glitches. Because of such glitches, the process of updating weekly summary data and records of trading was also affected. However, we have already resolved the technical problems with the support of the software vendor company.

Investors now have no grievances and misgivings vis-a-vis the online trading system.

 

  1. How the general investors in the share market are going to be benefited from such a system?

Our trading system is aimed at streamlining the stock transactions and also providing accurate updates about the stock market to the general investors. Similarly, the system could well discourage those individuals or organizations bent to manipulate the stock market for their own vested interest.

Moreover, the adoption of an online system can also narrow down the gap between the demand and supply of stocks.

  1. Is Nepse looking to come up with other plans in the days to come?

Of course, yes. Firstly, we are making preparations to make the stock transactions of all the companies registered at the Company Register Office effective through over-the-counter trading. Secondly, the Nepse is also looking to upgrade its system to support the trading of other investment instruments such as bonds, debentures and eventually derivatives.  Thirdly, we are working to finalize the modality of capital gain tax on stocks and funds. Under the same modality, the bio-data, portfolio and other necessary details of general investors will also be available in one click. The availability of such information regarding the investors will also facilitate the tax offices in its daily operations. Fourthly, the Nepse along with its regulator Sebon (Securities Board of Nepal) is having the phase-wise discussion with Citizen Investment Trust regarding the possibility of the Trust acting as a market dealer of the capital market.

  1. It seems the secondary market has not been able to gather pace for long. Why so?

It is the intrinsic nature of the benchmark index of any capital market in the world to go up and down depending upon the level of confidence of investors. The same applies to Nepal’s capital market as well.  The Nepse index had soared to as high as 1,800 points and also plunged down to as lows as 200 points as per the level of confidence among the investors. So, the current downward movement in the prices of shares in the secondary market should not come as a big surprise.

One of the prime reasons behind the sluggish performance of the stock market is a gradual diversification in the portfolio of general investors. After the formation of local governments across the country, they seem more inclined to pour their bucks into other avenues like construction business.

In fact, the bearish trend in the market is widely viewed as an opportunity to invest in new stocks. Currently, the price of per unit share of commercial banks in the secondary market has declined to Rs 100 to Rs 150. Likewise, the price of promoter shares of such banks is declined to around Rs 100.

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