Journal of SEBON
SEBON Journal
Volume III
July 2007
Securities Board of Nepal
Thapathali, Kathmandu
2
SEBON Journal, Vol.III, July 2007
Building a Dynamic Capital Market
- Deepak Raj Kafle
Nepalese financial system is characterized by small but a growing capital market.
During the past 14 years of its operation, securities market has witnessed three market phases of ups and downs. The latest upswing started from the fiscal year
2002/03 and is continuing. During this phase, Nepse index, the market indicator climbed from 205 to 621 (July 10, 2007). The market capitalization of the listed stocks climbed from Rs. 35.24 billion to Rs. 169.05 billion during the same period. During the past five years, capital mobilized through public issue and rights offerings has been in the tune of Rs. 8.4 billion from 109 issues. In the fiscal year 2006/2007 alone, capital worth of Rs. 2.8 billion has been mobilized from 34 issues.
In spite of expansion in size, the securities market is yet to make quality transformation gaining depth and maturity. The market lacks sectoral diversification of performing listed companies, access to secondary trading services is limited , transparency and efficiency of the issuer and market is not sufficient, capacity of the regulator, exchange and the players is limited, the market is featured by active individual investors and the institutional investors are conspicuously absent. The market infrastructures supporting the trading, clearing and settlement are not sufficient. Thus the effort to build a dynamic market is going to be an ardent task requiring a lot of commitment and efforts of the government, regulator, market place, maker players and the investors.
The vision for a new Nepal has to have an important place for a dynamic capital market. It should be a market where issuers have choice to tap the funds at lower cost while people have choice to invest in the securities with different risk and return. In essence,
Volume III
July 2007
Securities Board of Nepal
Thapathali, Kathmandu
2
SEBON Journal, Vol.III, July 2007
Building a Dynamic Capital Market
- Deepak Raj Kafle
Nepalese financial system is characterized by small but a growing capital market.
During the past 14 years of its operation, securities market has witnessed three market phases of ups and downs. The latest upswing started from the fiscal year
2002/03 and is continuing. During this phase, Nepse index, the market indicator climbed from 205 to 621 (July 10, 2007). The market capitalization of the listed stocks climbed from Rs. 35.24 billion to Rs. 169.05 billion during the same period. During the past five years, capital mobilized through public issue and rights offerings has been in the tune of Rs. 8.4 billion from 109 issues. In the fiscal year 2006/2007 alone, capital worth of Rs. 2.8 billion has been mobilized from 34 issues.
In spite of expansion in size, the securities market is yet to make quality transformation gaining depth and maturity. The market lacks sectoral diversification of performing listed companies, access to secondary trading services is limited , transparency and efficiency of the issuer and market is not sufficient, capacity of the regulator, exchange and the players is limited, the market is featured by active individual investors and the institutional investors are conspicuously absent. The market infrastructures supporting the trading, clearing and settlement are not sufficient. Thus the effort to build a dynamic market is going to be an ardent task requiring a lot of commitment and efforts of the government, regulator, market place, maker players and the investors.
The vision for a new Nepal has to have an important place for a dynamic capital market. It should be a market where issuers have choice to tap the funds at lower cost while people have choice to invest in the securities with different risk and return. In essence,
References: Citizen Investment Trust, 2004, Annual Report 2003/04, Putalisadak, Kathmandu. Employees Provident Fund, 2004, Special Annual Issue, volume 62, Social Security Management and Planning Department, Pulchowk, Lalitpur. Employees Provident Fund, Investment Policy, 2004, Central Office, 2004, Pulchowk, Lalitpur. Insurance Board, 2003, Annual Report 2002/03, Chabahil, Kathmandu. Insurance Board, 2005, Investment Guidelines, 2005, Chabahil, Kathmandu. Government of Nepal, National Planning Commission, July 1998, Ninth Plan (1997- 2002), Printing Department, Singhadurbar, Kathmandu. Government of Nepal, National Planning Commission, March 2003, Tenth Plan (2003-2007), Printing Department, Singhadurbar, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Securities Ordinance, 2005, Nepal Gazette, part 2, 23rd September 2005, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Companies Ordinance, 2005, Nepal Gazette, part 2, 9th October 2005, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Bank and Financial Institutions Ordinance, 2005, Nepal Gazette, part 5th August 2005, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Non-resident Nepali Ordinance, 2005, Nepal Gazette, part 2, 2nd September 2005, Kathmandu. Ministry of Law and Justice, Employees Provident Fund Act, 1962, Law Books Management Board, 1999, Babarmahal, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Citizen Investment Trust Act, 1991Law Books Management Board, 1994, Babarmahal, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Insurance Act, 1992, Law Books Management Board, 1994, Babarmahal, Kathmandu. Ministry of Law, Justice and Parliamentary Affair, Pension Fund Act, 1985, Law Books Management Board, 1994, Babarmahal, Kathmandu. Ministry of Law and Justice, Foreign Investment and Technology Transfer Act, 1992, Law Books Management Board, 1995, Babarmahal, Kathmandu. Nepal Rastra Bank, 2005, Unified Directives to Bank and Financial Institutions, 2005, Central Office, Baluwatar, Kathmandu. Securities Board of Nepal, 2004, Annual Report 2003/04, Thapathali, Kathmandu. SEBI Manual (as amended by SEBI (amendment) Act 2002), Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, Taxmann Allied Services Pvt. SEBI Manual (as amended by SEBI (amendment) Act 2002), Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, Taxmann Allied Services Pvt Section 6.1 states that as per the Section 19(C1) of the Employees Provident Fund Act, 1962 the investment in the shares of bank or finance company shall be Section 6.2 states that as per the Section 19 (C3) of Employees Provident Fund Act, 1962, the Fund 's investment in the debenture of company or corporate body