Kathmandu, December 15:

The long-awaited objective of the government and pro-market reformists has been finally met today after finance minister Dr Ram Sharan Mahat formally inaugurated the trading of development bonds worth Rs 4.95 billion on the stock market.

Dr Ram Sharan Mahat, finance minister, while inaugurating the trading commented that stock market should be the real barometer of the country’s economic situation. However, it is not turning out to be a real indicator as the market does not show a clear and true picture of the economy, Mahat added.

He said that the banking and financial institutions dominate the stock market, while the manufacturing sector’s performance has not been satisfactory so far. He expressed concerns that the manufacturing sector’s working is not transparent and its performance has not been as per the expectations. A balanced development is a prerequisite for a true economic outlook, he added.

Once the trading of development bonds takes hold in the stock market, it will boost liquidity and the borrowing cost of the government will go down, Dr Mahat commented.

Rewat Bahadur Karki, general manager of the Nepal Stock Exchange Ltd, said at the function that the transaction of development bonds is a new kind of instrument in the stock market issued by the government. “It will, we hope, boost capital market by being a ‘risk-free’ instrument,” he added.

Trading in development bonds will run from 10:30 am to 11:30 pm.

Karki informed that the market maker of development bonds has already reached three firms that include Ace Finance Company Ltd, Nepal Share Markets and Finance Ltd and Nepal Merchant Banking and Finance Ltd. Similarly, the number of brokers for development bonds has reached six out of a total pf 23.

Total market capitalisation of the existing stock market has crossed Rs 125 billion, which is one fifth of the country’s total GDP, said Karki.

Krishna Bahadur Manandhar, deputy governor of Nepal Rastra Bank (NRB), opined that market forces will ultimately determine the price of development bonds which is one of the crucial elements of the monetary policy.

Daily transactions in the stock market stands at Rs 80 million and a total of 140 listed companies have reached to 800,000 investors.

Stock market broker Ishwori Rimal opined that the introduction of development bonds will help the market to develop further. However, dissemination of information regarding the bonds is crucial in today’s context to attract greater number of investors, Rimal said.

Siddhanta R Pandey, CEO of Ace Finance Ltd, one of the market-markers of the development bonds, commented that introduction of development bonds in the secondary market is the driving force to create liquidity. Deepak R Kafle, chairman of Securities Board (SEBO/N), said development bonds trading is an innovative instrument for our market to boost it further.

Bimal Wagle, board chairman of Nepal Stock Exchange Ltd, feared that while starting transactions of development bonds, problems may arise. “We need to sustain trading of bonds in which all concerned institutions must work in unison,” Wagle said.

On the first day of development bonds’ trading, worth Rs 700,000 of developments bonds were traded. Trading of development bonds was done between Sagarmatha Insurance Ltd and Nepal Share Markets amounting to Rs 500,000 while development bonds worth Rs 200,000 were traded between Bank of Kathmandu and ICFC Financial Institution.