Capital market grows, needs effective watch

Kathmandu, December 20:

Securities Board of Nepal (SEBON) has approved more that Rs 2.48 billion worth rights and ordinary shares issue of 17 companies within the first five months of the current fiscal year 2007-08, whereas it had approved Rs 2.75 billion worth issuance of 31 companies during the fiscal year 2006-07.

It had approved 2.54 billion worth issuance in the fiscal year 2005-06, according to the annual report of SEBON, the apex regulator of Nepali capital market.

Similarly, within this first five months, the market capitalisation has also increased to more than Rs 3 trillion from Rs 1.8 trillion in the review period.

“However, due to lack of transparency in the listed companies — that stands at 142 at present — inside trading has also been increased,” Dr Chiranjivi Nepal, chairman of SEBON, said, adding that the regulatory body is keeping a hawk’s eye on them.

“The total market capitalisation has reached to 27.78 per cent of gross domestic product (GDP),” he said. “SEBON is joining hands with ICAN to make accounts disclosure system more reliable, in the absence of which the market is showing an abnormal activities.’

Stock market is considered a barometer of national economy. But in Nepal’s context, it does not reflect the real economic growth.

“Manipulations exist due to lack of diversification of instruments,” said Niraj Giri, director at the SEBON.

He said that the Nepali capital market is yet to see the introduction of a Central Depository

System (CDS), an essential market instruments to modernise it.

“Involvement of institutional investors will also help control market volatility,” he added.

According to the report, Merchant Banking Regulation is waiting clearance from the Finance Ministry, whereas Mutual Fund — an institutional investor — and IPO Registration Regulation is also in the offing.

In the last fiscal year, two projects — Nepal Stock Exchange, the sole secondary market’s automation and Company Registrar’s MIS system installation — have been completed, according to the report.