Nepal | September 28, 2020

Only a third of public shares are actively traded

Rupak D Sharma
Share Now:

Kathmandu, January 21

Only a third of shares that are in the hands of the public are actively traded on the stock market every day.

This became evident after the Securities Board of Nepal, the securities market regulator, introduced a measure to bar trading of shares that have not been dematerialised beginning January 15.

Currently, 2.97 billion units of shares are listed at Nepal Stock Exchange (Nepse), the domestic stock market, shows the latest Nepse report.

Many listed companies, whose stocks are actively traded, have allotted 30 per cent of their shares to public, while rest are owned by promoters.

This means around 892.02 million units of shares are currently in the hands of the public, which can be easily traded on the secondary market.

But so far only 308.96 million units of shares have been dematerialised, or converted into electronic form. This means only 308.96 million units of shares — or 34.64 per cent of shares owned by the public — are eligible for trading on Nepse at the moment.

This is an indication that supply of tradable shares has fallen drastically in the secondary market since January 15. Yet, there has been no change in trading volume since the new provision came into effect.

On January 15, for instance, when the benchmark index hit all-time high of 1,212 points, shares worth Rs 548.12 million were traded. A day after that, shares worth Rs 624.04 million exchanged hands. Yesterday, trading amount stood at Rs 427.65 million and today it hovered around Rs 460 million.

These trading amounts are similar to those of the period when provision on trading of dematerialised shares had not come into effect. This is evidence that trading at Nepse revolves around a third of shares allotted to the public — meaning dematerialisation of additional shares in the coming days may not have any impact on stock trading.

“This shows that there is a lot of room for trading volume to expand, which would make the stock market even more vibrant,” Shreejesh Ghimire, CEO of NMB Capital Ltd, told The Himalayan Times. “However, change is not going to happen overnight and it will take some time.”

One of the reasons for trading of tiny fraction of stocks offered to public is practice of holding on to shares bought on the primary market.

These days retail investors jump to buy shares whenever initial public offerings (IPOs) are launched. Once they buy the stocks, they just sit on top of them, without engaging in trading activity.

“Some of the investors who purchase stocks on primary market do not even come to collect share certificates for months,” Ghimire said.

Many retail investors are least bothered about their investment because they do not own considerable number of shares.

People who reach out to the primary market cannot always purchase large number of stocks because most of the IPOs here are heavily oversubscribed. So, allocations are made proportionately among all the applicants. This results in distribution of inconsiderable number of shares.

“But even these small quantities of shares generate yields in the form of, say, bonus shares, which continue to pile up in the accounts of investors for years,” said Ghimire.

Although it is the right of investors to hold on to their shares, trading is essential to make the stock market vibrant.

“Here, focus has to be laid on generating awareness among investors, especially retail investors,” said Ghimire.


A version of this article appears in print on January 22, 2016 of The Himalayan Times.


Follow The Himalayan Times on Twitter and Facebook

Recommended Stories:

More from The Himalayan Times:

Students demand justice for Bajhang rape victim in Kathmandu

KATHMANDU, SEPTEMBER 26 Students take to the streets on Saturday demanding justice for a 12-year-old girl whose dead body was found in a temple in Bajhang district on Thursday night. The minor was raped before being killed by the culprit/s. As per local police, investigation into the case in unde Read More...

United earn dramatic win at Brighton with late Fernandes penalty

BRIGHTON: Manchester United beat Brighton & Hove Albion 3-2 away in the Premier League on Saturday after an incredible finale in which Bruno Fernandes struck the winning goal from the penalty spot in the 100th minute of the game. Fernandes's winner, which came after referee Chris Ka Read More...

Chelsea recover from three goals down to draw at West Brom

Chelsea striker Tammy Abraham struck a 93rd-minute equaliser as they battled back from three goals down to draw 3-3 at West Bromwich Albion in their Premier League clash on Saturday. An error by Marcos Alonso led to Callum Robinson opening the scoring for West Brom in the fourth minute and t Read More...

A team of women of Police march past in a programme organised to mark the Constitution day at Nepal Army pavilion in Tundikhel, Kathmandu, on Wednesday, September 19, 2018. Photo: Skanda Gautam/THT

Province 2 threatens to knock Supreme Court door

KATHMANDU, SEPTEMBER 26 Months after the two bills related to adjustment of Nepal Police and Provincial Police were authenticated, provincial governments have not been able to take control of police. As a result, Province 2 government has sent an angry letter to the federal home ministry asking i Read More...

Local levels to resume schools from today in Siraha district

SIRAHA, SEPTEMBER 26 Community schools in Laxmipur Patari Rural Municipality and Mirchaiya Municipality of Siraha, that have remained closed for the past six months are likely to open from tomorrow. Education sections of both the local bodies, by issuing separate notices, decided to open s Read More...

Three persons including campus chief absconding

DHULIKHEL, SEPTEMBER 26 Three persons, including campus chief, have been absconding ever since police issued an arrest warrant against them in Kavre’s Banepa. A fraud charge was filed against three people including Kavre Multiple Campus Chief KJ Baidar in Kavre’s Banepa Municipality, with Read More...

Traffic police expedite monitoring of public vehicles

KATHMANDU, SEPTEMBER 26 Traffic police have expedited inspection and monitoring of public vehicles in Kathmandu valley to ensure that they follow health guidelines and other requirements specified by the government to prevent and control COVID-19. Senior Superintendent of Police Bhim Prasad Dh Read More...

Food, medicines provided to returnees from India

DHANGADI, SEPTEMBER 26 Dhangadi sub-metropolis has been providing free food and health facilities for Nepalis returning from India at border entry point, in Dhangadi. Deputy Mayor Sushila Mishra Bhatta of the sub-metropolis said food and water were being offered to the returnees ever since the Read More...