Too few stock brokers
Kathmandu, August 16:
When Nepal Stock Exchange (Nepse) Ltd opened its trading floor on 13th January 1994, there were 60 listed companies and 25 share brokers.
Today, the number of listed companies has reached 135, even after the delisting of more than three dozen companies, but the number of stock brokers has decreased to 23.
“The number of stock brokers should have increased,” says Rewat Bahadur Karki, general manager and CEO at the Nepse, adding that additions will increase healthy competition in the sole secondary market. “Healthy competition in the stock market will help grow the secondary market in a sustainable way,” he adds.
“Otherwise unhealthy competition will hit small investors and it will be difficult for them to enter the market,” says Rabindra Bhattarai, a stock analyst.
“An increase in the number of brokers will not hurt existing brokers,” says Rabindra Pradhan, a stock broker, adding that the present number of brokers is low in comparison to
the rising share trading and transaction.
As the number and the volume of transactions grow, the Stock Exchange has divided the listed companies into the eight groups and has introduced the Sensex to make it more transparent. “It has also started the circuit breaker to protect the investors’ interest,” says Karki.
Constant vigilance over the stock market is needed to protect the interest of investors. “The Nepse is also thinking of introducing a ‘brokers code of conduct’ apart from increasing the number of brokers to inject greater self-disciplined. It will also help check manipulations,” he adds.
Most industry players agree that the stock market is ripe for modernisation.
“To modernise and regularise the market, Nepse has introduced automation from yesterday that is a key tool for regulating the unjustified rises in share prices and track investors and their transactions, so that the market can not be manipulated,” Bhattarai says.
Nepse should also apply a Central Depository System (CDS) to grow as a vibrant sector. CDS can minimise the troubles for the buyers. The brokers’ commission should also be lowered from what they are charging right now.
“The market, now, has to be monitored and regulated without damaging the large number of investors’ confidence for sustainable growth,” feels Bhattarai.
The Nepse has virtually been on fire in recent months. “The stock market has been heating up primarily due to lack of investment alternatives. Petty investors have no opportunity,” adds Pradhan.
“Growth should be sustained on the long run otherwise it would be another ‘bubble burst’, leaving a lots of petty investors on the road overnight,” feel investors.