How does the current investment outlook in Nepal looks like?
- ShareSansar, September 13, 2017 on Exclusive , Featured , Latest , NEPSE News , Others , Stock Market
With the main agenda of developing an efficient capital market in Nepal, Securities Exchange Board of Nepal (SEBON) and Nepal Stock Exchange (NEPSE) was established in the year 1993. While, SEBON is the apex regulator of the capital market NEPSE is the secondary market operator in Nepal. It’s been 24 years since its establishment but still, the Nepali capital market is still considered to be in its inception stage.
Having said that, we cannot overlook the growing interest of Nepalese in the share market with the topic of shares investment being the talk among Nepalese with IPOs being over-subscribed in its opening day; the latest example being of the Nepal Hydro Developers Limited where the IPO has been oversubscribed by 2.35 times on the first day of its opening day and of Forward Community Microfinance Bittiya Sanstha (FOWAD)’s IPO which had been oversubscribed by over 101 times.
We know the outlook for investment in shares is huge because:
1. Securities Issue and Allotment Guidelines, 2074: The recently implemented Securities Issue and Allotment Guidelines, 2074 by Securities Board of Nepal (SEBON) has made it mandatory for all applicants to be allotted a minimum of 10 units of shares replacing then existing provision to set aside 40% shares for retail investors and 60% shares; the pro-rata basis for the other investors increasing the chances for all the investors to get their fair number of shares.
2. Full-fledged automated stock trading system: The initiative by Nepal Stock Exchange (NEPSE) to implement a full-fledged automated stock trading system by mid-October brings huge ease and opportunity for traders as the fully automated system will allow investors to post their buy/sell orders through the new online system and also settle transactions and the system when implemented will help boost the country’s stock exchange.
3. IPO issued at par: The prospect for investment in Shares in Nepal is booming and the Nepalese share market which is still considered an infant is a safe haven for the upcoming new investors as the Initial Public Offering (IPO) starts at the par value of Rs.100, while beyond national borders IPOs are generally issued at premium. Also, there are still many more companies which are lined up for issuing IPOs, recent one being that of Support Microfinance which will issue its shares soon enough.
4. Investment Diversification: There are 208 listed companies in NEPSE and among these there are 28 commercial banks, 11 mutual funds, 4 hotels, 31 finance companies, 18 manufacturing and processing, 16 hydropowers, 22 insurance companies 72 microfinance and developments banks and the rest belonging to other sectors. While the number of companies listed in the share market in Nepal is comparatively lesser than the neighboring stock exchanges, it still provides each individual investor ample of opportunities to diversify their investment hedging their risks and maintaining an efficient port-folio which would help them book returns in their investment even when the market is decreasing in trend.
5. Investment in Secondary Market: Likewise in the secondary market too, there is a lot of opportunity for higher profits and returns in Nepalese stock market as people can gallop in this market. Every share market has it own fair no of investors and traders and in the case of Nepalese market the ratio seems to stand at 65:35, with the investors looking forward for the long-term investors and the traders section looking forward for the short-term investment with the market sentiment of reaping higher profits in shorter time frame and they are the ones who are swayed by the market rumors that goes around in the Nepalese share market.
Having said that there are investors, who don’t just invest their money but also their time with their expertise; the veterans in Nepalese share market selecting the best companies and reaping profits even when the market is decreasing in trend. With the right attitude, mindset and quicker to nerves strategy one can book profits and earn returns in the secondary market in Nepal, both short-term and long-term.
Analyzing the investment scenario, we can say that in terms of short-term investment in the secondary market (NEPSE) insurance and micro-finance sector seems to attract the short-term investors and traders as their total market capitalization is lesser and the market sentiment of investors behind these sector is it that they have higher expectation on these sectors regarding the right shares and bonus.
However, it is also to be noted that higher the potential for return in shorter time frame, the higher is the risk. In terms of long term investment and being on a safer side, commercial banks and development banks seems to be more compelling as their prices do not fluctuate to that extent of the micro-finance and insurance and they are also give out attractive dividends and returns and is more secure.
Taking the afore-mentioned points and looking ahead, we can conclude that the outlook for investments in share market in Nepal is pretty strong and is still expected to grow. For those who haven’t started investing in the Nepalese share market, it is time to think about investing in Nepalese stock market.
- Deep Thapa
- Anu Lama