More of a liquid asset of investors is becoming un-tradable assets: Longer locking period halt the trading of securities   

The trading of about 25 companies is being halt worth Rs 11.7 Billion. Many companies started merger and acquisition (M & A) process, since Nepal Rastra Bank (NRB) has adopted the M & A policy. For the successful completion M & A, there should be proper matching and adjustment of structure, objective, culture and every aspect of involving organizations. The trading of Sahara Bikas Bank, for example, has been locked since Jestha 25^th 2074. Thus this process generally takes long period of time.

The trading of securities of such organization is locked until the completion of merger and acquisition process, once the companies agreed upon it. It means no investor can buy or sell the securities during this time. Generally, shares are considered as liquid assets. But because of locking period, the securities seem like more of long term fixed assets. Which can’t be converted into cash until the completion of process.

Securities Board of Nepal (SEBON), Nepal Stock Exchange (NEPSE) and NRB started discussion to sort out this problem. The discussion is crucial because it is happening just ahead of publication of monetary policy. They are trying to find the way to shorten the locking period.

Bank and financial institutions (BFIs) cover more than 70% of secondary market. 56.30% of the market is covered by commercial bank only. So if BFIs follow the instruction of NRB about big merger (in fact they won’t have option to choose), the market is likely to have no transaction at all or minimal transaction.

Many directors are likely to be jobless, because there will be less institutions to hire them. Retained directors may wanting to sell their shares, but they can’t. The research report of NRB also concluded that the shareholders and directors are in financial stress because of longer locking period.

The spokesperson of SEBON make an opinion to make the rule to shorten the locking period, by looking at international, before any formal steps toward big merger. The report of NRB also recommend to make the locking period shorter, if not eliminated.  Therefore it is wise to letting the securities more of a liquid assets rather than making them fixed assets, which cannot be converted into cash as per requirement.