For those who think that the share market has ever-increasing tendency, mind you, this piece could be bit disappointing. For those, who has given up all hopes of the revival of the local bourse, wait a second, there’s a burning light at the end of the tunnel. Politics though it shouldn’t have been, undoubtedly is the driving factor of our only secondary market and the investors are destined to succumb to the so-called unfortunate brunt of politics. But a new narrative is surely in the making and there are plenty of good omens that have kept the blaze of hopes still raising.
What’s in the Elections?
Elections have historically been the turning points which keep on forcing our only secondary market to shift its gears. This author presumes that the memories about sudden rise in the trade volume followed by the exponential surge in the NEPSE index are still fresh among most of the readers during some past elections. It should also have remained totally intact that the market had nose-dived number of times when the elections were postponed. This tendency to link the regular administrative functioning of the state hasn’t fared well for the investors as this has failed to establish the Nepalese investors as the matured ones.
There are certain principles of state towards which the investors in Nepal have totally turned their blind eyes. We are the same investors who went buying frenzy when the election dates were announced couple of times ago as if those elections were the sole panacea to Nepalese problems. We are the same investors who had sent the stock market crashing with circuit breakers after the formation of Nepali Congress led governments. We are still the same investors who are currently apprehensive that the economy without Nepali Congress won’t fare well as the ongoing elections is slowly directing the nation to the left turn. But what our investors have been lacking is the reflection on the bigger picture of Nepalese political economy. The country could have either the self-proclaimed centrists or the leftists in its helm of power but the engine that keeps both these seemingly contradictory forces running in Nepal is the same; undoubtedly the flow of capital.
The present political backdrop has put the leftist forces one more time in the commanding seat but this time with a mandate to make the flow of capital more accessible and profitable to all and sundry. Unlike this, we the investors are still in the state of paranoia with artificially-induced mindset that the leftists’ win is the end to free economy in Nepal. What we have failed to recognize is that the latest constitution has provisioned for lots of checks and balances for the emerging power centers and most prominently the economy of Nepal itself is in a state from where there’s no more turning back. So, the few apprehensive investors might choose to off-load their stock holdings and the market is destined to suffer some transient downfall. Nevertheless, the security market in general has evolved to a long way and there’s no other alternative for it other than to keep growing with the economy slowly taking shape.
A fresh breath of reforms
News about plenty of reform works in stock market has surfaced regularly for past couple of years which unfortunately hasn’t had expected impact over the investors. It’s quite natural for those investors to question, “Despite of all these reforms, why hasn’t the stock market taken a frog-leap?” a simple answer for them would be “Stock market is like a bouncing ball. It cannot stop to bounce up and down and the forces of those bounces themselves determine the next state”. A simple law of economics makes it clear that there arises a price difference when there’s mismatch between demand and supply. The irrational fear among the investors and the low liquidity has played a foul game against this demand –supply cycle and the reform agendas have therefore fallen shy of delivering. Nevertheless, there are plenty of them and one will definitely fire if others’ don’t.
First, it would come as the implementation of full-fledge automated trading system in NEPSE. Next, it would take another avatar of commercial banks working as stock brokers and stock brokers working as margin-lenders. Third, it would be the entry of more businesses from the real sectors in the NEPSE and the ultimate diversification of stock market as a whole through an endorsement of new stock exchange. These are few of the representative reforms that have huge potential to face-lift the secondary market of Nepal to make it ultimately a sustainable market place ensuring more investments from moffussil investors and from NRNs. The present imbalanced cycle of demand - supply would be then further imbalanced but for the better cause then; more demands and less supply.
Final say
It’s undoubtedly a trait of a wise investor to make investments when the stock prices are below the normal value and reap the benefit later with their careful sales. Therefore, this time of austerity, I believe is the time for young and inexperienced investors to do some simple market research and get hold of the stocks of few good-performing companies. There are plenty of examples that a person with a humble beginning in stock market has gone so far as to become a big market player in a decade or so. If the youths act today, they can be the ones in some 10 years’ time or even earlier provided that the luck factor and wisdom find a proper synchronization.
