Capital market yet to witness reforms
KATHMANDU, JULY 6:
The capital market is yet to witness scores of measures, announced in the budget, to come into action even as the fiscal year comes to an end. The much-anticipated central depository company — CDS and Clearing (CDSC) — and institutional investors have not been able to start operations despite receiving a licence.
The budget for the current fiscal year had announced the operation of CDSC and entry of institutional investors as measures to halt the free fall of stock indices. The need of institutional investors as market makers or mutual funds had been urgent as the share market is dealing with an imbalance in demand for and supply of shares.
To counter the over supply of shares and increase the involvement of more people in the share market, mutual funds are considered to be the best instrument. The budget had announced concessions to be provided for investments coming from institutional investors but there still is no institutional investor.
Siddhartha Mutual Fund and Nabil Mutual Fund have already got the licence but these companies have not started operations. “Securities Board of Nepal (Sebon) recently amended the Mutual Fund Regulation so that mutual funds could start operations soon,” according to Sebon’s chairman Baburam Shrestha. Likewise, the budget had announced that electronic transaction of shares would be initiated to enable share transactions from major cities of the country and also from foreign countries.
Nepal Stock Exchange is trying to update its trading system to allow online transactions but it does not seem that it will happen anytime soon. The operation of CDSC that will make share transfer, clearing and settlement faster is unable to start work despite getting the licence from the regulator. It is not yet ready as public companies have yet to register their stocks for dematerialisation. The Finance Ministry has already set another deadline for CDSC operation — beginning of the coming fiscal year. “CDSC is all set to start operations from the beginning of next fiscal year,” said Shrestha.
Moreover, the budget had also announced that Non Resident Nepalis (NRNs) will be allowed to invest in the Nepali capital market. Though the legal framework for NRN investment is ready, but in the absence of much-needed mutual funds, the investment cannot be channelised into the securities market. The recently amended mutual fund regulation has opened up NRN investment in the share market but through mutual funds only.
“It is true that things are running slow and a lot more needs to be done but we are more focused in strengthening regulations and forming a strong base so that the capital market progresses at a faster pace in the coming years,” said Shrestha. Though the government slashed capital gain tax on share transactions from 10 per cent to five per cent, it failed to bring excitement in the capital market.
Moreover, regulation for supervision of futures and commodities’ markets is still not ready which was announced in the budget of fiscal year 2009-10.
