Daily transaction dips 50% in futures market

KATHMANDU, Jan 11: 

Daily transaction in the country´s futures market has dropped by 50 percent to around Rs 100-150 million, thanks to investors gradually switching to share investment in the hope that the slowing stock market and real estate sector would revive with some government intervention. 

Daily transaction amount in the stock market is around Rs 200-250 million in recent weeks. 

“The number of investors in the commodities market has dropped to around 12,000 this year from around 25,000 last year as investors who switched to futures market a couple of years ago without investment analysis are returning to either stock market or real estate,” said Dipendra Kumar Khatiwada, managing director of Mercantile Exchange Nepal Ltd. 

However, he said investors who are wise to select right companies and brokers are enjoying profit in the commodities market.

Khatiwada said the number of investors in the derivative market has dropped by 60 percent in Kathmandu and increased by over 70 percent outside the valley in last one year. 

“Investors who wisely analyze the market situation and engage the right brokers are increasing outside the valley. However, the number of investors in the capital declined over the year significantly as most investors blindly invested without analyzing the situation and without selecting the right commodity exchange company as well as the brokers,” said Khatiwada. 

Out of the total transactions, 40 percent had taken place between the clients themselves whereas the remaining transactions were done through clearing members or mediators. 

Though the derivative market is growing fast, the government is still to formulate necessary laws to govern this emerging sector, which has been making an annual contribution of over Rs 250 million in the form of different taxes to national coffer. Total, half a dozen commodities exchange companies are registered in the country.

“Though we drafted an Act a couple of years ago to regulate the derivative market, the draft is still to be finalized by the Finance Ministry, which has recently forwarded it to the Law Ministry for later´s consent,” said Khatiwada who is also a member of the drafting committee. 

He said banks´ disinterestedness to involve themselves as facilitators in the commodities market, lack of necessary infrastructure such as warehouse to handle the agro-based commodities, and trend of blindly investing without analyzing the market situation are the major problems seen in the development of derivative markets in Nepal.

Source: Republica