Foreigners, NRNs can invest in Nepali stocks if govt approves industry ministry proposal

Nepal’s share market might get a boost from the injection of funds once the government approves the proposed Foreign Investment Policy 2013, drafted by the Ministry of Industry, that has separate provisions on NRNs and foreigners.

The draft proposal suggests opening the door for foreigners and non-resident Nepalis (NRNs) to invest in the stock market. Once the government gives green signal to the proposal, NRNs will be in a position to buy shares on both individual and institutional basis, while foreigners can invest in stocks only through institutions. The draft policy requires the foreigners to invest in the share market for a minimum of three months. The entry of NRNs and foreign investors is expected to ease the flow of funds in the market.

A total of 227 companies are listed on the Nepal Stock Exchange, which is mostly dominated by banks and financial institutions. Attracting investors from abroad, however, might call for a sort of overhaul of the current trading system that is bogged down by procedural bottlenecks that could put off potential investors. The provision of self attendance, for example, might put off potential investors. The rule requires that the investors submit details of three generations and should also submit a photocopy of their citizenship certificates. The rule might have to be relaxed to allow foreigners to do transactions through nominee accounts.

Also, the NEPSE has much to do to create a fully automated trading system. Government officials have told media that increasing investments of NRNs in other sectors has led them to believe that the NRNs would be willing to invest in the share market as well.