Government agencies all set to invest in stock market
KATHMANDU, FEB 27 -
There’s good news for stocks: Government agencies are all set to invest in the capital market.
At a meeting on Sunday, representatives from Employees’ Provident Fund (EPF), Citizens Investment Trust (CIT), Insurance Board (IB), Rastriya Beema Sansthan (RBS), Nepal Telecom (NT), Securities Board of Nepal (Sebon) and Finance Secretary Krishna Hari Baskota reached an agreement in principle to this effect.
As per the agreement, the agencies will create a fund for investing in the stock market, and CIT will work as market maker. “The agreement is aimed at reviving the capital market,” said Baskota. “We have told CIT to prepare a modality on how it would work as market maker and how other parties could contribute to the fund.”
CIT has been given the role of market maker as it has been involved in investing people’s funds in various investment instruments, Baskota said. However, the size of fund is yet to be decided.
A market maker should have the capacity to hold stocks for a certain period and invest in appropriate time so as to maintain stability in the market.
“The government agencies participating in the meeting agreed to contribute to the fund to be created for investing in stocks,” said Sebon Chairman Babu Ram Shrestha. “This move will definitely boost general investors’ confidence.”
In its action plan submitted to the Finance Ministry three weeks ago, CIT had expressed interest in working as market maker. “Currently we do not have the mechanism to operate as market maker,” said Rishi Ram Gautam, executive director at CIT. “Therefore, our first job is to prepare the mechanism.” He added that developing such a mechanism will take some time.
The government had been asking various government agencies, including EPF, NT, CIT and RBS, to invest in stocks so as to revive the secondary market.
Meanwhile, the Finance Ministry is holding discussions on Sebon’s proposal to increase the income source disclosure limit to Rs 10 million from the current Rs 1 million.
But ministry officials said such a measure is less likely to be taken at a time when Nepal narrowly avoided itself from being blacklisted by Financial Action Task Force, a global anti-money laundering body.
However, the government is confident that once the Central Depository System comes into operation, investors’ confidence will rise. Baskota said the ministry has directed the agencies concerned to work to bring CDS into operation by mid-April.
Government officials say the psychological impact of the protracted market slowdown on investors was the reason behind the failure of the measures taken to boost the market.
“We hope that the latest effort to bring in a market maker would boost investors’ confidence,” said Sebon Chairman Shrestha. “There is no reason for the market to remain at low ebb as a majority of economic indicators are sound.”
Source: Kantipur
