Sebon's master plan implementation tardy

KATHMANDU:

Even after more than two years since the five-year master plan on capital market was devised, nothing substantial has materialised.

The preparation of World Bank funded master plan to revamp Nepali capital market was completed in July 2011. The master plan was supposed to address most of the shortcomings bothering Nepali securities market at the time and make it at par with international standards by July 2016.

Capital market regulator — Securities Board of Nepal (Sebon) — had sought international support to address structural problems bugging the overall market as the stock index had crashed. However, as the stock prices have become bullish again, implementing the devised plan seemed have taken backseat on Sebon’s priority list.

The master plan had emphasised on preparing legal and institutional infrastructure to make securities market diverse. It was prepared with the objective of making effective regulatory provisions and developing the securities markets, but the chances of Sebon achieving the set deadline seem unlikely, given the current pace.

“It is wrong to assume that Sebon has done nothing outlined in the master plan, as most of our annual programmes are based on its recommendations,” pointed out chairman of Sebon, Baburam Shrestha.

The plan had stressed on introducing the policies that encourage real sector companies to get listed at stock exchange. The consultant hired by World Bank to prepare the master plan had highlighted the overwhelming presence of financial institutions as the bane for stock exchange.

Since then, Sebon has not introduced any change in regulation or enabling facilities for the real sector companies, such as manufacturing, to encourage listing. The number of real sector companies listed at Nepal Stock Exchange (Nepse) has remained almost unchanged, except for addition of one hydropower company — Sanima Mai Hydropower. Moreover, hydropower companies are choosing to offer shares to public due to sheer need of raising capital, not because of any policy level influence.

Likewise, the master plan had pointed out the major flaw in the ongoing public issue regime that has rigid condition about offering primary shares at premium rate. According to the plan, Sebon needs to do away the system of offering the shares at face value, which is the major deterrent for profitable companies in steering clear of going public despite the obvious benefits.

According to Sebon, their focus right now is on preparing the regulation that will allow issuers to float shares at premium rates by amending their Securities and Issue Regulation 2065.

“We cannot haphazardly change the laws without assessing the repercussions on the market, investors and issuers, so we are taking it slow,” pointed out Shrestha, adding that Sebon is even assessing book building to determine the initial price of primary floatation as per international practice.

The master plan had further stressed on bringing in institutional investors that can balance out short- term market volatility, which spikes the share prices. Since past one year, two mutual funds have come into existence in the capital market, but those companies were already in pipeline when the plan was being prepared.

“We have brought in institutional investors such as mutual funds, credit rating agency, while automated share trading will also be undertaken soon and investor education has also been expanded, so works are being done, but the pace is slow,” he added, citing lack of institutional capacity — especially human resource — as the reason for such slow development.

Source: THT