Stock market rebounds to leave market maker plan on sidelines
KATHMANDU, FEB 05 -
With the stock market beginning to recover from its worst beating in recent history, an earlier plan to create a market maker seems to have lost its urgency. The Citizen Investment Trust (CIT) had been envisaged to act as a market marker to protect small investors from wild fluctuations in share prices. The market maker would intervene in the share market by buying or selling stock as required to stabilize prices.
The CIT has remained silent on the issue although it has prepared an operating guideline for market makers. “We stayed silent as the Nepal Stock Exchange (Nepse) does not have the software to enable us to operate,” said Rishi Ram Gautam, executive director of CIT.
The new trading software that Nepse wanted to purchase was supposed to have a facility to permit market makers to operate. “However, the task of purchasing new software did not happen due to a bureaucratic logjam,” said Shankar Man Singh, former general manager of Nepse who left two weeks ago after completing his tenure. Some 10 months ago when the capital market had hit rock bottom, agitated investors had pushed vigorously for the establishment of a market maker.
“With the stock market presently on a rising trend, investors too have been showing little interest in a market maker,” Gautam.
After the government decided to allow the CIT to act as the market maker, a committee was formed to recommend how it should function.
The committee headed by Nawaraj Adhikari of the Securities Board of Nepal (Sebon) had recommended mobilizing a fund of Rs 4 billion to enable the CIT to do its job of stabilizing the market.
It was also proposed that there should be an independent and autonomous unit within the CIT to function as market maker.
The Finance Ministry and other government entities including the Employees’ Provident Fund, CIT, Insurance Board, Rastriya Beema Sansthan, Nepal Telecom and Sebon had pledged to contribute to the fund.
The committee has advised the CIT to purchase securities of companies with a good net worth and high earning per share in order to minimise losses. “It is first necessary to have money with us to purchase and hold shares,” said Gautam. There is no institution working as market maker in the domestic capital market.
“Although both the government and investors have shown little interest in establishing a market maker in recent times, we will resume the process within a few months,” said Gautam.
Source: The Kathmandu Post
