Kathmandu. A study committee formed under the coordination of former Deputy Governor of Nepal Rastra Bank Chintamani Shiwakoti has made public the report with the conclusion that a new stock exchange is necessary.
The committee formed by the government on whether it would be appropriate to allow a new stock exchange has pointed out the need to allow the new stock exchange along with the restructuring of the Nepal Stock Exchange. According to the report released by the Securities Board of Nepal( SEBI), nepal’s new stock exchange is necessary as an institution owned by the regulatory body cannot carry out effective incorporation due to conflict of interest while operating the market on the basis of the basic principles of balance of power and regulation.
The report also envisages the expected achievements and scenarios in the stock market after the new stock exchange comes into operation.
Such expected achievement and market scenario
1. The secondary market access to securities and increase financial literacy will significantly increase the number of investors in the securities market, transaction amount and other market activities.
2. To develop and operate a modern technology-friendly system prevalent internationally in the listing, transaction, rafsaf and information dissemination of securities.
3. Diversification of listed organized institutions, securities instruments will be an attractive destination for investors to invest in nepal’s securities market.
4. Numerical and qualitative growth of stock market participants (securities brokers, securities traders, central deposit service, RAFSAF bank, RAFSAF members, deposit members) etc.
5. Small savers in rural areas of the country will also get investment opportunities as access to the services of the overall secondary market, including securities broker business service, is wide and accessible.
6. The second market infrastructure and market operation arrangement will be implemented in accordance with the principles of IOSCO. This will create an environment where Nepali companies can mobilize and list capital from abroad and foreign companies can be listed in Nepal i.e. cross-border listing and trading.
7. By providing that the same securities can be listed on two stock exchanges, according to the principle of arbitrage of finance, investors will be transferred from the highly valued market to the undervalued market, which will help in determining the real price of securities and bringing price stability.
8. Create an environment for international financial institutions to mobilize capital by issuing bonds in local currency.
9. A large number of energy companies directly concerned with agriculture, industry and other products will be listed in the secondary market of securities.
10. Increase in employment and income and monetization of economic activities in rural areas will have a positive impact on the overall economy.
11. For non-resident Nepalis and foreign investors, the securities market will be an attractive destination for investment.
12. Investors will be benefited by developing an environment of competition in the operation of the stock exchange and reducing the transaction fee.
13. Even if the transaction fee decreases, the government’s revenue will increase through capital gains tax, income tax and tax deduction on source, etc. through the securities market when the number and amount of transactions increase significantly.
14. Overall market regulation is effective by improving various structural and operational deficiencies in the secondary market of securities.
15. The stock market expands as an effective means of long-term and medium-term capital mobilization. It helps in increasing the stability and credibility of the entire financial system.
16. When the listing system is easy and convenient, an environment can be created in which the organized organizations of the real sector of the economy will be encouraged to collect and list through the securities market by reducing the listing cost and procedural time.
17. With the increase in the country’s GROSS domestic product, the number of organized organizations, securities transactions and investors listed in the securities market is also expected to increase.
