Kathmandu. The Securities Board of Nepal (SEBON) is all set to launch a new benchmark index of the stock market by mid-November.
The Securities Board of Nepal (SEBON) is preparing to use the benchmark index as mentioned in the Capital Market Strengthening and Revival Action Plan, 2083 issued by the Ministry of Finance on September 12, 2083. For this, the Securities Board has prepared a working paper on restructuring the benchmark index in the stock market, 2083 and made it public for consultation.
According to the Securities Board of Nepal (SEBON), the new benchmark index of the securities market will be used on the basis of tradable shares, market capitalization, financial condition of the company, liquidity of transactions, corporate governance and information flow status.
The NEPSE index currently in use calculates the index on the basis of the market capitalization of the promoter shares that are not traded daily and are locked-in. As a result, the government owned and locked-in shares are not available in the daily trading even though they are added to the total market capitalization, so the issue of public concern has to be addressed as it does not accurately depict the market, according to the Securities Board.
In order to solve this problem, the Securities Board of Nepal (SEBON) is preparing to restructure the existing NEPSE index as a comprehensive index to measure the overall share price. “The NEPSE benchmark index will be developed based on the market capitalization of tradable free-float shares,” the Securities Board of Nepal (SEBON) said, adding, “For the implementation of this new benchmark, a certain free-float factor will be implemented on the basis of tradable share by separating founder, government and locked-in shares.” ’
With the development of a new benchmark index based on the market capitalization of tradable free-float shares, the NEPSE index calculation method will become realistic and it will help in the development of modern financial instruments such as index funds, ETFs and derivatives.
The Securities Board of Nepal (SEBON) has urged all stakeholders to provide suggestions for the proposed working paper by November 30.
