Introduction to Nepal Stock Exchange (NEPSE)
Nepal Stock Exchange (NEPSE) is the one and only stock exchange of Nepal. NEPSE is located in Singha Durbar Plaza in Kathmandu. It is established under the Company Act 2006 and is operated under Securities Act 2007. In 2033 B.S., Nepalese government established a Securities Exchange Centre as a buying and selling center. The main objective of the Securities Exchange Center was to promote the growth of capital markets. All the operations related to brokering, underwriting, managing, issues and all financial services were undertaken by the center. Later, the same center was transformed into Nepal Stock Exchange in 2050 B.S. with the aim of developing the capital market.
Biratnagar Jute Mills Pvt. Ltd started the securities trading in Nepal by floating its share in 1937. This started the development of the secondary market in Nepal. The first government bond was issued in 1964.
Ownership of Nepal Stock Exchange
|S. No.||Shareholders||Ownership (Percentage)||No. of Shares|
|1.||Government of Nepal||58.66||2,933,122.5|
|2.||Nepal Rastra Bank||14.60||729,989.5|
|3.||Employees Provident Fund||10.00||500,000|
|4.||Rastriya Banijya Bank||6.14||306,816|
|5.||Laxmi Bank Limited||5.00||250,000|
|6.||Prabhu Bank Limited||5.00||250,000|
The main objective of the NEPSE is to manage the trade of the listed securities. NEPSE works for the listing of the companies. Listing means to register all the publicly traded securities in the secondary market. The end goal of the NEPSE is to work on the economic development of the country. To achieve economic development, NEPSE focuses on the capital formation and promotes the investors of the secondary markets. NEPSE is the government owned entity and works under the Security Act. It acts as the economic mirror of Nepal’s economy. NEPSE supports the capital formation of the listed or listing companies. The required information regarding the investment and profit is provided by the NEPSE. For the fair trading of the financial instruments, NEPSE looks to protect the buyer and seller.
The primary focus of NEPSE is to regulate the trading of the shares, bonds, mutual funds and other securities. The trading of the securities are performed through brokers. NEPSE works as the regulatory body and oversees the market operations, listed companies and securities dealers. .Rules and regulation are maintained to minimize the fraud activities. For buying and selling of the securities, NEPSE has 50 member brokers and 43 Remote WorkStation. Through these members NEPSE looks to channel the public savings into meaningful investments.
Roles of Nepal Stock Exchange
Any stock exchange can have various roles in the economy. The roles of the NEPSE are based upon the dealing of securities in the secondary market.
NEPSE plays a significant role as a ready market for the trading of second hand securities. NEPSE regulates and promotes the liquidity of investment and trading of securities in the secondary market . It is the only regulatory body for trading the securities in Nepal.
Safety of Market
In Nepal NEPSE is the safest option for transaction of securities. NEPSE looks after all the primary and secondary markets and acts as a control or a regulatory body. There are norms to follow by all the listed companies making it difficult for companies and brokers to interfere against the norms. Hence, NEPSE is safe for both investors, companies and traders.
NEPSE regulates different listed companies’ securities. NEPSE, as the only stock exchange of Nepal, evaluates the price of different securities based upon the interaction of demand and supply of the securities. Any irregularities in market operation are looked at by NEPSE. Price adjustment, in any necessary condition, is conducted by NEPSE.
Capital Formation Agency
NEPSE is the capital formation agency for Nepal. It attracts people’s savings to investment in different projects. NEPSE connects investors, companies and traders and is a major actor in maintaining liquidity in the market. NEPSE is the resort place for the companies for raising capital from the public. Also, NEPSE inspires people to save more and invest in securities.
Development of Industries and Commerce
NEPSE plays a major role in the industry and commerce development in Nepal. Through NEPSE, people transfer investment from inefficient companies to efficient companies. Companies can go for public investment for expansion strategies, NEPSE is a prime actor.
Reflector of the company
NESPE reflects the political, economic and social environment of the country. This environment affects the price of the securities. The buy and sell process in the stock market reflects all the behavioral intentions of market participants i.e. reflects the perception of participants towards the trading companies. NEPSE manages the business atmosphere for evaluation.
Store Business Information
Companies listed in the NEPSE are required to provide financial statements, annual reports and related documents to NEPSE. Such companies’ information can be useful; for the general public, for investment, and for the government to make any investment and economic plans and other informed decisions.
Participants in Nepal Stock Exchange
At the current time, NEPSE is the only intermediary to oversee the buying and selling of the securities. NEPSE has 50 member brokers who have 43 branches in total. Brokers have branches in 21 cities of Nepal. There are various categories of securities i.e. sub-indices in NEPSE. Different categories include; commercial banks, development banks, micro finance, hydropower, investment, life insurance and nonlife insurance, bonds, mutual funds and others. Currently, there are 223 companies in Nepal Stock Exchange (NEPSE) listing. The major participants of NEPSE area as follows
- Stockbrokers: The member brokers are licensed for the purpose of buying and selling of the securities. They act as the link between the stock exchange and investors.
- Underwriters: Underwriters are mediators in the primary market who undertakes the responsibility of subscription of public offer which are not bought by investors.
- Issue and Sales manager: They have the responsibility of issuing and underwriting the public securities. Issue managers are responsible for providing advice related to capital structuring, capital gearing and financial planning for the company.
- Security traders (Investment Banker): They have the main role of managing the portfolio of the individuals. They are responsible for buying and selling of stocks and other trading commodities at a stock exchange.
- Shareholders: For the NEPSE, the government is the 58.66% shareholders and remaining shareholders are Nepal Rastra Bank, commercial banks and others. They all are stakeholders at NEPSE hence, they are actively participating in operation and decision making of NEPSE