The country’s only secondary market set another record this week.Average daily turnover at Nepal Stock Exchange (Nepse), had been hovering at around Rs 400 million in Fiscal Year 2013/14, jumped to Rs 1 billion on Monday.
According to Nepse, 2.2 million units of shares, worth Rs 1.20 billion in total, were traded on Monday through 5,349 transactions.
The daily transaction volume in the market has been growing steadily in recent months.Nepse has attributed this rise in trade to a host of technical factors including a recent upgrade of their operation system and database server, the migration of data to the new upgraded server, and improvement in its Automated Trading System.
Traders had been using an ‘open-out-cry system’ at the trading floor inside the Nepse offices since the government established the secondary market exchange for the first time on January 13, 1994.
On August 24, 2007, a screen-based trading system that used a wide area network enabled the brokers to connect with Nepse’s server from their own offices.
According to Nepse, the improvement in the trading system led to increment in the transaction of shares.
MARKET MOVING TOWARD ‘MATURITY’
Market experts say the surge in daily turnover, together with the rise in the benchmark --Nepse Index -- is an indication that the nascent share market is heading toward maturity.
“The rise in turnover means that the market is becoming mature. The market can now move on by itself. It is now impossible for a handful of big investors to drive the market,” Narendra Sijapati, the president of Stock Brokers Association of Nepal, told Republica. “When daily transactions and turnover increase, there is less room for these big investors to manipulate the market.”
Anjan Raj Poudyal, the proprietor of Thrive Brokerage House, agrees with Sijapati.
“In the past, a drop in the benchmark index would usually be followed by a significant dip in turnover. In recent months, the turnover and transaction volume have not gone down significantly even when there is a correction in the market. This shows that the market is becoming mature,” said Poudyal.
However, share market researcher Gopal Prasad Bhatta says that there is still a long way to go for Nepal’s bourse to become a mature market. “The share market here does not follow market rationale. For example, share prices of those companies who are likely announce bonus shares or rights issues go up.
As per demand and supply theory, their price should not rise as this issuing would lead to the availability of more shares,” says Bhatta. A flawed pricing method for rights issues also fuels the rise in share prices of those companies, he adds. The companies offer rights issues to its shareholders at their face value of Rs 100 per unit share.
Bhatta, whose doctorial thesis was on ‘Stock Market Efficiency in Nepal’, however, observes that though the market has been shifting from investors’ ‘heard behavior’ to ‘analysis-based behavior’, rumor and speculation still largely dominate the direction the market takes.
LIQUIDITY SURPLUS BOON TO CAPITAL MARKET
Liquidity surplus in the banking system is one of the main reasons behind the recently seen growth in turnover at the secondary market.
As bank and financial institutions (BFIs) offer less than 5 percent interest deposits, investors find pouring their money into a bullish market more rewarding.
Even those BFIs flooded with the excess cash are wooing share investors by offering them loans against share pledges at attractive interest rates -- as low as 9 percent.
With a lack of areas to invest in and a slowdown in demand for lending, BFIs have also found the share market a safe bet. Currently, Rs 70 billion rupees is lying idle in the banking system, according to Nepal Rastra Bank.
PAPERLESS TECHNOLOGY TO BOOST TURNOVER
With the full-fledged operation of the central deposit system (CDS) – a paperless system that handles securities in dematerialized form without the physical movements of securities or execution of transfer -- transaction volume is expected to grow even more.
With the current system, it is difficult for investors outside Kathmandu to buy or sell their shares as the settlement and clearing of trading requires
their signature for verification.
“With the full-fledged implementation of CDS, the trading frequency will also go up as the market will rope in new aspiring investors from outside the Kathmandu Valley,” Murahari Parajuli, deputy spokesperson of Nepse, told Republica.
source: republica,24 july 2014
LINK
According to Nepse, 2.2 million units of shares, worth Rs 1.20 billion in total, were traded on Monday through 5,349 transactions.
The daily transaction volume in the market has been growing steadily in recent months.Nepse has attributed this rise in trade to a host of technical factors including a recent upgrade of their operation system and database server, the migration of data to the new upgraded server, and improvement in its Automated Trading System.
Traders had been using an ‘open-out-cry system’ at the trading floor inside the Nepse offices since the government established the secondary market exchange for the first time on January 13, 1994.
On August 24, 2007, a screen-based trading system that used a wide area network enabled the brokers to connect with Nepse’s server from their own offices.
According to Nepse, the improvement in the trading system led to increment in the transaction of shares.
MARKET MOVING TOWARD ‘MATURITY’
Market experts say the surge in daily turnover, together with the rise in the benchmark --Nepse Index -- is an indication that the nascent share market is heading toward maturity.
“The rise in turnover means that the market is becoming mature. The market can now move on by itself. It is now impossible for a handful of big investors to drive the market,” Narendra Sijapati, the president of Stock Brokers Association of Nepal, told Republica. “When daily transactions and turnover increase, there is less room for these big investors to manipulate the market.”
Anjan Raj Poudyal, the proprietor of Thrive Brokerage House, agrees with Sijapati.
“In the past, a drop in the benchmark index would usually be followed by a significant dip in turnover. In recent months, the turnover and transaction volume have not gone down significantly even when there is a correction in the market. This shows that the market is becoming mature,” said Poudyal.
However, share market researcher Gopal Prasad Bhatta says that there is still a long way to go for Nepal’s bourse to become a mature market. “The share market here does not follow market rationale. For example, share prices of those companies who are likely announce bonus shares or rights issues go up.
As per demand and supply theory, their price should not rise as this issuing would lead to the availability of more shares,” says Bhatta. A flawed pricing method for rights issues also fuels the rise in share prices of those companies, he adds. The companies offer rights issues to its shareholders at their face value of Rs 100 per unit share.
Bhatta, whose doctorial thesis was on ‘Stock Market Efficiency in Nepal’, however, observes that though the market has been shifting from investors’ ‘heard behavior’ to ‘analysis-based behavior’, rumor and speculation still largely dominate the direction the market takes.
LIQUIDITY SURPLUS BOON TO CAPITAL MARKET
Liquidity surplus in the banking system is one of the main reasons behind the recently seen growth in turnover at the secondary market.
As bank and financial institutions (BFIs) offer less than 5 percent interest deposits, investors find pouring their money into a bullish market more rewarding.
Even those BFIs flooded with the excess cash are wooing share investors by offering them loans against share pledges at attractive interest rates -- as low as 9 percent.
With a lack of areas to invest in and a slowdown in demand for lending, BFIs have also found the share market a safe bet. Currently, Rs 70 billion rupees is lying idle in the banking system, according to Nepal Rastra Bank.
PAPERLESS TECHNOLOGY TO BOOST TURNOVER
With the full-fledged operation of the central deposit system (CDS) – a paperless system that handles securities in dematerialized form without the physical movements of securities or execution of transfer -- transaction volume is expected to grow even more.
With the current system, it is difficult for investors outside Kathmandu to buy or sell their shares as the settlement and clearing of trading requires
their signature for verification.
“With the full-fledged implementation of CDS, the trading frequency will also go up as the market will rope in new aspiring investors from outside the Kathmandu Valley,” Murahari Parajuli, deputy spokesperson of Nepse, told Republica.
source: republica,24 july 2014
LINK
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