A 75-year-old grandmother was waiting for something in the local bank. She was impatient to give her thumbprints for creating a Demat account. Her grandson was arranging everything. The grandma neither knew what was happening nor wanted to know. She said, “I am here to fill up some forms; what type of forms are they God knows.”
Lately, Nepal’s stock market has seen a positive development after Covid-19; however, the investors are not feeling secure. There has been a debate whether people should be limited to invest or not. The ongoing views over the regulations of the market seem to be a serious issue.
The stock has always been notoriously known as easy money. For those who invest only in Initial Public Offering (IPO) there is low risk, but for people who are buying Follow-on Public Offering (FPO) through the secondary market – it’s never easy to gain.
Why Investing in Stock is Better?
A decade ago, cooperatives emerged as a better option for savings. The savings and loan plan concept worked better for the economic independence and financial enhancement for the Nepalis. Furthermore, cooperatives were established all over Nepal because of the Cooperative Act 1992 – which provides an opportunity for 25 people to form it registering from the Department of Cooperatives.
However, paying a huge amount of interest after taking a loan seems a bit uncomfortable. Some people may argue that cooperatives are working fine for those who are economically backward. A majority use these institutions for credit, whereas some people use cooperatives for savings only. Gyanendra Prasad Paudel and Suvash Khanal write, “Nepalese cooperatives are doing fund intermediating business as depository institution like banks. It has been always a debate that how much amount of liquidity must be held by a depository institution. Since idle cash in a vault does not earn and also deteriorates the value with the passing of time due to inflation, therefore holding [a] high amount [of] cash in the vault is [the] opportunity loss for a firm.”
Since cooperatives do not play a vital role in liquidity (asset to cash), buying and selling stock is becoming a popular trend in Nepal. People who used to save money are now investing freely. For instance, Sushmita, 24, a student from Butwal, told Kathmandu Tribune, “I have taken a loan from the bank by putting all of my jewelry as the assets, now I am using my spare time investing in the market.” She also said, “I have made more than enough profit from stock — which I never expected.”
Yet, people should not neglect the issue that investment is not always the key for good returns. Sometimes, the market can slump, the values of shares can decrease drastically. There is nothing such as absolute in stock business.
SEBON Should regulate the Stock Market
The Securities Board of Nepal (SEBON) is often criticized for the Nepali stock market’s dark underbelly. Nowadays, people are using fraud numbers, emails for filling IPO. One person can invest for anybody – if he/she succeeds in opening a Demat account of someone. Genuine investors often condemn this issue.
A few years back, in order to make the market free, 10 Units of IPO allotment system was introduced in Nepal. With a thousand rupees people were able to apply for shares. However, because of this reason, the market is now bearing negative consequences.
Buying and Selling Is Different Now
A few years ago, people used to spend days buying and selling. The investors had to be present physically for the process. However, these days, people can swipe up and complete their tasks. CDS and Clearing limited launched their website and a mobile application to make the process hassle-free.
In addition, the subsidiary of NEPSE has also launched a separate website to check the allotment results. Furthermore, people are hoping that in the upcoming days, the troubles of EDIS transfer, as well as WACC calculations, will be resolved.
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