The government has stepped up efforts to curb possible inflow of illicit money into the ever-growing stock market.

The Ministry of Finance has initiated discussions on empowering the Securities Board of Nepal (Sebon) to investigate source of investors’ funds by amending regulatory provisions and rules. “We are holding initial phase of discussions and are yet to decide on point-wise provisions to be amended. Further developments may surface within a week,” said Joint Secretary Surya Acharya.

Despite poor macroeconomic fundamentals, average daily transaction at Nepal Stock Exchange (Nepse) has soared to around Rs2 billion in recent weeks. “We have been informed discussions are ongoing at the ministry to bring plans to monitor the market movement and high-volume transactions,” said Sebon Spokesperson Niraj Giri. “There is a growing need for effective monitoring to protect investors and promote fair trading as the market is experiencing abnormal movements and rise in the transaction volume.”

According to Sebon officials, the ministry is planning implementation of a strict market monitoring mechanism through Sebon.

The Financial Information Unit (FIU) at the Nepal Rastra Bank (NRB) also sees the need for vigilance on stock financing. “Keeping in mind the unusual growth of investment in the market, there is a growing need for a deeper investigation into the issue,” said an FIU source. “We have been receiving reports about suspicious transactions at the stock market too, but not to the level we have expected.”

Moreover, the regulator has also time and again warned investors in recent months to be cautious while investing as companies are seeing unusual rise in stock prices. According to Sebon officials, the price-earnings ratio of many companies does not justify the share value which might hurt investor’s expectations of high returns.

The number of traded shares is hovering at 2.15 million units daily on an average, which indicates people are aggressively selling and buying stocks in line with profit booking motives. The capital increment plan of financial institutions and insurance companies has also been termed as the major reason for Nepse’s bullish run.

However, financial analysts also fear the bullish run may end in a bad note to small investors because of prevailing speculation. “Big market players obtain vital information pre-hand and influence the market while small investors fall for market rumours,” said sources. “The regulators and the government should monitor the market strictly to safeguard the people from financial losses.”