Delay in implementing policies adversely affecting stock exchange, brokers saySecurities Board of Nepal, the sector’s regulator has missed the government deadline by over a month.
Delay in the implementation of government policies has adversely affected the stock exchange market as seen by the bearish trend in recent weeks, said stockbrokers.
The Securities Board of Nepal, the sector’s regulator said it has been working to enforce several policy measures as recommended by the panel formed by the Ministry of Finance on December 7. Based on the study report forwarded by the panel under Nepal Rastra Bank Deputy Governor Shivaraj Shrestha, the ministry had asked the stock market regulator to enforce the measures.
Of them, implementation of margin trading, providing the banks with brokerage licence, reducing the period for settlement of shares transaction and allowing the Citizen Investment Trust to work as a market dealer was among the major steps that the government had sought the regulator to put into effect by mid-July. However, the regulator has failed to implement the policies well past the deadline set by the government.
The board, however, said the policies were being worked on and nearing completion. “Most of these policies are likely to come online shortly as the board has already amended the laws related to them and has asked the concerned agencies to make necessary preparations,” said a high ranking official of the board under the condition of anonymity.
According to the board, the provision of margin trading has already been approved by Nepal Rastra Bank. “However, some technical work to link the demat account of investors to the CDS and Clearing has been left over for the smooth operation of the margin trading,” said the source.
Margin trading allows stockbrokers issue credit to their clients, which is expected to improve the cash flow to increase the demand at the secondary market.
The board had moved ahead to allow banks with a brokering licence for which Nepal Stock Exchange had issued a notice, inviting banks to take brokering licence for their subsidiaries. However, the work has been halted after the parliamentary Finance Committee last week directed the government not to provide stockbroker licence to commercial banks for the time being until a sub-panel formed to study the issue has submitted its report.
In regard to reducing the number of days for transaction settlement, the board has been reluctant to enforce it, stating that it would be difficult to reduce the settlement time to T+1 day from existing T+3.
Besides, the panel had also recommended the government to put a cap on the bank interest rate to address problems seen in the money and capital markets. Banks are still charging an exorbitant interest rate on loans, breaching the central bank’s rule of maintaining the interest spread of 4.5 percent.
Stockbrokers said the delay in policy enforcement along with the high-interest rate has been affecting the transaction in the secondary market. With the factors in place, the market index has come down to around 1,200 points after reaching nearly 1,900 points three years ago.
“If these measures can be put into effect soon, it will help improve investor confidence and boost the overall market,” said Bharat Ranabhat, president of the Stockbrokers’ Association of Nepal.