The world markets have tumbled after the events of 11 September. The Dow Jones dipped and so did all the major world markets. Markets in South Asia also followed suit. For Nepal this has been another blow to the ailing market. The Nepal Stock Exchange Index (NEPSE) on Monday closed at 280, a year ago the index was at 422. Nepal for investors was already an uncertain market and the recent global backlash has put Nepal back a couple of years. Some of our compatriots were anxious enough to ask this Beed to examine the future of our market and to see what is in store for people who have invested in shares. The Beed, naturally, complies.

The dismal response to the public issue a company issued last week clearly depicts the mood of the public. It is going to be difficult to raise funds. The country has been witnessing economic and political instability for quite some time and unfortunately the way events have unfolded, what little hope even optimists like your columnist had are vanishing.

Investments are judged on risk and return. The returns are dwindling and the risks are increasing, leaving few options for the would-be investor. There are no ways of mitigating risks and looking at the future, no sign of recovery is visible. This, together with the growing trend of asset disposal is making people believe that it is better to liquidate everything and convert to cash rather than wait for the future. This selling pressure is pushing the prices of shares lower. Investors are scared that their share certificates may turn out to be little other than paper gods in the near future.

The bleak scenario in tourism and the other problems industry at large faces will slowly, but surely take their toll on the banking system. Banking company shares have in recent years dominated the Nepali share market and now people are scared-what if under the weight of all these worries, banks start going bust? The non-performing assets of banks have not been disclosed to anyone's satisfaction and with the new regulations on this issue coming into force soon, some institutions could be shaken up. That, in turn, will greatly undermine investor confidence. Banking sector share prices will plummet, the index will fall-who knows by how much. We should be worried by having placed so much confidence in just one sector.

The share market has also suffered from the ambiguity of the capital gains tax that was imposed this year. The proposed income tax legislation will add to this confusion, not reduce it. The legislation does not recognise investment in the stock market as an incentive for personal and institutional investors.

The market is being hit from all sides. But there is one saving grace-though the movement in the global economy has some bearing on us, we are not really directly affected by global markets, which means we can look at the NEPSE in isolation, pretty much, and try and bring about legislative and institutional changes, so the market can withstand future calamities. Ideally this means that market operations move from the government to the private sector, with government just the regulator. Investors need to see that the management of the stock exchange is changing-right now they expect the same laxity demonstrated in other government operations. The government should play the role of a strong regulator to ensure that the markets are operated within the framework defined by law. Nepali investors have billions of rupees in the stock market. They deserve a better deal.