While Kathmandu's glitterati, literati and twitterati focused on prophesying doomsday, cash-rich investors just made it to the stock exchange and gave it a bull-run that has not been seen for quite a while.
Even though the NEPSE index soared 20 percent post-February First, we are yet to hear from our self-proclaimed economist intelligentsia or advice-bag donors. This bull-run is not pushed by insider traders who like to see their shares soar at financial year ends to make their annual reports look good. It isn't the result of a few diaspora Nepalis investing in the bourse either. Why is there significant volume changing hands now?
Firstly, the insulated inhabitants of the Valley are experiencing a 'feel good' factor and investment in stocks is a definite indication of this security. Second, there is a lot of money in the market. Real estate transactions tumbled as regulations became strict so the returns-hungry punters put their money in stock.
Surely, this bull-run is not good money chasing bad stocks as the only place the money is going is into commercial bank shares. The Nepali investor knows that banks are professionally managed companies better regulated than other industries. They have also been cautious in keeping banks promoted by people of dubious distinction at bay. So here's an opportunity for people to ponder upon why more companies should be professionally managed and share the booty with the public.
Many would be forgiven for wondering if we even had a stock exchange but as the bull run advances the regulators have come into focus. This Beed has been harping on about reforming this sector for a while now. The stock exchange should be in the private domain and the government remain a regulator. Thereafter, we should stop injecting socialist concepts into capitalist products like the stock exchange (see 'Shareholder Scare', #74 or www.arthabeed.com). More instruments have to be allowed such as non-voting shares, debenture linked variants and mutual funds owned by banks. Finally, trading of stocks on paper now belong to museum showcases. We need to get into de-mat or paperless trading through the process of depositories. If multiple banks can share one institution such as the SCT, depositories can surely facilitate multiple companies' registry function.
This would bring transparency, ensuring that the stock market growth is sustainable. At the end of the day, you provide comfort to your investor and the investor will provide you with money. There could be a lesson from India, where investors large and small are lining up to get a biometric identity that has been made mandatory by the regulators to invest. Interestingly, private companies that are designated by the regulator are provided this identity.
The starting point could be making the Nepal Stock Exchange operations transparent. If they ask everyone to submit audited accounts of the investing public for the same, can we see the NSE financials published?