The government’s effort to establish a second stock exchange in Nepal while neglecting the much-needed restructuring and reform of the existing Nepal Stock Exchange (NEPSE) is an illogical move. For more than ten years, debates on NEPSE reform have been taking place, but each successive government has neglected to carry out significant reforms. Now the government has opted to follow an illogical path: introducing another stock exchange while the existing one awaits much-needed reforms to address the demands of the market. The authorities should first resolve long-standing challenges such as insufficient regulatory monitoring, insider trading and a stagnating market. Although NEPSE has been around since 1994, it is still not as vibrant as the stock exchanges of other nations. Frequent and unprecedented fluctuations in the market, low investor confidence and government inefficiencies have been discouraging both domestic and foreign investors and have plagued NEPSE. The lack of a solid legislative framework has led to market manipulation and insider trading, therefore weakening investors’ confidence.
The privatization of NEPSE was advocated over a decade ago, with different proposals to make it more competitive and efficient. Still, these initiatives have yet to gather pace. Instead of fast-tracking these changes, the Securities Board of Nepal (SEBON) has moved forward with licensing a new stock market. The government’s claim that competition would boost the stock market is weak since NEPSE itself has failed to gain pace with its full capacity. The government might need to consider a merger if NEPSE does not improve its performance and the new stock exchange attracts insufficient business. Forced mergers have taken place multiple times in the country's banking sector because of operational inefficiencies and disruptions. If the stock market faces a fate similar to that of previous forced mergers in the banking industry it will create further complications for the capital market. The banking and hydro sectors control NEPSE which fails to sufficiently represent major real-sector industries like manufacturing, agriculture and technology. The financial market must reflect the diverse economic activities of a nation rather than just representing selected industrial sectors. The government would benefit from the existing stock exchange system by expanding the market scope and stimulating new company listings while ensuring active participation from various industry sectors rather than creating another stock exchange. The existing stock exchange can also significantly help make the stock market vibrant by introducing new financial instruments for trading.
Himalayan Stock Exchange applies for a license for a new stock...
Business organizations and political figures have manipulated the launch of a new stock exchange to serve their interests rather than considering the broader economic welfare of the country. Such acts weaken investors’ trust in any new stock market. The government requires spending its resources on strengthening the regulatory aspect and implementing severe measures against acts such as insider trading or decision influence that affect investors’ confidence. Investor safety should be a major concern since a stable and well-regulated stock market encourages long-term investment and supports economic progress. The SEBON ought to be given more power to keep an eye on and address market abuses. Ultimately, creating a second stock exchange without fixing the problems with NEPSE is like building a new house while abandoning the old one. To concentrate on NEPSE reform, the government must reevaluate its recent attempt to operate a new stock exchange. A stable, transparent, and well-regulated stock market can contribute to economic expansion. Merely increasing the number of exchanges will not achieve this goal.
