A trip to Stock Exchange in Sri Lanka and Mumbai

The enthusiasm of broker offices towards working for the betterment of Nepalese capital market is the sole proof of their visit in different stock exchanges belonging to international market. Few directors of broker offices visited different stock exchanges such as Colombo Stock Exchange (CSE), Sri Lanka and Bombay Stock Exchange.

“The purpose of the visit was learning” said one of the broker participants of the tour. While few broker participants such as Santosh Mainali shared the experience of the visit on social media, we also contacted other broker directors about their experience. Here is the nutshell of the visit from both the social media and individually contacting few directors of broker houses:

The capital markets in these countries are far developed than Nepalese capital market. As per the sources, one of the major components missing in Nepalese secondary market compared to other stock market is the integration of technology and capital market. The Bombay stock market and Sri Lanka Stock exchange have an advanced facility.

With a total of 18 billion US dollar market along with 298 companies listed from 20 different sectors, CSE of Sri Lanka currently stands at an index mark of 6100 with 27 broker members. With the motive of increasing investor awareness regarding the primary market, 8 branches of CSE has been established. Unlike Nepalese secondary market, the CSE has involvement of foreign investors, institutional investors and individual investors. Among the involved investors, the numbers of institutional investors exceed the individual investors. 90% investors are institutional and High Net worth Individual whereas 10% are retail investors in CSE.

While our country saw a major conflict regarding capital gain tax few months ago, the Sri Lanka government does not impose such tax rather government levy 0.3% applicable on transaction. The government has also a separate fund that amounts to USD 4.4 million set for the guarantee of settlement. The guarantee settlement fund is solely developed by the government without contribution from exchange, CDS and broker. In CSE a number of traded instruments are present such as equity, debt, preference share, funds and is also in the process of introducing index based futures and options.

Even the investors and companies enjoy greater facility in the international stock exchange. For instance, listed companies can buy back their shares from the market, brokers also enjoy trading facility through their own firm, investors D-mat account is credited instantly after the transaction, and brokers also appoint domestic and foreign individuals and institutions as agents to introduce new clients. Similarly a 50% advance is paid by investors for margin trading purpose. In Sri Lanka, margin trading and broker credit are also facilitated.    

“The stock exchange of Bombay and Nepal is not even comparable” said one of the participants of the trip. Sources further revealed Nepal is more than 4 to 5 years backward than the foreign stock exchanges. With the learning from this trip, managing directors of broker firms have confirmed they have become more confident about their role in Nepalese secondary market.

Source: technotification.com

The participants further believe this trip will be a foundation to provide suggestions to government on how Nepalese stock market should be developed. An anonymous broker participant further said “After the trip, our part will be done but now the question is how supportive will the government be?”