Investors, Led by MP Hari Dhakal, Present Seven-Point Proposal to Finance Minister for Scientific NEPSE Capitalization and Market Reforms

A group of investors, led by Member of Parliament Hari Dhakal, met with the Finance Minister to submit a seven-point proposal aimed at improving the stock market. The delegation emphasized the need for a scientific approach to calculating NEPSE's market capitalization, citing that the current methodology is misleading and causes public confusion.

The group presented their concerns, stating that the current market capitalization calculation is flawed and suggested legal amendments to make the process more accurate. They proposed that market capitalization should be determined by considering the tradable shares under public and promoter categories separately. Specifically, the value of shares that are publicly traded should be based on the market price, while the value of promoter shares—those whose lock-in period has ended but are still traded as promoter shares—should be calculated based on their last traded price. For promoter shares still under a lock-in period, a scientific method should be used to determine their value. The market capitalization of each listed company should then be aggregated to reflect the overall market capitalization.

The investors pointed out that if the market capitalization were calculated based on actual data, it would likely be around 70% of the currently reported figure. They also criticized the practice of using inflated market capitalization figures in GDP comparisons, arguing that this leads to unrealistic assessments of the capital market's impact on the economy.

Dhakal highlighted the need for an immediate recalculation of the market capitalization to prevent negative perceptions that could harm the market. The group also urged the government to allow banks and financial institutions to invest up to 2% of their core capital in listed companies on a short-term basis and to maintain a 100% risk weight for all types of share collateral loans. Additionally, they called for the prompt appointment of the chairman of the Securities Board of Nepal (SEBON).

Furthermore, the group recommended halting the issuance of initial public offerings (IPOs) and rights issues by companies with poor financial performance. They also stressed the importance of enhancing the technical capabilities of entities licensed by SEBON, such as stock exchanges, brokers, and merchant bankers. To ensure transparency and prevent unwanted activities in the market, they suggested that SEBON and the Nepal Stock Exchange should intensify regulatory measures.

In response, Finance Minister Bishnu Prasad Paudel acknowledged the feasibility of the suggestions and expressed his readiness to implement necessary policy changes to foster sustainable market development and boost investor confidence.

He also noted that the initial optimism observed in the stock market since the formation of the new government has started to positively influence the broader economy, creating a strong foundation for overall economic recovery.

The delegation led by MP Dhakal included Tulsiram Dhakal, President of the Nepal Investors Forum, prominent investors Gopal Swami and Durga Tiwari, Stock Brokers' Association representative Priyaraj Regmi, and Sachin Silwal, among others.