My Experience: NEPSE vs. Global Markets

With considerable experience as the former Investment Head at a leading merchant bank in Nepal, I gained a deep understanding of the dynamics of the Nepal Stock Exchange (NEPSE), where the market is primarily driven by long-term investments. The market’s limited scope for active trading, combined with a narrow selection of listed companies, shaped my approach to investment strategies in Nepal.

Over the years, as I transitioned from Nepal to trade in the US and UK markets, I was introduced to a completely different trading environment. The shift from a developing market to more mature global markets exposed me to a wide array of financial instruments, advanced trading platforms, and sophisticated market structures. This contrast has not only expanded my trading expertise but also offered me a unique perspective on the development of capital markets.

Key Differences Between NEPSE and Global Markets

The transition from trading in Nepal to global markets such as the US and UK has highlighted several key differences between these markets. While NEPSE was largely focused on investment opportunities with limited short-term trading mechanisms, markets like the US and UK offer much broader financial tools and greater liquidity, creating a more dynamic and fast-paced environment for traders. Here are some key differences I’ve observed:

1. Market Liquidity and Access to Instruments

In Nepal, NEPSE has a limited number of listed companies, primarily focusing on long-term investments. The low liquidity and fewer opportunities for speculative trading mean that much of the market activity is concentrated around a few large companies. This contrasts sharply with the US and UK markets, where there is access to a wider variety of instruments and higher liquidity, enabling both retail and institutional traders to take advantage of short-term price movements. Over time, as I became more familiar with the global markets, it became clear how having access to a greater number of financial instruments, such as derivatives, CFDs, and options, can provide traders with opportunities to hedge, speculate, or manage risks. The wide availability of these products in the global markets allows for greater flexibility and efficiency, something that is not yet fully realized in the Nepali market.

2. Technology and Trading Infrastructure

One of the most significant differences I encountered when transitioning from NEPSE to global markets was the advancement in trading technology. In Nepal, the trading platforms were functional but lacked the real-time data feeds, advanced charting tools, and swift execution capabilities that are standard in markets like the US and UK. This difference became more pronounced when I started trading in the global markets, where speed, precision, and access to real-time data are critical for making informed trading decisions.

The efficiency of trading platforms in the global markets also allows for a more seamless experience. From high-frequency traders to retail investors, everyone benefits from faster order execution, reduced latency, and access to sophisticated market analysis tools. This not only enhances the trading experience but also enables more informed decision-making
in volatile market conditions.

3. Transparency, Governance, and Investor Protection

While global markets are known for their well-established regulatory frameworks and robust investor protection mechanisms, the situation in Nepal is somewhat different. In NEPSE, there have been instances of market manipulation and insider trading, which can undermine investor confidence. This is partly due to the lack of stringent enforcement of regulations and less transparency in the reporting and disclosure of corporate activities.

Having experienced trading in the US and UK markets, where regulations like the Sarbanes Oxley Act in the US and the Financial Services and Markets Act in the UK provide stricter oversight, I was able to appreciate how important these frameworks are in maintaining market integrity. The consistent enforcement of these regulations helps build a trust-based environment that attracts both retail and institutional investors.

4. Investor Education and Market Accessibility

The importance of financial literacy and investor education became more evident as I transitioned to global markets. In Nepal, many retail investors are still learning the basics of stock trading, and a lack of formal education around market dynamics often leads to uninformed investment decisions. While NEPSE has made some strides in promoting market participation, there is still a long way to go in terms of improving financial literacy among the general public.

On the other hand, in markets like the US and UK, there is a wealth of resources available for both new and experienced traders. Financial education is accessible through online courses, books, webinars, and seminars, making it easier for investors to understand complex financial products and strategies. As someone who has benefited from such resources, it became clear to me that access to education is key to reducing speculative trading and fostering a more stable market environment.

5. Settlement and Clearing Systems

In Nepal, the settlement cycle is typically T+2, which is a standard practice in many markets. However, the process can sometimes be slower compared to more advanced markets where settlements are faster, such as T+1 or even T+0 in some cases. The slower settlement process in Nepal can create a higher level of risk for traders, particularly in a volatile market.

Global markets, with their faster settlement cycles, contribute to a more fluid and efficient market where traders can quickly realize gains or losses and make more agile trading decisions. This liquidity and speed are essential in fast-moving markets, particularly for those dealing with derivatives or other complex instruments.

Conclusion: Moving Toward a More Competitive Market

My experience trading in both NEPSE and global markets has deepened my understanding of the challenges and opportunities that exist in different market environments. While Nepal’s capital market is still evolving, the exposure to the more advanced and liquid global markets has provided me with insights into how markets mature over time. As the Nepali market continues to grow, there will undoubtedly be more opportunities for both local and international investors.

Though the transition from a developing market like NEPSE to global markets may seem vast, the lessons learned are invaluable. As Nepal’s capital market gradually evolves and adapts to changing global trends, there is great growth potential, provided the necessary steps are taken to address issues related to liquidity, technology, governance, and investor education.

Article By: Ramesh Belbase (Market Analyst)