One more ineffective decision about stock market! Until when will officials of stock market implement decisions on trial and error basis?

What if Mark Zuckerberg came up with an idea to bring Facebook down? Or what if every social media owner decides to disclose the currently trending social networking sites? Imagine your mobile phone without the blue colored app. Imagine that you will be spending the rest of your life without uploading pictures, communicating friends online, submitting printed documents instead of emailing your boss the next PowerPoint presentation! It obviously looks difficult for any person, organization, society and a state to go back to a life without online facilities. However, there is one department/entity within Nepal that believes bringing down online facilities wouldn’t be a problem. This department in Nepal  has proved its persistency in launching new facilities for its audiences' convenience and also bringing in a new problem along with the facility. They are the concerned authorities of Nepalese Stock Market!

Before understanding the actual issue, let us go down the memory lane and recall the mistakes from the authorities that hampered the Nepalese stock market. Perhaps, the list seems to be long enough so, let us limit our focus to last year.

• The march of investors on street instead of trading floor:

After Finance Minister Dr. Yuvraj Khatiwada presented the budget proposal to increase Capital Gain Tax on stocks in Jestha of FY 2075/76, the sideways trend of NEPSE took a downward trend. The new regulation to calculate taxes on current price instead of average base price worked against the benefit of investors, leading to a declining NEPSE index. The rest of the month witnessed strikes by investors throughout the year. As a result, investors were forced to carry the “no trade movement” throughout the country. Within a week, government took back its decision regarding Capital Gain Tax. 

• The hoax of semi online trading/ automated trading:

Investors in Nepal had waited a long time for an online trading. Their expectations were high and investors were looking forward for the beginning of a trading era in Nepalese stock market.

On 13^th April, 2018, authorities of Nepalese stock market announced that a semi online trading or an automated trading has been launched for the first time in history in Nepalese Stock Market. Investors expected golden days in the era of trading. However, the reality was different. It was nowhere close to an automated trading because the major works had to be done manually by the officials in the broker houses. The semi online trading was just an advanced form of manual trading. The new program simply replaced face to face and telephone orders to internet based orders in the form of message and email. Investors could not still execute their orders on their own.

• The offline trading instead of online trading:

On 6^th November, 2018, NEPSE launched its online trading. Ironically, the same day, NEPSE’s server went down. Investors were ready to reap the fruits of their long wait even after few days. However, NEPSE’s online trading platform made it worse for the investors. The already bearish market had to suffer a lot due to recurring technical disturbances in NEPSE’s websites. Since its official launch, NEPSE index lost more than 60 points. This is partly due to the problems and glitches that came with the launch of online trading system even after repeated tests and trainings. Problems like technical faults on the website, slow processing of transaction, ambiguity among brokers and investors etc. took their toll on the market. There were days when the website simply labeled “Null” to every price, transactions, market index. After the implementation of online trading, investors had to go back to the broker houses to find out the status of market because the prices reflected on their laptops might not be accurate. NEPSE’s authorities kept on claiming that the technical problems have been solved while the screen still depicted a Null figure.

• The hunger strike of investors hungry for the demands to be fulfilled:

As a result, Investors’ Pressure Group along with investors came to the street to launch reality hunger strike. The event unfolded by flying black balloons, locking up SEBON and even investors taken under custody by Nepal Police. The pressure group presented 14 demands to NEPSE and SEBON for the improvement of the stock market. The hunger strike went ahead for few days and consequently stopped when the concerned authorities assured to work on the demands presented by the investors.

• The back and forth decision of PAN number:

SEBON required investors to apply for PAN number in order to trade in the secondary market. The policy was expected to be mandated from 14^th April, 2019. After few days, SEBON realized it will further discourage the market and came into a consensus that the PAN number will be mandated to only such transactions that are equal to or above Rs 5 lakhs. The uncertainty of authorities while making decisions regarding stock market has harshly affected the market.

The current policy that disappointed investors:

After a number of ineffective decisions that government, ministry of finance, Nepal Stock Exchange and Securities Board of Nepal have made about the market, the investors have been a victim of these defaults. Recently, CDS & Clearing introduced a new approach to the calculation of weighted average capital gain tax (CGT). Last year after the “no trade movement” march launched by Nepalese investors throughout the country, the authorities decided that the weighted average will be calculated by taking Poush, 2072 BS as the base year. However, now that the time of implementation has come, the authorities have turned their face away from the consensus that was achieved last year.  On 9^th Shrawan, 2076 (i.e. yesterday) although the discussion between investors and SEBON authorities concluded that the average price of trade between Shrawan 30, 2064 and Asadh 31, 2076 will be taken as the base price for the purpose of calculating the tax amount, however, no any press releases regarding investors’ need to visit the brokers personally have been published by the authorities. Besides, last year’s consensus achieved on the calculation of weighted average CGT was based on the assurance that the necessary details of investors’ transactions have been installed in all the servers of broker houses and that of CDS & Clearing Limited. Moreover, authorities claimed that the investors will be able to provide buy/sell information through the online platform in the last year’s discussion. However, CDS & Clearing recently directed investors to fill up the form related to CGT calculation by visiting the broker houses and also provide necessary purchase information by visiting broker offices one on one.  The capital market of Nepal has just entered the era of online trading and if investors have to go back to broker again and declare their buying information in paper form and thumb stamp, then that just indicates a step backward.

No matter what the issue has been, how the issue aroused and who are responsible for the issues of Nepalese Stock market, there is one single cause of all these issues. The major cause for all the erroneous policies that have been implemented is lack of research. The authorities who are expected to improve the market are uncertain about the decisions that they implement. The research is never based on the comfort and convenience of the investors. The example provided in the beginning paragraph regarding life without social media might be one exaggerated form to illustrate current issue however, if the provision to visit the broker houses again is implemented, the impact is tremendous. The process simply does not take Nepalese stock market back to paper based system but also blocks the entry of Nepalese foreign residents into the market.

Moreover, until when will the investors tolerate the inefficient decisions by authorities regarding stock market? When will authorities understand the significance of stock market in the country? When will experts learn to research on policies before implementing? When will authorities start seeking suggestions from investors before implementing policies? An economy’s well-being is defined by banking, industrialism and stock market. However, experts and authorities in Nepal have always undermined the role of stock market in the economy.