{{TAG_OPEN_p_40} Kathmandu. The government has released a 20-point ‘Capital Market Strengthening and Revival Action Plan, 2083’ to make the capital market more modern, competitive and investor-friendly. The action plan brought by the Ministry of Finance will pave the way for the implementation of modern trading systems such as margin trading, intraday trading, short selling and securities lending (SLB), which have been in demand in the stock market for a long time.

The government has come up with a special plan for market revival in view of the slowdown in the economy in recent years, disappointment in the capital market and the impact of the Bhotekoshi-Trishuli floods on the hydropower and infrastructure sectors.TAG_OPEN_p_39

According to the action plan, the Securities Board of Nepal (SEBON) will issue new IPO issuance guidelines. The price discovery system will be implemented in the public issue of hydropower, manufacturing industries, agriculture, hotel and pharmaceutical companies.TAG_OPEN_p_38

This is expected to make the company’s actual pricing market-based.

The government is going to amend the Securities Act, 2063 to prepare the legal basis for the operation of intraday trading, margin lending, short selling and securities lending and lending (SLB).TAG_OPEN_p_36

According to the action plan, the necessary regulations and directives for the operation of these systems will be approved by mid-October, 2083.TAG_OPEN_p_35

With this, investors will get the facility of intraday trading and short selling of borrowed shares on the same day.TAG_OPEN_p_34

Margin loan facility will be made available through a stock broker company for the purchase of shares. The government aims to start margin loan trading through brokers by mid-January 2083 after the approval of the regulations in this regard.

This will give investors the opportunity to invest more from a limited capital.

The Foreign Investment and Foreign Exchange Act is to be amended to allow Non-Resident Nepalis (NRNs) to carry out business in the secondary market.TAG_OPEN_p_31

The government believes that this will bring in foreign currency and add new investors to the Nepalese capital market.TAG_OPEN_p_30

New Index and Nepse Restructuring

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The action plan proposes to develop a new benchmark index along with the restructuring of the Nepal Stock Exchange (NEPSE). The new index will be developed on the basis of market capitalization, transactionability, liquidity and corporate governance while retaining the current NEPSE index as an ‘All Equity Index’.

Policy reforms will be made to increase the investment of Employees Provident Fund, Citizen Investment Trust, Social Security Fund, insurance companies and mutual funds. The government plans to maintain long-term stability by strengthening the presence of institutional investors in the market.

The action plan prioritizes the development of new financial instruments such as corporate bonds, green bonds, disaster bonds, and social bonds. It also aims to make money markets, ETFs and mutual funds more efficient.TAG_OPEN_p_27

The government has also proposed changes to the capital gains tax to encourage long-term investment.TAG_OPEN_p_26

According to the proposal, 3.75 percent capital gains tax will be levied on the sale of shares held for more than 365 days and 5 percent capital gains tax will be levied for the sale of shares held for less than 365 days.TAG_OPEN_p_25

45 days limit on bank investment

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Banks and financial institutions will be required to hold their investments for at least 45 days so that their investments in the secondary market are not overly speculative. After the action plan formally included intraday trading, margin trading, SLB and short selling, which have been demanded by the market stakeholders for a long time, there has been a new enthusiasm among the investors. However, analysts say that the real impact of the reforms mentioned in the action plan will be seen only if the reforms mentioned in the action plan are implemented on time.

The government, on the other hand, has stated that it aims to restore investor confidence by making the capital market modern, transparent, competitive and in line with international practices.TAG_OPEN_p_23