Securities Board of Nepal (Sebon) granted permission to three more financial institutions to work as the Merchant Banks whereas three others are in pipeline.
Development Credit Bank Ltd (DCBL), Vibor Bank Ltd (VBL) and Nepal Housing and Merchant Finance Ltd (NHMFL) got the licence to work as Merchant Banks making it to a total of 11 financial institutions working as Merchant Banks.
"With more companies floating their shares, number of Merchant Banks has also increased," said Dr Chiranjivi Nepal, chairman of the Sebon, the regulatory authority of the capital market.The Merchant banks can work as Issue and sales Manager, Share Registrar, Underwriter and Portofolio Manager, according to the Merchant Banker Regulation-2064 that has come into effect from February 15 to help better manage capital market.
The regulation has clearly defined - Issue Manager, Underwriter, Share Registrar and Portfolio Manager - four entities. They all have to get licences from the board before operating. "A company can also work as all the four," according to the regulation.
Issue Manager manages issues of shares, Underwriter underwrites shares that are not sold and buys unsold shares, Share Registrar keeps all the records of shareholders and helps register shares, while Portfolio Manager helps investors to manage their portfolio. They all have to get licence separately to operate as either one of the four, or all from the regulatory authority, the Sebon.
In case, any company wants to operate as all the four, it must have a paid up capital of Rs 70 million. However, the paid up capital for Issuer Manager is Rs 30 million, Underwriter is Rs 40 million, Share Registrar is Rs 10 million and Portfolio Manager is Rs 10 million.
According to the regulation, Merchant Banks must disclose their annual report within the three months after the end of fiscal year to maintain transparency. They also have to submit their half-yearly report within the 60 days of half yearly closing to the Sebon."They are regulated by the board," said Nepal adding that earlier due to dual regulation of Nepal Rastra Bank (NRB) and the board, there had been some confusion.
However, Issue managers have been in trouble regarding the allotment of Initial Public Offerings (IPOs) of some financial institutions recently.
NIDC Capital Markets Ltd faced wrath from the investors during the allotment of Global Bank's shares. A week ago that NMB Bank had also faced the similar situation during the allotment of Clean Energy Development Bank's shares.
Capital market under scanner
The Securities Board of Nepal (Sebon) is keeping its eye open and carefully monitoring the capital market. "It is investigating current phenomenon in the market," said Dr Chiranjivi Nepal, chairman of the Sebon. "When we'll have enough evidence, we'll take action against those involved in malpractise," he assured.
Nepse today dropped below 700 points. It lost 27.66 points to 698.81 points, after almost four months of bullish trend. It has been floating above 800-point mark for long. However, Nepal telecom shares have pulled the Nepse down to below 700 points. Excluding NT shares, the Nepse is still around 900-point mark. NT shares were traded as low as Rs 531 today, a loss of Rs 69 per share in its minimum bidding price of Rs 600. Some investors have even bidded over Rs 2,500 per unit of the NT share.
All major bull markets go through three distinct stages and this is particularly true of Nepse as well. According to the experts, the first is the 'stealth' phase. This is when the bull market is flying under the radar and most investors are unaware it has even started. The next stage is characterised by 'disbelief'. The upward slope is easy to see on the charts but most investors don't believe the trend will continue. During this stage, the investing public is frozen with uncertainty. This stage of the bull market can carry on for years and it is often marked by deep corrections and long periods of consolidation. And its the time for correction, said Sebon.
"The Nepse index is decreasing as it is affected by rumours," Sebon said, adding that the negative flow of information in the market regarding the share pulls the Nepse down.
However, the regulator of the capital market is keeping its eye open and supervising the trading online. "The board is committed in controlling the illegal activities in the market and keep the market fair," commits Sebon.
According to Sebon, the investors should not be nervous as the securities market in Nepal does not have any foreign investment and the current global financial crisis will not affect it.
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