Nepse closure hurts government coffer

The sole secondary market has been closed -- for the second time -- in last two months.

Last time, it was by the irate investors but this time its due to the indefinite strike called by the UCPN-Maoists and the government being a mute spectator.

"The closure has hit the secondary market straight for three days," said Shankar Man Singh, managing director of Nepal Stock Exchange (Nepse). "Nepse offered protection to the brokers," he said adding that the brokers have, however, turned down the Nepse's protection offer and have closed the trading.

"Brokers denied the Nepse protection offer citing security reason," he added. "They were afraid because some of them were threatened to close the trading."

The closure of the secondary market will not only hurt the investors but the government coffer too.

"Last fiscal year, Nepse had contributed around Rs 930 million to the government coffer," Singh said adding that "but this year, it could plunge three times lower to Rs 300 million."

However, a week-long bandh by investors once and week-long bandh by UCPN-Maoists will hit the government coffer hard.

The Nepse has been performing poorly due to low confidence of the investors and the indefinite general strike.

"Investors' confidence is more important then the revenue loss," he said. "At a time when the capital market is bearish due to low investors' confidence, its going to have negative impact on the investors' psychology and panic selling might pull the Nepse lower."

"Investors are losing confidence," Nanda Kishor Mundada, president Brokers Association of Nepal, said adding that the indefinite strike could be the last blow to the already-shaky market.

He is of the opinion that the capital market could not function in such an uncertain environment. "Even if we trade, banks are closed and we could not settle transactions," Mundada said.

At the time when the whole industry is suffering due to strike, he thinks the operation of secondary market is impossible. "The bandh this time is different from earlier," he added.

The government is losing one million rupees -- directly and indirectly -- daily from the capital market due to the closure, according to him. "In a week government will lose around Rs 5 million," he added.

Last time when the investors closed the market operations for a week the government could not do anything, though the issue was related to development of the market. "This time its more difficult to trade when compared with last time," he added. "Till the situation normalises the trading cannot take place," he concluded.

Neither the Securities Board of Nepal (Sebon) -- the regulatory authority nor the government is concerned over the closure of the secondary market operations.