Growth and Performance of Securities Market in Nepal

Abstract

Securities Board, Nepal, an apex regulator and facilitator of capital market, and Nepal Stock Exchange Ltd., only a single stock market, are the main constituents of securities market in Nepal. This paper attempts to study the growth trend and analyze the performance of Nepalese securities market. Likewise, the variables such as number of listed and traded companies and their securities, number of transactions, trading turnovers, paid up value, market capitalization and NEPSE index are analyzed for the secondary market.SECURITIES MARKET IS A MECHANISM created to facilitate the exchange of financial securities or assets by bringing together buyers and sellers of securities (Sharpe 1998). Securities markets provide an effective way of procuring long-term funds by issuing shares and debentures or bonds for corporate enterprises and government and at the same time provide an investment opportunity for individuals and institutions (Adhikari 2004). Thus, the market place for these financial securities is called securities market which is further subdivided into the primary and secondary market. The former market denotes the market for newly issued securities to the public whereas the latter market refers to the market for secondhand securities, traded previously in the primary market (Francis, 1991).The securities market plays an important role in mobilizing savings, and channeling them into productive investment for the development of commerce and industry of the country. It basically assists the capital formation and economic growth of the country. In many developing countries like Nepal, the undeveloped capital market is still prevailing in the economy. The Nepalese securities market still could not take its height. The further improvement of this market is very crucial. It helps in accumulating even small savings for development activities of the economy otherwise, which would have spent in unproductive areas. But it is true that there is no presence even of organized money market in rural areas, which covers almost 90 percent of the total area of the country. Thus, the securities market is only confined to the very limited urban areas of Nepal. Despite these truths, an attempt has been made to analyze the growth trends and performance of Nepalese securities market.

An Analysis of Security Market Growth and Individuals' Investment Decision

“…They also found unidirectional causality runs from stock market development to economic growth in Nepal. Similarly, Gurung (2004) revealed that NEPSE index growth rate was very low and highly fluctuating that indicates poor performance of public limited companies listed in stock exchange. Such erratic trend in the value of market capitalization and its low contribution to GDP indicated the poor and immature capital market, de-motivation in investment in the companies, and downward trend of economy during the study period.…”

“…Second, it is presumed to include companies' past retained profits and future growth prospects so that a higher ratio to GDP can signify growth prospects as well as stock market development (Levine & Zervos, 1998;Rajan & Zingales, 2003). Gurung (2004) Al-Tamimi (2006) suggested that expected corporate earnings, get rich quick, stock marketability, past performance of the firm's stock, government holdings and the creation of the organized financial markets to be the most influencing factors on the UAE investor behavior. Similarly, Akbar et al (2016) proved that advocate recommendations, self-image/firm image coincidence, neutral information have positive significant relationship with individual investor investment decision whereas, the study did not find any evidence on relationship between accounting information, classical wealth maximization and personal financial needs.…”

“…This study based on both secondary as well as primary data collected from different sources. -relation: Number of traded and listed companies (Gurung, 2004) have been tested using Karl Pearson's coefficient co-relation.…”

“…Growth Analysis: General growth formula has been used extensively to analyze growth in different NEPSE index. Development is the core aspect that can be measured by the growth as a whole (Gurung, 2004).…”

Status of Primary Market Response in Nepal

“…It saves the company enormously of the hassles of capital issue (Gurusamy, 2011). Gurung (2004) carried a study on growth and performance of securities market in Nepal and concluded that the primary market is poor in case of public issue in Nepal. He further stated this poor trend indicates public response on the liberalization and public participation policies of the government became ineffective except in a few sectors.…”