The Nepal Stock Exchange (NEPSE) is Nepal's only stock exchange, where securities like shares, bonds, and mutual funds are traded. NEPSE is vital for mobilizing savings and investments in Nepal's capital market. Below are the key elements of NEPSE:
- Listed Companies
NEPSE lists companies from various sectors, allowing them to raise capital through the public. These include:
Commercial banks
Development banks
Insurance companies
Manufacturing and processing companies
Hydropower companies
Investment funds
Hotels, trading, and other sectors
- Stock Indices
NEPSE calculates and tracks various indices to measure market performance:
NEPSE Index: The overall market index that reflects the average price movement of all listed shares.
Sectoral Indices: Separate indices for sectors like banking, hydropower, insurance, and others.
Sensitive Index: Tracks the performance of the top companies based on market capitalization.
- Trading System
Online Trading System (TMS): NEPSE provides an online platform for investors to trade securities using the TMS system.
Order Types: Limit orders, market orders, etc.
Settlement Cycle: Trades are settled using the T+2 system (trades are completed within two working days).
- Brokers and Dealers
NEPSE operates through licensed brokers who facilitate trading for investors.
Currently, there are over 50 brokerage firms in Nepal.
- Instruments Traded
Equity Shares: Common shares of listed companies.
Preference Shares: Shares with fixed dividends.
Bonds/Debentures: Fixed-income securities issued by companies or government entities.
Mutual Funds: Investment schemes pooling money from investors.
- Regulators and Governance
Securities Board of Nepal (SEBON): Regulates the capital market and ensures transparency in NEPSE operations.
NEPSE Management: Responsible for managing trading operations and ensuring market efficiency.
- Clearing and Settlement
Handled by the Central Depository System and Clearing Limited (CDSC).
Shares are electronically stored in dematerialized (demat) accounts.
- Market Participants
Investors: Retail and institutional investors participate in NEPSE to buy/sell securities.
Listed Companies: Issue securities to raise capital.
Market Makers: Ensure liquidity in the market.
- Key Metrics in NEPSE
Market Capitalization: The total value of all listed companies' shares.
Turnover: The daily volume of trades.
Price-to-Earnings (P/E) Ratio: A measure of valuation for companies.
- Challenges in NEPSE
Limited liquidity and market depth.
Dominance of retail investors over institutional investors.
Over-reliance on banking and hydropower sectors.
Low financial literacy among investors.
Recent Developments
Introduction of margin trading.
Real-time online trading and mobile apps.
Growing participation in mutual funds and ETFs.
Gradual adoption of international best practices.
NEPSE plays a crucial role in Nepal's financial system by channeling funds into productive investments and providing a platform for wealth creation. If you'd like detailed insights into any specific element, feel free to ask!
