Key proposals include a strategic review of current tax policies, the privatization of the Nepal Stock Exchange (NEPSE), the introduction of advanced financial instruments, and streamlined investment channels for Non-Resident Nepalis (NRNs).
Speaking on the current market landscape, Brokers' Association Vice-President Nitesh Kumar Agrawal noted that while the stock market is well-capitalized relative to the nation's GDP—partly due to a massive influx of retail investors following the COVID-19 pandemic—the market currently faces unique hurdles. Agrawal highlighted that unusual demand driven by under-regulated real sector IPOs has led many retail investors to buy shares without carefully analyzing prospectuses or rating reports.
Furthermore, secondary market liquidity has tightened due to capital diversion toward the pre-IPO market and a trade-to-trade taxation system. Corporate profitability has also taken a hit across various sectors, weighed down by rising non-performing loans in banks, challenges in the insurance sector, and natural disasters impacting hydropower projects.
Key Demands and Reform Proposals:
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Tax Policy Revision: To incentivize long-term investing over short-term trading mentalities, stakeholders urged the government to widen the narrow 3% gap currently existing between short-term and long-term capital gains taxes.
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NEPSE Privatization: Agrawal stressed that privatizing NEPSE is vital for introducing modern market systems and new financial instruments. He also voiced concern over the exchange operating without a permanent leader for an extended period.
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Easing NRN Investments: The committee recommended simplifying administrative hurdles—such as mandatory national identity card requirements—and streamlining repatriation processes to easily channel capital from Non-Resident Nepalis and the diaspora into the domestic market.
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Facilitating Promoter Exits and Mutual Funds: Introducing dedicated auction markets was suggested to ease exit barriers for promoter shareholders facing restrictive, control-oriented policies. Additionally, mutual funds should be leveraged to mobilize capital from the large pool of inactive demat account holders.
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Technology and Open Policies: While defending broker commissions as competitive compared to regional peers outside India, Agrawal emphasized the need to heavily invest in tech expansion, especially given brokers' increased paid-up capital of NPR 200 million. He advocated for an open technology transfer policy allowing multiple firms to build and operate automated trading systems.
Industry leaders maintain that long-term stability hinges on policy consistency, advanced technological integration, investor-friendly regulations, and a tax framework that rewards patient capital.
