NICM New kid in the block
What ails the Nepali capital market? Ask anyone who has rudimentary knowledge on the operation of the capital market and pat comes the reply: “Lack of institutional players”. National Investment and Capital Market Ltd. (NICM) recently started operation with a promise to fill the vacuum.
Promoted by a group of leading businesspersons, Chartered Accountants and hoteliers, NICM is offering services hitherto unavailable in Nepal and its brochure proudly declares its aim to “fill up the current gap in the capital market sector of the country”.
Take dealership services, market maker services and asset management services for example. Though the Nepal Stock Exchange (NEPSE) had some market makers some years ago, none of them is active at present. Dealership is a totally new concept, at least for Nepal . A dealer, like a market maker, ensures liquidity to the investors by offering to buy or sell any quantity of a stock any time. In addition to that, a dealer is also allowed to buy and sell securities on his own account (not only on account of the clients). As this service is not available at present, NEPSE every week reports that most of the quotes in the floor were either only on the buying side or on the selling side thus leaving the stocks untraded.
Asset management too can be considered a completely new service. Though mutual fund concept (another name for asset management) is already introduced in the Nepali capital market, the experience in this is not so encouraging. For example, while the NAV of NCM Mutual Fund Units is about Rs. 17 or Rs. 18, they are selling at around Rs. 11 per unit. “Clearly, the awareness about it is very low,” notes Vijaya B. Shah, CEO of the company. Asset management service can also be personalised for the people with a high net worth.
Another aspect of asset management is managing the physical assets, mainly real estate, which involves brokering of a deal to outright purchase and beautification to sell it further. Till now, there is no organised institution in Nepal involved in such a business. All such activities, if any, are being carried out by individual players in an unorganised way. Involvement of an institutional player is expected to make this market professional and bring about more efficiency.
Other services of the company will be in share brokering, private placements, underwriting of public issues and management of public offerings. One major service will be counselling, such as counselling to the firms on designing their capital structure, and counselling to the individual investors on which stock to buy and which one to sell. This also involves continuous monitoring of the performance of various companies and forecasting their future. “We want to function under the Full Service House concept,” says Shah. Since some of these services may be conflicting, the company has signed agreements to channelise some of these services through them. Moreover, such agreements have also taken care of the problem of the company not having the license to function as a stock broker at present.
So far, trading in the Nepali stock market is based mainly on inside information, rumours, and guts and not on research. Therefore, NICM has set up a separate division to carry out continuous research. “We feel that the lack of institutional players in the capital market today in Nepal is due to the lack of research-based information. We want to fill this gap,” says Shah. In this regard, the company is also planning to take a few steps ahead and provide trainings to the existing stock brokers, portfolio managers, insurance companies and their staff.
NICM also plans to cater to the investor outside the valley through agents, subagents and brokers by using the latest communication technology, says Shah.
