Stock Taking

By Atmaram Ghimire

Investors’ Perspective

Dreams will Come True !

I was very happy. I do not now whether I had won or lost the money in stock trading but I was extremely cheerful. I recall that I was at my place using computers and ordering and transacting shares through net. It was not Nasdaq, it was not the BSE or NSE in India. It was a Nepali stock market (www.kathmandustock.com). I recall the summary of the event that made me cheerful:

The Parliament had passed the new bill on stock exchange allowing the E-transactions of shares and securities. It allowed the payment through the net as Digital Signatures Act and Cyber Law were also passed by the same session of the parliament. It opened distinctly, without any reservations, the establishment of private stock exchange in Nepal. As a result, Kathmandu Stock Exchange was established facilitating the e-trading of shares.

The number of investors had actually tripled. The investors had better information of the market. All the listed companies had an access to Kathmandu Stock Exchange website, where they were allowed, with their password, to review and update the information of their companies live. The website had articles/report section where analysts had made market surveys and researchers had their reports. The investors had an easy access to the site where they could see all the financial analysis of listed companies, stock market price analysis for the past and predictions for the future. It also contained sections for the rate of the day and all.

I recall going to the floor of Kathmandu Stock Exchange. An electronic board was used for transactions. All the brokers were in their seats using computers for their transactions. Each broker had an assistant busy taking incoming calls from investors from the market and from the floor. Even the floor was spacious for viewing transactions direct at electronic board or at terminal located in that room. About 30 house phones were available for investors to call and talk to the brokers on the floor.

The premises had a section called share depository. It was in fact huge site with lakhs of boxes with electronic management and operation. It was for depositing shares of the investors. Shares were electronically sent by companies to that site and it used to go directly to the individual boxes of investors. Investors had an electronic key and another key was with that section. It would open only with both those keys used simultaneously. When the transaction was done, the section got the information from the floor and investors got their information through the broker. When queried to an investor whether he had any problem with this system (e.g. using shares as collaterals for bank loans), he smiled and told me that it was much easier.

I went to NFSC, a broker’s office. I was much astonished. It was not a room but a spacious and well arranged office. Reception, accounts, library, discussion room, private meeting room, office room and even a small kitchen. The kitchen had ready made black coffee and mineral water, with a board reading "self service". The library was fascinating, it had some published documents, annual reports of every listed company, two computers - one depicting the rate of the day and one for interested customer to use on stock transaction purpose. They could enter their sales/purchase order electronically through desired broker. The account was even fascinating. This, I think, was due to Nepal Rastra Bank’s recent approval for e-wallets issued through commercial banks. Customers gave the wallet to the account person, s/he put it to the reader attached to the computer, and a receipt was generated and handed to the customer. What it did was that the card reader read the information on the card and then the computer got all the information about the transaction of that particular customer. It sent the information to the banker of the customer, the bank verified the amount and password of the customer, deducted from his account the amount of the transaction and deposited that to the brokers account and then sent out both advices - one to the broker for deposit and one to the customer for deducting the amount. The surprising thing was that it would complete in just two minutes.

I thought Nepal at least made a good progress in this sector. And I thought I should really complement DHITOPATRA Board for this and went to Baghbazar. I found that office had no bad smell any more at the entrance, and it was well decorated. The library was excellent with a number of computers available for investors, researchers, academicians and students. The library was physical in terms of important books, periodicals, including one professional journal on stock market published by the Board. But, it also had on electronic library with all required information available.

There also was a seminar hall and one of the officials told me that they were just were coming out of the hall after an interaction with market makers and share dealers for the growth and development of Stock Market. It also had one room and board called investor’s club - a room provided by the Board with all the logistics, so that it could meet and listen to the investors, who were the heart of the market. I saw a connection to Kathmandu Stock Exchange’s electronic floor, to view live the actions at the stock exchange floor. It was important for the promoter and regulator of that market.

The changes in all these compelled me to visit a market maker’s physical facility. I went to Jaya Manokamana Merchant Banking & Finance Company, which was one of the market makers of Kathmandu Stock Exchange. I was surprised to see a hall with 50 computers in a row. I asked the purpose of the facility. They told me that it is for merchant banking function, namely primary share issue. Applicants would come and enter the data on share application themselves (instead of filling out printed forms) and pay with e-wallet for the required amount. The share subscription was allowed from all 75 districts and they were connected through the net and the database would be in one of the servers. Right after seven days, the computer would automatically allocate share randomly based on number of applications. Notification of the allocation would be through the net within nine days of application and the balance amount would be returned from day 10th. I was astonished that there was no three month holding of private fund for no valid reason and without any compensation for the lost interest about. By the 12th day, the share certificates were issued by the company. Validating and stamping of the certificates was done electronically.

And then it was sent to share depository section of Kathmandu Stock Exchange, where investors had their electronic boxes.

The other section on the market maker’s office was share transaction counter, where the screen showed summary of morning transaction of Kathmandu Stock Exchange and any investor physically or through the net, could buy or sell shares with market maker for the prices quoted by them which was 0.5% less or higher than the exact transaction price. The customers could come and sell the shares and get payment right there in three minutes. They did not have to wait eight days to receive the payment from the sale of shares.

The mobile phone was ringing, I was awake. I had dreamt an ideal stock market. Still I believe that nothing is impossible. Let’s hope to have such a market one day, here in Nepal in reality.

(Ghimire is a stock analyst.)

 Share Trading

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 (Closing Price in Rs.)

Movement in Nepse Index

(Base: February 12, 1994=100)

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