KATHMANDU, FEB 16 - 2012
Investors have expressed concern over the ban by the Nepal Stock Exchange (Nepse) on the trading of shares of banks and financial institutions (BFIs) in the process of merging.
Financiers became anxious after Nepse halted trading in the shares of two dozen BFIs as the domestic financial market moves towards consolidation.
The provision of stopping share trading was introduced about four years ago when the market was on a bullish run. Officials of the Securities Board of Nepal (Sebon) said that they were aware of the situation and were discussing ways to address the issue.
“There are both pros and cons of this provision of halting transactions. We have realized that investors are affected when share trading is stopped,” said Niraj Giri, Sebon director. “But if trading is not stopped, there is a high possibility of market manipulation.”
Currently, almost all the BFIs have been authorized by their shareholders through their annual general meetings to find suitable partners and go for a merger if possible. And when they sign a memorandum of understanding (MoU) with a potential merger partner, trading in their shares are halted. This discourages investors from buying shares of potential merger partners as they cannot trade in the shares nor put them up as collateral for the duration of the merger process.
Experts said the merger process could be very long, and also there is no guarantee that the merger will materialize. “Investors have been talking to Nepse and the
companies whose shares they own for some solution, but nothing has happened. Under such circumstances, nobody would like to invest in shares,” said Sitaram Thapalia, chairman of the Nepal Investor Forum.
Earlier, there was no such provision of barring trading in the shares of BFIs headed for a merger. The ban was introduced after companies planning a merger started engaging in publicity stunts to increase their share prices and trading in the stock market. Stock analyst Rabindra Bhattarai said that this was a temporary regulation which had been brought for a specific reason in the past. “However, news of potential mergers or declarations doesn’t send share prices soaring these days,” said Bhattarai. “Therefore, against a backdrop where every tool used by the authorities to revive the stock market has failed, the restriction has become irrelevant.”
The rule has also created confusion among those involved in margin lending. If trading in shares pledged for margin lending is halted, investors might have to repay their loans at once. According to Sebon, the major thrust currently is to find a solution to this problem. Giri said that a probable solution would be stopping share trading only at the last moment or allowing the market and the companies themselves to decide when to stop trading.
Thapalia said that there should be a deadline for mergers; and if they don’t happen within the time limit, the ban on share trading should be lifted. Experts said that the regulator and the stock exchange should immediately lift the ban on share trading and allow the market, investors and listed companies to decide for themselves as is done in other countries.
Source: Kantipur
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