NMB Bank applies for mutual fund licence

NMB Bank Limited on Monday applied to the Securities Board of Nepal (Sebon) for the permission
to run mutual fund. With this, the number of banks and financial instructions (BFIs) applying for
mutual fund license has reached two. Earlier, Siddhartha Bank had applied on June 9.
Following the introduction of the mutual fund regulation a few months ago, a number of banks,
including Nabil, Kumari and DCBL, are preparing to establish subsidiary companies to operate mutual fund
business.

In a press release, NMB said it has completed all preparations related to management and infrastructure.
It will launch schemes in coordination with its subsidiary company NMB Mutual Fund, which works
as its fund manager, after its registration. "We have to train our staff and prepare operational manual

for its operation," said NMB CEO Upendra Poudel. NMB Mutual Fund has a paid-up capital of Rs
70 million and the remaining Rs 30 million will be raised through initial public offering, according to
Poudel. According to the bank, the capital market would take a positive direction with the operation
of mutual funds, as the funds will introduce small investors to the market. Mutual funds will operate as
institutional investors.

Siddhartha bank will operate the mutual fund through its subsidiary Siddhartha Assets Management
Company. After Nepal Rastra Bank allowed BFIs to open asset management companies to operate
mutual funds in the last week of March, BFIs have intensified their preparations. The central bank
opened the door for establishing such companies through Article 47 of BAFIA that has provisioned
that banks can venture into other businesses as determined by the central bank.

Another bank gearing up for mutual fund license is Nabil. It plans to apply to Sebon within the current
fiscal year. "We have met all requirements related to infrastructure and paid-up capital and also
appointed board members," said Prabeen Ram Parajuli, head of Nabil Investment Banking.
"We will apply to Sebon after the completion of the feasibility study which is in its final stages."

Nabil will run the mutual fund through its subsidiary Nabil Investment Banking. It has a paid-up capital 

of Rs 100.5 million. The Mutual Fund regulation has provisioned that BFIs having Rs 1 billion paid-up 

capital cal only operate mutual fund. The subsidiary company working as fund manger should have a paid-up

capital of Rs 100 million. Establishment of mutual funds is expected to help stabilise the capital market as it is

heavily distorted in the absence of big investors.

 

Master plan to modernize stock market on cards

In a bid to strengthen and modernize the sole capital market in the country, Securities Board of Nepal (SEBON) - the capital market regulator -- is preparing to formulate a five-year master plan with the financial and technical assistance from the World Bank (WB). SEBON took the step after a number of studies showed that the country´s capital market was lagging far behind most of the stock markets in the SAARC region due to lack of necessary infrastructures and autonomous regulatory mechanism.

Surbir Poudel, chairman of SEBON, told myrepublica.com that one of the objectives of the proposed master plan was aimed at making necessary amendments in existing laws related to capital market, thereby upgrading capacity of regulatory body and establishing necessary infrastructures in the capital market. "The five-year master plan will incorporate a number of programs with the vision of upgrading our capital market at least to the SAARC standard," Poudel told myrepublica.com on Tuesday. He said development of other institutions related to capital market such as Credit Rating Agency and modern securities trading system -- Central Depository System -- will also be included in the master plan.

Implementation of a full-fledged internet based securities trading, attracting foreign investments to domestic share market, and paving the way for setting up new stock markets have also been envisioned in the master plan.The World Bank a few months ago had agreed to provide a financial support of $152,500 to SEBON -- the stock market regulator -- for the master plan. "We will complete draft of the plan within the next six months as the WB has already selected consultancy for the purpose," he said. After getting Finance Ministry´s nod, SEBON had submitted the proposal for formulating master plan to the WB last year. Poudel informed that SEBON would plan short-term, medium-term and long-term programs to modernize the capital market as per the master plan which will be a blend of the best of international practices and local context. "We will incorporate the short-term plan under our annual programs, while the medium-term and long-term plan will be implemented as per the target of the master plan," he added.

Everest Bank to Open Branch at New Delhi.

Everest Bank Limited has received an in-principal approval from the central bank of Nepal to open its first international branch in New Delhi. The expansion of branch was made possible according to NRB's provision on monetary policy to let banks to open international branches.

Earlier, the BOD of bank has recommended 30 per cent bonus shares and 30 per cent cash dividend subject to permission from Nepal Rastra Bank and AGM. The bank increased its net profit by 37 percent in comparison to the preceding year to Rs 638.7 million and its deposits also increased by 31 per cent and advances by 30 per cent during the financial year 2008-09. The NPA of the bank is at 0.48.

What future prospects do we see from opening branches abroad?
1- Definitely there is going to be higher risk so outcome is either higher gain or higher loss.
2- Which sectors in India can a foreign bank do? Limitations?
3- Can any individual invest through this bank in Indian share market?
4- Is it right time to buy shares of EBL then?

Expecting comments from general public as well as CEOs, CFOs, COOs of these companies.

Shares to flood capital market

Do you want to save? Buying shares, generally IPOs(Initial Public Offerings) which in capital market is also known as Immediate Profit Oppotunity, is currently the best way to invest your hard earned money. There are some 10 financial companies, one commercial bank, four development banks and five finance companies on the pipeline to float pubic shares worth about half-a-billion rupees. Among them, the Securities Board of Nepal (Sebon) has already given green signal to eight, three development banks and five finance companies to float initial public offering (IPO). "We are studying the applications of Global Bank and Pashupati Development Bank," said Binaya Dev Acharya, deputy director at the Corporate Finance Division of Sebon. Global Bank has assigned NIDC Capital markets Ltd as its issue manager. Apart from these ten financial institutions, two more commercial banks are also preparing to float Rs 300 million worth shares to public, each. Prime Commercial Bank has already assigned Citizen Investment Trust as its sales and issue manager and the Bank of Asia has picked Nepal Merchant Banking and Finance Company as issue manager. According to the new regulation of Nepal Rastra Bank, the financial companies must issue 30 per cent minimum shares to the public. Lately, the central bank has also fixed the paid up capital for the finance companies (at Rs 200 million), development banks (Rs 640 million) and commercial banks (Rs 2 billion). The central bank's regulation requires already established financial companies to increase their paid up capital by the end of fiscal year 2012-13. However, the financial institutions are floating the shares according to the current structure of their paid up capital. The financial institutions play a dominent role in our capital market as it has more than 80 per cent weightage in the total listed companies. New IPOs, Global Bank is floating 30,00,000-unit worth 300 million rupees, Pashupati Development Bank is floating 8,00,000 -unit of shares worth Rs 8,00,000,00, Subekchhkya Development Bank is floating 1,20,000-unit shares worth Rs 1,20,00,000, Triveni Development Bank is floating 1,50,000-unit shares worth Rs 1,50,000,00, Clean Energy Development Bank is floating 9,60,000-unit shares worth Rs 9,60,000,00. Among Finance companies, Kaski Finance Company is floating 2,00,000-unit of shares worth Rs 2,00,000,00, Shikhar Finance Company is floating 2,00,000-unit of shares worth Rs 2,00,000,00, Sagarmatha Merchant Banking and Finance is floating 2,00,000-unit shares worth Rs 2,00,000,00, Reliable Investment Finance Company is floating 2,47,500-unit shares worth Rs 2,47,500,00 and Lord Buddha Finance Company is floating 2,25,000-unit shares worth Rs 2,25,000,00

Mistakes to avoid while investing

Investing is not just about picking winners, but also about avoiding mistakes. Retail investors/traders can be better off if they avoid making the following mistakes. Thou there can be different rules for different kind of investors these are fundamentally fit for all.

Overconfidence - Don't be unrealistically optimistic

A bull market makes retail investors believe that they are geniuses - after all, anything they put money into goes up. This overconfidence in their own abilities leads to a complete disregard of the risks involved. Every new generation that invests in the market ignores past experience. These new investors wrongly believe that stock prices only go up.

Don't be overconfident and don't start believing that you have superior skills compared to the market. Recognise that in a bull market you are benefiting because the whole market is going up. If those around you are getting unrealistically optimistic, start managing your risk accordingly. Remember that sometimes markets do come crashing down.

Over enthusiasm to trade - Not every ball should be hit

Good batsmen realise that some balls outside the off-stump should be left alone(okay now this is some cricket stuff if u don't know this game leave this and read futher). Similarly, professional investors realise that sometimes its better to just stand still than to rush into a stock. Retail investors often make the mistake of "flashing outside the off-stump" because they cannot resist the temptation to trade in every opportunity. And, like an inexperienced batsman, they suffer the same fate.

Too much trading will lead to a lot of churn, extra commissions to your broker and huge tax implications for you. Some of the world's best investors follow a buy and hold strategy - you should too.

Missing the benefits of compounding of capital - Learn from Einstein

Albert Einstein is reputed to have said that compounding of capital is the 8th wonder of the world because it allows for the systematic accumulation of wealth. Even though any one in class 5 could tell you how compounding works, retail investors ignore this basic concept. Compounding of capital can benefit you only if you leave your money uninterrupted for a long period of time. The sooner you start investing, the bigger the pool of capital you will end up with for your middle-aged and retirement years.

Don't wait to start investing only when you have a large amount of money to put to work. Start early, even if it's with a small amount. Watch this grow to a very large amount with the passage of time.

Worrying about the market - But there is no answer to your favourite question

Smart investors don't worry about the direction of the market - they worry about the business prospects of the companies whose stocks they own. Retail investors are obsessed with the question "Where do you think the market will go?" This is a wrong question to ask. In fact, no one knows the answer. The right question to ask is whether the company, whose stock you are buying, is going to be a much bigger business 10 years from now or not? Don't take a view on the market, take a view on long-term industry trends and how your chosen companies can create value by exploiting these trends.

Timing the market - Around 99% of investors will fail in this strategy

Its very difficult to time the market, i.e, be smart enough to buy at the absolute bottom and sell at the absolute top. Professionals understand that timing the market is a wasted exercise. Retail investors always wait for that elusive best opportunity to get in or to get out. But by waiting they let great investment opportunities go by. You should use systematic or regular investment plans to make investments. You'll have to make fewer decisions and yet can accumulate substantial wealth over time.

Selling in times of panic - You should be doing the opposite

The best opportunity to buy is when the markets are falling and there is fear in the minds of investors. Yet, many retail investors do exactly the opposite. They sell when the markets are falling and buy only when the markets are high. This way they end up losing twice - by selling low and buying high, when they should be doing exactly the opposite. If nothing has changed about the long-term outlook for the company that you own, then you should not sell this company's stock. Use this opportunity to buy more of the same stock in falling markets. Some of the world's biggest fortunes were made by buying when others were selling in panic.

Focusing on past performance - Its like driving forward while looking backwards

It is a very common perception that because a stock has done well in the past one year, it's the best stock to invest in. Retail investors do not realise that often the best performers will underperform the market in the future because their optimistic outlook has already been priced into the stock. Don't go after hot sectors that are currently producing high returns. Don't let greed drive your investment decisions. Look forward to see whether the gains produced in the past can get repeated or not. Short-term trends of the past might not get repeated in the future.
Investing is not just about picking winners, but also about avoiding mistakes. Retail investors can be better off if they avoid making the following mistakes.

Diversifying too much will kill you - Investing is all about staying alive

Beyond a point, having too many names in a portfolio can be counterproductive. You might end up duplicating, or end up taking too much exposure to a sector. Over-diversification can upset your portfolio, especially when you have not done enough research on all the companies you have invested in. If you are an active investor in the stock market, maintain a manageable portfolio of 15-25 names. Instead of adding new names to this portfolio, recognise ideal ones. Then back them with more capital. In the long-run, this will produce better returns for you than adding another 20 names to your portfolio. Investing is all is about patience and discipline. By avoiding mistakes you can improve the long-term performance of your portfolio, whatever the economic conditions prevailing in the market.

Markets crash: Selling in haste may bring heavy losses

It began with a small fall. Then there was a recovery. Experts called it volatile times. But soon the Stock Market came crashing down, day after day. Not just in Nepal but its happening world wide. Many lost all their savings. For others, it is a difficult time to make decisions. Should they sell, buy or simply hold? For investors who had a jolly ride over the past few years, it was a rude shock. It was a turbulent and unhappy ending that many investors find hard to digest. What should you do in a crashing market?

Here are a few tips:

Do not panic
Ups and downs are a part of stock markets. What goes up must come down and what comes down must go up. This explains the market behavior. It may take a few days, or weeks, or even months. But the wheel will rotate. An index cannot rise up indefinitely. So, a fall is a natural market phenomenon. The economy is strong. There is every possibility that markets will recover and bounce back to even stronger levels.

Wait and stay calm
This is the golden rule for turbulent and unpleasant times. Some people indulge in selling their shares in utter haste. Nobody can predict the markets. So why burn your fingers? Stock markets must be viewed as long-term investment vehicles. So do not sell in haste. Things will improve. It will take time and no one can predict it. Have an investment horizon of five to 10 years. Hold your stocks till then, unless there are enough indicators that the company is expected to fare badly. Stocks are good long-term investment instruments but can turn risky or even dangerous in the short term. Hence, simply hold. If you have a well-diversified portfolio, there is little need for you to worry. Even if the fall is owing to a particular sector, the other sectors will pull your returns up. To accurately time the market is impossible. Even the experts fail many times. Nobody can predict how the market mood will change the next minute. Hence, have a long-term investment horizon. For those who have to sell, exercise caution. Bad markets expose weak companies that struggle to make a regular profit. If you do not have faith in a company, selling can be your only option. Research the company before making the final sell decision. It can so happen that you sell at a loss and have to reinvest elsewhere at a high price.