Ongoing Manipulation in NEPSE

Kathmandu. As of 6 September, between 10:30 a.m. and 10:45 a.m., the Nepal Stock Exchange (NEPSE) seems to have been a weapon of major manipulation in the stock market, as the current regulation permits the acquisition or sale of any company’s share from 10 lots and above to raise or decrease the share price by 5%.

Many people have lowered the price of 10 lots of stock by 5 percent in a conspiracy and this has severely disrupted daily trade from 11 a.m. As a result of this movement in the market, the acquisition and disposal of shares in some firms came to a standstill during the first half of the daily trading hours.

Shares of most of the firms exchanged during the session increased by more than 4 percent, impacting daily trading after 11 p.m. In the pre-op session, 10 shares of most companies were traded. Of the 87 companies that traded in today’s pre-opening market, 85 of them rose. The share price of each of the firms was up to 5 % higher.

As the NEPSE index grew by more than 42 points at the beginning of the day, the general investors who purchased shares in daily trading were misled at high rates, while the investors earned gains by selling shares at the same price. The 42-point rise in NEPSE with a total turnover of 20 million was an abnormal task.

Although pre-opening in the developed stock market, special pre-opening, and intra-day trades are useful, it has begun to become a weapon for some players in the emerging stock market, such as Nepal. The Securities Board of Nepal (SEBON) and NEPSE have remained silent given the demand of most stock market investors to avoid pre-opening.

Tilak Koirala, a stock market expert, recommended that NEPSE be shut down immediately as there are only a couple of people in the pre-op market. Koirala said that the pre-openings were just for the initial business of the companies that had come through selling IPOs. He requested that this be provided for other companies that are doing business, even though it is retained. He argued that to preserve pre-opening, every business should be allowed to purchase and sell only 1000 lots per transaction and the price should not be less than 2%.

Share analyst Prakash Tiwari says it makes no sense if pre-op transactions are not monitored. He says the regulatory body should be able to inspect all pre-op transactions. Given the tradition of pre-opening in various markets around the world, it is misused in Nepal. He believes that all sorts of sales and practices in the market should be regulated and that those who do fraud should be placed into the confinements of the law.

In the pre-op on Sunday, the share price of NRN Infrastructure increased by 5 percent, and the regular price increased by 5 percent. As per the market on 6th September, those who purchase shares of the company at Rs 590 per share suffered losses of up to Rs 106 per share in a single day.

Similarly, in the pre-op to ordinary microfinance, the share price rose by around 5 percent, and in the regular market; the share price declined by 3.28 percent relative to the previous day. On this day, the share price of most of the firms that raised their share price by a small amount during the pre-opening time declined in the regular market.