The Nepal Stock Exchange (Nepse) is preparing to allow shareholders to sell their rights to buy additional shares in a bid to introduce new instruments in the secondary market.

Currently, shareholders who do not wish to buy rights shares cannot sell their stock purchase right to another person. Nepse has been attempting to launch new derivatives for more than a decade, but its plan has been held up mainly due to a dispute with the regulator Securities Board of Nepal (Sebon).

According to a Nepse source, Nepse has been drafting a new bylaw which is at the final stage and will be submitted to the Nepse board soon. After it is endorsed by Sebon, shareholders will be able to sell their stock purchase right to another person.

Investors who buy the stock purchase right will not be eligible to receive dividends issued by the company until there is complete transfer of ownership of the rights shares. Likewise, the bylaw has proposed a commission ranging from 0.3 to 0.5 percent for brokers.

Delays in launching the new provision have affected shareholders of commercial banks which were ordered to increase their paid-up capital fourfold from Rs2 billion to Rs8 billion. Nepal Rastra Bank had aimed to reduce the number of financial institutions by encouraging mergers by raising the minimum paid-up capital requirement.

Both Sebon and Nepse have often been criticised for failing to introduce new derivatives in the country’s only stock market. Currently, the secondary market is dominated by transactions in primary shares of listed companies, most of which are financial institutions.

Despite delays in launching the provision allowing shareholders to sell their stock purchase right, it is a positive move to expand the investment portfolio in the country’s capital market, analysts said.  

Source: The Kathmandu post