KATHMANDU: The mutual funds have been recognised as the best medium to channelise Non Resident Nepali (NRNs) investment in the capital market by the committee formed to prepare guidelines to facilitate NRN investment.
“The committee has advised to prepare necessary framework to allow NRN investment in the mutual funds,” informed deputy director at the Securities Board of Nepal (Sebon) Nabaraj Adhikary. The committee consisting of representatives from Securities Board of Nepal (Sebon), Nepal Rastra Bank (NRB), Company Registrar Office (CRO) and Insurance Board was formed in July to frame guidelines regarding NRN investment in Nepali capital market.
The NRNs can investment in Nepali mutual funds through the recently formed NRN’s investment company. Global Capital Investment — the investment company formed by Non Resident Nepalis (NRN) to invest in Nepal — already has collective fund worth Rs 500 million. “To allow NRN Investment Company’s bulk investment in the market the Mutual Fund Regulation 2067 has to be amended,” pointed out Adhikary.
However, he added, that the amendment of regulation will not take longer.
The regulator has already provided licence to Siddhartha Mutual Fund, a subsidiary of Siddhartha Bank to operate mutual fund. There are three more commercial banks that are waiting for Sebon’s green signal to start mutual funds. NMB Bank, Nabil Bank and Laxmi Bank’s merchant banking subsidiaries have applied for the license to operate mutual fund. The government had opened capital market investment for NRNs in last fiscal year’s budget. However, due to practical complications regarding the entry and exit of foreign retail capital, the matter has remained in theory only. The current fiscal year’s budget has directed Sebon to prepare necessary guidelines regarding NRN investment in securities market within mid-October but it has not been finalised yet.
NRN investment is supposed to aid the capital market in balancing its demand supply mechanism. At present, the stock market is heaving under the supply pressure pushing the overall performance of the market down. The committee was formed to work out the procedure to eliminate the probable obstacles in attracting NRN investment in the capital market.
The guidelines thus prepared as supposed to eliminate any possible cases of clash of regulations imposed by different regulatory bodies. Though, the capital market regulator has permitted NRN investment in securities market through portfolio investors back in December 2010, it also could not be materialised.
According to Portfolio Management regulations, NRNs can appoint licensed portfolio managers to undertake investment on their behalf. However, there are difficulties regarding the exit mechanism for the returns and fund that NRNs have invested. As a preventive measure to capital flight, there are some complications posed by Nepal Rastra Bank (NRB) regarding the exit mechanism.
“The repatriation of returns will be simpler if the investment is being undertaken by a company instead of numerous individuals that is why the committee has recommended investment through the company,” pointed out Adhikary.
However, the policy measures alone will not help attracting the foreign investors in the stock trading the infrastructure also need to support the policies. It is not possible in the existing technology; thus, Nepal Stock Exchange is trying to get its trading software upgraded to incorporate online trading as well.
Source: www.thehimalayantimes.com
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