Why No New Shares Have Been Issued in Nepal for So Long: Key Reasons Explained

Nepal’s stock market, particularly NEPSE (Nepal Stock Exchange), has seen various fluctuations over the years. One concern that's been buzzing among investors and traders alike is the noticeable gap in new share issues. For many, the question remains: why haven’t we seen new shares come into the market for so long?

Here, we'll explore the reasons behind this prolonged absence of new shares and how it affects the overall market sentiment.

1. Regulatory Delays

One of the primary reasons behind the lack of new share issues is the slow regulatory process. SEBON (Securities Board of Nepal), the governing body, often takes a long time to approve Initial Public Offerings (IPOs) and Further Public Offerings (FPOs). The approval process is complex and involves thorough scrutiny of the financials, business plans, and compliance of companies. This regulatory bottleneck slows down the introduction of fresh shares to the market.

2. Market Volatility and Uncertainty

The stock market, much like any other market, is subject to volatility. If the market is experiencing unstable conditions, companies may hesitate to issue new shares. Nepal’s economy has been hit hard by global events such as the COVID-19 pandemic and inflation, which have caused a lack of confidence among investors. Companies are likely waiting for the market to stabilize before going public or offering additional shares.

3. Lack of Company Preparedness

Another possible reason is that many companies in Nepal are not fully prepared to meet the stringent requirements for issuing shares. Preparing for an IPO involves legal, financial, and operational restructuring, which many companies may find daunting. Smaller firms, in particular, may lack the necessary infrastructure or strategic planning to go public, contributing to the lack of share issues.

4. Global Economic Factors

The global economic situation plays a significant role in Nepal’s stock market. Rising inflation, increasing interest rates, and overall economic uncertainty worldwide have impacted local businesses. Many companies have focused on stabilizing their existing operations rather than expanding by issuing new shares. In times of economic downturn, companies tend to hold off on aggressive financial moves like share issuance.

5. Political Instability

Nepal’s political landscape often contributes to market uncertainty. Frequent changes in government policies and leadership can make it difficult for businesses to plan long-term financial strategies. This political instability discourages both local and foreign investors from putting their money into new shares, and it may also discourage companies from issuing them.

6. Lack of Investor Confidence

When investors don't see consistent growth or returns from the stock market, their confidence diminishes. With fewer investors interested, companies may find it unattractive to issue new shares. This creates a cycle where fewer shares are issued because of reduced investor interest, and investors lose interest because of the lack of new opportunities in the market.

Check IPO RESULT IN 1 Minutes

Conclusion: A Slow Period, But Not the End

The absence of new share issues in the Nepalese stock market has been caused by a mix of regulatory, economic, and political factors. While the current situation might seem discouraging, it’s important to remember that markets are cyclical. As economic conditions improve and companies become better prepared, we can expect the issuance of new shares to pick up once again.

For now, investors must stay patient, informed, and cautious. The wait for new shares might be long, but with the right conditions, Nepal’s stock market has the potential to regain its momentum.

Stay tuned to The Bipin Blog for more insights on Nepal's stock market trends and investment opportunities!