Nepal’s Stock Market and Economic Growth: Words and Impact of Politicians – The Himalayan Times – Nepal’s No. 1 English Daily Newspaper

Some political parties and investors have opposed the offensive remarks recently made by the senior political leadership of the Maoist CPN-Center, which sent the wrong message to the capital market.

Pushpa party chairman Kamal Dahal “Prachanda” recently declared that it was right to characterize the capital market as a developed form of imperialism. After this declaration, the NEPSE index gradually fell.

Prachanda’s secretariat said on Twitter that the theoretical question President Prachanda raised about the capital market was correct. However, he said the party will take conscious initiatives and make efforts to protect investors’ investments in the stock market, as well as the interests of small investors.

In principle, the stock market promotes economic growth by increasing investment and productivity.

The savings go to the corporate sector and economic growth is expected. There is a positive correlation between stock market growth and economic growth, but between the two sometimes questions arise. To reiterate, why did the equity market rise when Nepal’s real economy was weak in the past? The stock market is affected not only by politics, but also by political decisions around the world. However, the recurring political instability in Nepal had an immediate impact on the stock market, but political parties should view the rise in the stock market as a message from investors to politicians.

Investments in the stock market have increased due to the accumulation of investable funds in banks and financial institutions, as demand from the private sector is less and also due to falling interest rates.

The general public, unaware of the functioning of the stock exchange, assimilates it to a casino. It occupies such an influential place in the economic theory of production and distribution that it is natural to have an equally important place in the theory and practice of economic development.

Historically, analytically or politically, it emphasizes savings, and capital markets can be described as the management and supply of capital.

Higher rates of capital formation generally lead to faster growth in output and income. The capital market is important for all financial instruments, whether they are short-term or long-term financial instruments or commercial, industrial and government instruments.

The capital market refers to all the institutions and mechanisms for raising funds in the medium and long term by various means available in equities, debentures and bonds. In these markets, private and public sector companies raise billions of rupees.

The main components of the capital market are stock exchanges, banks, investment funds and companies, specialized financial institutions or development banks, mutual funds, savings banks and non-bank financial institutions.

In addition, the establishment of the Nepal Stock Exchange (NEPSE) brought about significant changes in the functioning of the Nepalese capital market, especially since the liberalization policy adopted in the 1990s and the automation of trade and the functioning of the system. central repository in a few years. There are.

The rise of the Nepalese stock market, which reached record levels, was maintained a few days ago. The NEPSE index, which measures the stock market, has increased significantly and the amount of trades has also increased.

Meanwhile, the Securities and Exchange Board of Nepal (SEBON) said that investor participation in the stock market has increased significantly as more than 85% of transactions are done through NEPSE’s online trading system.

According to the board of directors, there are more than four million investors in the primary securities market due to the development of the securities market and reforms carried out by the board of directors, which is about 14% of the total population. The focus should be on ensuring that small investors have access to credit to play in the stock market.

Calling the stock market an evolving form of imperialism regardless of the effect of its expression on market psychology may be the product of the thinking of a person with high political leadership and the organization he leads. , but it needs to be pre-assessed to see how it affects the investor.

The capital market must move at its own pace and at its own speed without any outside influence, and if the market collapses, it will have a profound effect on many other sectors, and the economy will fall into a vicious cycle.

In the current context, it is important for Communist leaders to study Deng Xiaoping’s journey to power in China from 1978 to 1989, how he developed capitalism, and how China became the world’s second-largest economy. It is well known that the Chinese capital market has played a major role in bringing China to where it is today. The Chinese stock exchange is one of the most sophisticated in the world. Recognizing the importance of capital, Deng led the country into a capitalist system during his 11 years of leadership.

India’s capital market also provides an “supply of capital” for new businesses.

A new business needs money and gets it in the capital market. By mobilizing this capital, it produces, creates jobs, earns income and pays taxes on it.

This is just one representative example of how the capital market has a multidimensional effect on the economy. The capital market is affected by information, the financial situation of a company, the economic situation of the country, political reasons and the market situation. Much of the capital market is therefore “predictable”.

The finance minister called on equity investors to invest in choosing a company that will provide long-term benefits.

Investors therefore expect a positive message from the capital market and full implementation of the policy and direction of action.

A version of this article appears in the December 23, 2021 print of The Himalayan Times.

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