Brokers' Aggressive Preparation: 12 Companies Get Rated for 18 Billion

According to the existing policy of the Nepal Rastra Bank, companies must mandatorily acquire a credit rating to obtain bank loans exceeding Rs. 500 million. Since it is impossible to provide margin loans solely from their internal resources, brokers have adopted a strategy to raise large sums (short-term loans) institutionally from banks.

Analyzing the latest data from Care Ratings Nepal, 12 broker companies have so far obtained ratings to bring in loans ranging from Rs. 1 billion to Rs. 3 billion. This gives a clear indication that broker companies are now rising above being traditional commission agents and are developing into strong financing institutions for the stock market.

Who Got Rated for How Much?

• Rs. 3 Billion: Naasa Securities

• Rs. 2 Billion (Each): Aryatara Investment & Securities and Kohinoor Investment & Securities

• Rs. 1.5 Billion (Each): Vision Securities, Trishakti Securities, Dynamic Money Managers, and Hathaway Stock Dealer

• Rs. 1 Billion (Each): Imperial Securities, Capital Max Securities, Secured Securities, Nepal Stock House, and Shubhakamana Securities

Policy Path Open, but Implementation Sluggish

The Securities Board of Nepal (SEBON), relying on Article 118 of the Securities Act, 2063, had approved the 'Margin Trading Facility Guidelines, 2082' to be effective from Falgun 1. However, the service could not be resumed immediately after the policy path was opened. Due to procedural hurdles such as the integration of software systems, resource management, and a shortage of manpower, brokers could not start margin lending immediately.

But the situation has changed now. While only 31 brokers had received permission for margin trading until the last fiscal year, this number has now crossed 50. In terms of infrastructure and capital, brokers are now sitting in a completely 'Ready to Launch' position to provide loans to investors.

The Paradox: Money is Available, but No Borrowers

On one hand, brokers are sitting with an 18-billion-rupee weapon (loan) ready, while on the other, its demand in the market is almost zero. This is a situation contrary to the general principles of economics. When there is a 'bull trend' (rising market) in the capital market, investors go around looking for loans even if they have to pay high interest. But the situation is exactly the opposite right now.

The continuous declining market, the recession overshadowing the economy, and policy instability have weakened investors' morale so much that they are afraid to put their own pocket money into the stock market, let alone take the risk of borrowing. Margin lending is like a 'double-edged sword'; when the market rises, it multiplies profits qualitatively, but when the market falls, it can wipe out the entire capital. This fear has gripped investors at this moment.

Market Leaders' Understanding: 'The Problem is Not Capital, It's Confidence'

Broker operators themselves accept this market psychology. According to Bhaktiram Ghimire, General Secretary of the Stock Brokers Association of Nepal and Managing Director of Imperial Securities, even though all preparations have been completed from the brokers' side, the current market condition is not favorable for investing by taking loans. "If the market had risen and investors had confidence, the demand for loans would certainly have been high. However, it is not that loan disbursement is completely zero, but it has not been able to gain the expected momentum," Ghimire states.

Similarly, the analysis of Rajkumar Timilsina, Chairman and Managing Director of Vision Securities, is the same. According to him, rather than a technical or financial shortage, a 'Crisis of Confidence' in the market has become the biggest hurdle in the expansion of margin trading.

Conclusion: 18 Billion Will Remain 'Frozen' Until the Market Regains its Rhythm

Overall, the fact that broker companies have acquired credit ratings for Rs. 18 billion is a massive leap for the institutional development of the Nepali stock market. This will end the investors' compulsion to rely on banks in the future. However, until the Nepal Rastra Bank's overall monetary policy, the upcoming steps of the Securities Board, and the broader macroeconomic indicators become positive, investor morale will not be uplifted. Until morale improves, it is certain that this billion-rupee 'booster dose' prepared by the brokers will remain unused and frozen in the market.