The History of New Stock Exchanges Worldwide and Nepal's New Stock Exchange Plan: A Boon for Investors

The establishment of new stock exchanges has proven transformative for financial markets globally. By introducing competition, transparency, and technology, these initiatives have fueled economic growth, enhanced market efficiency, and provided significant benefits to investors. Nepal, with its plans to launch a new stock exchange, can learn from the successes of other countries.

Examples of New Stock Exchanges and Their Growth

1. India: National Stock Exchange (NSE)

   • Established: 1992.

   • Purpose: Modernize the Indian stock market and reduce inefficiencies of the Bombay Stock Exchange.

   • Growth:

     • The Nifty 50 index launched at 1,000 points in 1996; it crossed 19,000 points in 2023.

     • NSE facilitated a surge in retail investor participation and introduced derivative markets.

2. China: Shenzhen Stock Exchange

   • Established: 1990, alongside the Shanghai Stock Exchange.

   • Purpose: Develop a capital market for small and medium-sized enterprises.

   • Growth:

     • Shenzhen Component Index increased from 1,000 points (1991) to over 10,000 points (2023).

     • Home to technology-focused companies, contributing to China's innovation economy.

3. USA: NASDAQ

   • Established: 1971.

   • Purpose: Create the first electronic trading platform.

   • Growth:

     • NASDAQ Composite Index started at 100 points in 1971; it crossed 13,000 points by 2023.

     • It became the preferred exchange for technology giants like Apple, Microsoft, and Amazon.

4. Japan: Tokyo Pro Market

   • Established: 2009.

   • Purpose: Provide a flexible listing platform for startups and foreign companies.

   • Growth:

     • The market helped smaller companies gain visibility and grow their valuations.

5. South Korea: KOSDAQ

   • Established: 1996.

   • Purpose: Support technology and innovation-focused companies.

   • Growth:

     • KOSDAQ Index grew from 100 points in 1996 to over 900 points in 2023.

     • It became a major platform for biotech and IT startups.

6. United Arab Emirates: Dubai Financial Market (DFM)

   • Established: 2000.

   • Purpose: Develop Dubai into a regional financial hub.

   • Growth:

     • DFM General Index grew from 1,000 points in 2001 to over 4,000 points by 2023.

     • The market attracted foreign investment and supported regional companies.

Nepal's Plan to Establish a New Stock Exchange

Nepal currently operates a single exchange, the Nepal Stock Exchange (NEPSE), which has struggled with limited depth and inefficiencies. The government’s proposal to introduce a second stock exchange aims to address these challenges and bring numerous benefits:

Expected Benefits for Investors:

• Improved Liquidity and Efficiency:

  • Increased competition between exchanges will enhance market liquidity and price discovery.

• Technology-Driven Trading:

  • Advanced systems will minimize delays and improve trading experience.

• Diversification:

  • New companies and products (e.g., derivatives) will offer diversified investment opportunities.

• Global Participation:

  • A transparent and robust platform will attract foreign institutional investors.

• Better Regulations:

  • Competition will push both exchanges to adopt better governance and investor-friendly policies.

Impact on Nepal's Indices

The establishment of new exchanges in other countries has consistently led to a rise in market indices due to:

• Increased investor participation.

• Easier access to capital for companies.

• Introduction of innovative trading mechanisms.

If Nepal follows global examples:

• NEPSE Index: Could experience steady growth as competition drives efficiency and investor confidence.

• New Exchange Index: Will likely grow rapidly, as seen in Shenzhen or KOSDAQ, due to the listing of innovative companies and improved investor access.