Securities Board of Nepal Chairman Dr. Gopal Prasad Bhatta Announces Short Selling System Implementation Soon

Kathmandu. Chairman of the Securities Board of Nepal (SEBON) Dr. Gopal Prasad Bhatta has said that the 'short selling' system is going to be implemented soon in the capital market. 

Speaking at a meeting of the Finance Committee on Wednesday, he informed that this system is being implemented to provide investors with returns even when the market falls, not just when it rises.

Mentioning that there is a belief in Nepal that the stock market should always be rising, Chairman Bhatta clarified that the capital market of any country in the world cannot continuously go only upwards. Complaining that unnecessary pressure is put on the Securities Board when the market falls, he said that the board's role is not to determine the direction of the market but only to provide a fair 'playing field'. 

He expressed confidence that the problem of investors coming out in protest when the market falls will end after the short selling system is implemented. After this system is implemented, investors who predict the market will fall will be able to borrow shares and sell them, and when the price falls, they will be able to get returns from the price difference by buying and returning the same shares. 

Investors who expect the market to rise will be able to buy shares, sell them when the price rises, and make a profit, as they do now. He claimed that this arrangement will change the one-sided psychology that the market must rise, and create an environment where investors make decisions based on their own study and analysis. 

Stating that the responsibility of the Securities Board is only to ensure rules, regulations, and equal opportunities in the market, he said that investment decisions are entirely dependent on the investor's discretion. Discussing the current market trend, Chairman Bhatta said, 'What is the nature of our market now is that everyone gets worried if the market falls, and everyone gets happy if the market rises. There is a belief that the market should always be rising.' 

He clarified that in the context of Nepal, there is a psychology that the market should keep rising, and no one is happy even if it reaches 3 thousand, 35 hundred, or 5 thousand, and the market cannot always keep rising. He added, 'Even if it reaches 5 thousand in Nepal and then falls, the Securities Board will be surrounded, which happened yesterday. I faced it yesterday, and in my life, I faced a siege for the first time.'

Stating that investors buy shares for returns and there is no situation in Nepal where returns can be obtained without the stock price rising, Chairman Bhatta said that a mechanism is being created for investors to get returns regardless of the market's direction. He added, 'That means returns will come even if the market goes down, and returns will come even if the market goes up. We are introducing an instrument called short selling very soon, which will be implementable.' 

According to him, if an investor predicts that the market will fall, they will borrow shares and sell them at the current price, and buy and return them when the market falls in the future. If they sell shares worth 50 rupees and buy and return them when the price is 30 rupees, they will make a profit of 20 rupees. On the other hand, someone who predicts the market will rise can buy at 50 and sell at 80. 

He claimed that with investors divided in this way, the compulsion for the market to rise will end. He said, 'Then there will be no investor associations. So far, because it has been going in a single line, investor associations have surrounded us. We will end this problem that is currently seen in the market.'

Chairman Bhatta also informed that necessary policy arrangements are being brought to control the spread of rumors in the market. He said that complaints have been received that investor morale has declined due to ongoing government actions such as asset investigations, and that the Securities Board will coordinate with the relevant government agencies on matters related to asset investigation, inspection, and financial crime control. He also informed that the board recently published the 'Capital Market Development Roadmap of Nepal, 2083' for the reform of Nepal's capital market. Similarly, he stated that the Capital Market Policy for Fiscal Year 2083/084 has also been published for the board's work in the upcoming fiscal year.