April 6, 2019 | Som Thapa
The stock market of Nepal is on a three-year losing streak since it peaked on 2073 B.S reaching the all-time high of 1881.45. Investors have lost huge sums of money in the market since then. As of today (Chaitra 21, 2075), the index is at the level of 1165. What guided me to write this blog are the recent activities that are seen in the stock market of Nepal. Investors, angered by the loss of wealth, have continuously protested against the governing bodies including Finance ministry, Securities Board of Nepal (SEBON), Nepal Stock Exchange (NEPSE), etc. The investors discouraged by the continuous fall in the market are complaining against the authorities and are asking their help in order to push the market in a positive direction.
However, I totally disagree with their initiatives. This does not mean I don’t empathize with their intentions. As an investor, I fully understand their motive and I also want the market to move forward. What I don’t encourage is the help they are seeking in order to push the market up.
Why I don’t agree?
When the stock market was rising to a new high every day, investors were making tons of money. They were exhilarated with the instant profits delivered by the bull market. At that time, did any investors thank the government and it’s regulating bodies. Did we surround the buildings of NEPSE and SEBON and sing the songs of their praises? NO. We were praising ourselves in the inside. The thought of how smart we were overwhelmed us. We were confident about our abilities and ignored other factors that might have made the profits possible.
Now, when the market has plunged, we are complaining and begging the authorities to make things right. Is this the right behavior? Can the government and its authoritative institutions have the power to change the market direction in an instant? If they can, is this the free market? If the government can exert so much control over our investing fate, then the free market economy exists only in the theories of the textbooks.
I have lost my fair share of wealth in this market decline. But I don’t need anybody’s support to earn back what I have lost. I made my own decision then and I stand by it. If my decision was right, time will reveal it. If it was a mistake, I have something to learn from it.
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Why the Stock Market should be independent?
As the title suggests, the Stock Market should be independent. The prices in the market are determined by the collective and organized decision making of millions of investors involved in the market. If we believe that the stock market exists through the decisions of millions of investors, then we need to have confidence in our decisions. We need to understand how valuable our investment decisions are to us and the economy. Like small drops of water make the ocean, each and every decision (whether buy or sell) made by all the investors make up the stock market. Therefore, the market is at this current crisis, because we collectively decided it to be here.
Good financial, economic and market reforms are essential for the stock market to perform better. So, the government plays a major role to promote the market. But, if we ask the government to move up the prices in the stock market, we are asking the wrong question. We (all investors) are the ones responsible for the future prices of the stock market. We don’t need support from the government to determine the prices. This is our responsibility. If we don’t want interference from the government when the market is rising, then we shouldn’t expect the support of the government when the prices are falling. The stock market should be free and self-reliant.
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While talking of support, I remember a lecture from one of my teachers who was talking about foreign aid. He argued that the concept of foreign aid looked nice on the surface. However, too much aid destroys the receiver, he said. He supported his theory with an example of Haiti. The people of Haiti, a poor African nation, lived through their fishing occupation which was passed down from generation to generation. The USA through its helping institutions started providing foods and accessories, to the people of Haiti, in the name of foreign aid. Eventually, people with no need for fishing forgot their occupation. The skill passed from generation to generation was lost. Finally, my teacher concluded that if the USA were to pull back its support, people of Haiti would starve to death because of hunger as they didn’t possess the skills to provide for themselves and survive.
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Similarly, if we as investors look outside for the support to move our stock market, we too will be destroyed in the end. We will forget our abilities to make shrewd investment decisions if we depend on others for the result of our actions. The stock market will always rise high and fall hard in the coming days as it has done in the past. This is the only certainty about the stock market.
United States of America emerged as the superpower only after it was destroyed in World War II. It rebuilt itself into its best after passing through its worst. In the same way, the current crisis in the stock market of Nepal may be an indication for better days ahead. If we believe in ourselves and stand by our decisions, there will be better tomorrow. Stock Market will be stronger than ever. It is just a matter of time.
I leave you with the famous quote:
“It is always darkest before the dawn”