Nepal Share Market Vs American Stock Market (Nepal Stock Market Update's short survey)

The History of Nepalese Share market is not long in Nepal as Compared to American Stock market. Nepal Stock Exchange (NEPSE) is only one stock exchange in Nepal opened its trading floor in the beginning of 1994 i.e. 22 years ago but till the date, NEPSE has not been able to operate with full automation.

Nepal Stock Market Update- Short Selling

The History of American Stock market is very old as well as far better in terms of modernization as compared to Nepal. There are several stock exchange in America such as NASDAQ , New York Stock Exchange, NYSE MKT, NYSE Arca, National Stock Exchange, NASDAQ OMX PHLX, Miami International Securities Exchange, IEX , EDGA and EDGX etc but New York Stock Exchange and NASDAQ are major stock exchange operating in USA.

Most of the listed companies in the stock market in Nepal belong to the financial sector where as in USA, most of the listed companies belong to manufacturing, processing, producing, electronic, medical/dental instruments products, services/amusement & recreation, software, programming & data processing, aerospace, diversified commercial services, pharmaceuticals, clothing , real sector companies etc.

Due to only one stock exchange owned by government in Nepal, decision-making process is very slow to formulate new policies. There are several bodies involved in single decision, which is major obstacle for development of stock market in Nepal.

There are several problems in stock trading in Nepal. Documentation, payments settlement and ownership transfer process is still lengthy.  Due to traditional trading system, limited investors from limited area within the Nepalese territory can trade stock in Nepal.

Nepal Stock Market Update- Put Options

In American stock markets, there are many facilities and options for trading to minimize investment risk and maximize profits in up and down trend. Short Selling and put options are essentially bearish strategies used to speculate on a potential decline in security or index, or to hedge downside risk in a portfolio or specific stock. If the stock declines as expected, the short-seller would buy it back at a lower price in the market and pocket the difference, which is the profit on the short sale.

Put options offer an alternative route of taking a bearish position on a security or index.  A put option purchase confers on the buyer to sell the underlying stock at the put strike price, on or before the put's expiration. If the stock declines below the put strike price, the put will appreciate in price; conversely, if the stock stays above the strike price, the put will expire worthless.

Nepal Stock Market Update- Hedge Fund

Similarly, if the market is too risky, there is facility to hedge investors risk in American capital Market to minimize their risk. It's a strategy that raising cash allocation and protects profits during falling markets and lowers cash allocation and puts more to work during rising markets.

In Nepalese share market; commission rates are still very high as compared to foreign stock markets. In American Stock Market, maximum commission rate is not more than 0.3% or US $ 5-7 for every trade. Now, free stock trading is also in practice, which is made possible by Robinhood.com.