KATHMANDU -- Like most Asian stock markets, Nepal's benchmark Nepse index has tumbled this year amid rising interest rates, jitters about the U.S.-China trade war and the uncertain outlook for economic growth.
Nepalese investors, however, are not willing to wait for the market to sort itself out. Suspicious of the intentions of the country's first communist-controlled parliament, a group of stockholders this month held a hunger strike in front of the Nepal Stock Exchange for almost two weeks to demand the resignation of Finance Minister Yuba Raj Khatiwada and the implementation of promised reforms that they believe could revive a market that has fallen about 24% since the election late in 2017.
"Instead of opening our market, the communist government is controlling it," said Dipendra Agrawal, an executive member of the Nepal Investors' Forum, which has joined the protests. "It is not helping investors like us."
Though the hunger strike was called off on Dec. 21 because of the health impact on the protesters, the investors plan to picket the offices of Khatiwada and other regulators if reforms are not implemented.
Banking and insurance stocks overwhelmingly dominate Nepal's share market, which dates back to 1976. While financial institutions are legally required to list, companies from large sectors of the economy like tourism, agriculture, property development and construction are relatively scarce.
A 15% income tax concession offered to companies listing on the market has increased initial public offering activity over the past two and a half years however. In the fiscal year ended July 15, Shivam Cement, which raised 2 billion Nepali rupees ($17.95 million) was the biggest of 21 offerings that brought in a total of 8 billion rupees.
Khatiwada, the top target of the shareholder protests, is no party apparatchik. He served as central bank governor under a previous government and holds a doctorate in economics from the Delhi School of Economics. But he is a strong supporter of economic planning who recently dismissed the stock market as an "unproductive sector" and has expressed disagreement with the constitution's establishment of land ownership as a fundamental citizens' right.
The Nepal Communist Party, which emerged from the merger of a grouping of former Maoist rebels and a more mainstream communist party, is the first party to hold a parliamentary majority in the country in almost 20 years. While it has generally continued the economic policies of the previous Nepali Congress-led coalition government since it came to power in February, business people and investors still worry about its statist inclinations.
"The government should tell people that it is not against investment," said Deepesh Vaidya, managing director of merchant bank Kriti Capital & Investments in Kathmandu. "Its policies have left investors panicking."
Investors first took to the streets in June against the government when Khatiwada proposed collecting a capital-gains tax from investors in relation to share rights issues. Protests then persuaded the government to back off.
Nepal's exchange remains small, with an overall market capitalization of 1.39 trillion Nepali rupees. Banks and insurers accounting for more than 90% of the country's 198 listed companies.
Only local investors can trade. Trading accounts nearly doubled after a 2015 central bank order required banks to boost their share capital, leading to a flood of rights issues and bonus shares. The Nepse Index soared 125% to all-time highs over a period of 14 months before peaking in July 2016.
A government directive last year to restrict bank lending helped accelerate the market's slide while a battle for deposits that has seen rates on fixed deposits rise up to 13% has drained investor interest.
Several of the measures demanded by groups like the Nepal Investors' Forum echo reforms that have previously received government endorsement in recent years but which have failed to receive parliamentary approval or otherwise come into force.
They want to see brokers be allowed to offer margin trading and open branches beyond Kathmandu. They are asking that Nepalis living overseas be allowed to trade and for controls on the pricing of secondary share offers. And they are demanding that officials improve systems for online trading.
A quickly assembled government panel submitted its own recommendations on market reforms on Dec. 19 and the finance ministry immediately promised to implement them. The protesters are now pausing to see if the changes come into force.
"The government in the past has promised reforms, but implementation is the key," said Hari Dhakal, coordinator of the Share Investors' Pressure Group, which organized the protests. "Assurance is not enough. We want to see [reforms] being implemented."
Niraj Giri, executive director of the Securities Board of Nepal, the market regulator, agrees reforms have moved too slowly. "The government has to make bold policy reforms to promote the capital market," said Giri, who was appointed by the previous administration.
In his view, what the market really needs is more institutional investment and more diversified listings. Yet the country's many family-owned businesses are not showing much interest in getting onto the market. "Even big local companies don't want to share their profit with the public," said exchange spokesperson Murahari Parajuli.