NEPSE at 38 Times Earnings: We Are Among the World’s Most Expensive Stock Markets
Summary
Nepal's stock market trades at a 38 times price-to-earnings multiple, making it the most expensive frontier market globally, primarily due to limited investment alternatives and a captive domestic investor base.
Key Points
- Nepal's NEPSE trades at a 38x price-to-earnings ratio, far exceeding frontier and emerging market averages.
- The market capitalization-to-GDP ratio of Nepal stands at 72.6%, comparable to developed economies despite its frontier status.
- Nepal's market-wide return on equity (10-12%) does not justify its high price-to-book ratio of 2.78x.
- The captive nature of Nepali investors, due to restrictions on overseas investments, inflates stock valuations significantly.
