The Hot Issue Market in Nepal

Abstract

This paper aims at identifying the “hot issue” market in the Nepali primary stock market. Altogether, 202 initial public offerings of equity shares have been used as samples for examining the cyclical pattern of the market over the period from 2011/12 to 2022/23. It is found that the “microfinance sector” has been identified as the hot issue market in Nepal. Because the microfinance sector has met all three characteristics of the hot issue market which is above average mean and median values of IPO volume, initial returns, and subscription rates. Similarly, four fiscal years viz., 2014/15, 2020/21, 2021/22 and 2022/23 were identified as hot issue periods as they also met all there criteria to be considered as the hot issue markets. Additionally, the results reveal that the firms going public in hot issue market is influenced by underpricing, subscription rates, offer size, listing delay, sales, firm size, age of the firm and gross domestic product. Thus, it is concluded that the microfinance sector and the four fiscal years can be considered as hot issue markets that they attract greater investor interest and able to generate superior performance of IPOs compared to other sectors and fiscal years.