Stock exchange: Price fluctuations, bonus issues and off-market transactions of shares of the 21 listed companies in the country has resulted in an increase in total value of shares in the economy to Nu 23.99 billion last year, from Nu 22.49 billion in 2014.
In other words the market capitlisation in the economy or the value of shares at the prevailing share price was almost Nu 24 billion in 2015. This is derived by multiplying the number of shares by the prevailing price. From the investors’ perspective, market capitalisation determines the worth of the 21 listed companies.
So to improve the country’s capital market, either the size of the share or the price should go up.
However, figures with the Royal Securities Exchange Ltd (RSEBL) revealed that last year, the Royal Insurance Corporation of Bhutan Ltd (RICBL) issued bonus shares at the ratio of 1:1.5 amounting to 72 million shares to its existing shareholders.
Similarly, the Druk Wang Alloys Ltd (DWAL) issued bonus shares amounting to 970,000 shares at the ratio of 20:1 to its existing share- holders.
A bonus issue is an issue of additional shares to shareholders instead of a dividend, in proportion to the shares already held. Companies give away bonus shares to shareholders when companies are short of cash and shareholders expect a regular income. This according to a local economist, who wished not be named, gives shareholders an opportunity to sell the bonus shares in the secondary market, where investors buy and sell securities they already own. Whereas the primary market issues new securities through initial public offering.
In addition, the Druk PNB has also completed transactions for 28,770 shares off-market, wherein the trading is settled directly between two parties without the involvement of stock exchange.
The local economist also said that with very little trading of shares, the market can do very little to influence the share prices. The economist said one of the ways to improve the capital market in the country is by infusing more shares from some of the state enterprises and DHI companies.
“The intent of possessing shares is different in Bhutan because people consider investing in shares as long-term investment while in other developed countries, it is the everyday trading of shares that makes money,” he said.
Last year, a total of 7.3million shares worth Nu 193.77 million were traded in the secondary market as compared to a total traded volume of 4.58 million shares worth Nu 181.87 million in the previous year. This is a growth of 37.13 percent in terms of volume.
Combining the trading occurred both at primary and secondary market, more than 80 million shares worth Nu 923.75 million were traded last year.
However, the total number of shareholder’s account in the central depository has decreased to 62,555 as compared to 62,991 in the previous year. The decrease in the number of shareholder’s account was mainly due to secondary market transactions.
Based on the total securities traded in the secondary market, the BNB Securities Ltd has traded 51.86 percent of the shares followed by RICB Securities Ltd with 20.70 percent, BOB Securities Ltd with 11.84 percent and BDB Securities Ltd with 1.23 percent.
The only private broker, Drukyul Securities Broker Pvt Ltd, which was registered in April last year, managed to fetch more than 14 percent of the trading in the secondary market.