… crossing more than Nu 1.13B

Tshering Dorji

Share trading in the secondary market has hit the roof, with more than 23M shares being bought and sold by individuals and institutions amounting to more Nu 2.2B transactions.

The secondary market traded shares worth Nu 1.13B, three fold increase from last year (384M). The figure, according to the Royal Securities Exchange of Bhutan (RSEBL) is as of December 24.

Secondary market is a platform, where investors buy and sell securities they already own. It is what most people typically think of as the stock market, though stocks are also sold on the primary market when they are first issued as initial public offering (IPO).

Consequently, the market capitalization, which is the value of shares at the current market price, has hit almost Nu 51B as of yesterday. This is an increase of about Nu 20B, compared with 2018.

Trading in the secondary market, usually is triggered by companies’ performance and dividend yields. However, in Bhutan’s case figures have picked up despite the suspension in trading of stocks of few manufacturing and mining companies.

Even otherwise, there is an increase in growing number of people keeping track of the stock prices and trading.

A three-fold increase in secondary market and drastic jump In market capitalization means that people who have invested in shares are now drawing cash from what is termed as liquid asset (those assets which can be easily converted to cash).   

At a time when loans are being constricted and NPL has reached 30 percent, stock exchange can be seen as a platform to facilitate liquidity in the market. In other words, people have been engaging in share trading to draw cash.

This, too is an opportune time for sellers because the market price of the shares has increased by more than Nu 20B. For instance, the market price of Druk PNB was priced at Nu 28 last year, which increased to Nu 78 today.

 Even with one IPO and suspension in trading of stocks of five companies, the market price is picking up.

A local economist said that this is bound to happen when the supply is less and demand is more.

The X-factor

The RSEBL, on the other hand, been promoting trading through technology, which enabled the smallest stock exchange in the world to facilitate five-days a week trading, today.

The RSEB:’s CEO, Dorji Phuntsho said that the kind of technology and platform, the stock exchange has built, could cost more than USD 1M. “Despite the limited resources, RSEBL has not only successfully developed an online live portal, inhouse but also engaged crowdfunding in it and there is more to do,” he said.

Since last year, he said the RSEBL has been educating people on stocks and shares. Friday session’s held by the RSEBL has imparted knowledge to more than 3,000 individuals.

After the launch of M-Cap, a mobile App, the RSEBL saw more than Nu 2M trading a day.

“While  liquidity shortage is also viewed as one of the factors, literacy and digitalization has more to with increase in trading,” Dorji Phuntsho said adding that a rigorous study would be carried out in the capital market to study the trend and only then he said he will be able to pin point the factor(s). The CEO also said that changes in regulation of rights issue has contributed to increase. 

For example, starting this year unsubscribed shares were put  up for auction in the market. In the earlier regime, the company took back the unsubscribed rights issue.

If an existing shareholder has one share and that person did not subscribe the rights issue, his rights will be put up in the auction. This means that if the rights is sold at Nu 25 in the auction, against the offer of Nu 15, that shareholder would get to keep the remaining Nu 10.

In the earlier regime unsubscribed shared would be retained by the company while the new regulation offers other individuals an opportunity to buy new shares.

Rights issue is an issue of shares offered at a special price by a company to the shareholders in proportion to their holding of old shares.

However, when there isn’t  much avenues for investments, stock market is worth exploring.