The Bhutanese Stock Market

 

The Bhutanese Stock Market is probably one of the smallest in the world and is governed by Royal Securities Exchange of Bhutan (RSEB). It is the only Stock Exchange in the country with the market capitalisation of about Nu.61billion . There are only 18 listed companies under RSEB as of 30 September 2024 (https://rsebl.org.bt/company.php). The size of the stock market is the size of the few Bhutanese who knows about stock market and only few does trade in secondary market. Many of the largest shareholders still wait for the good dividend rather than trading in secondary market.  Further, these lot may be not comfortable using the online trading through the app called mCaMS.

                Source: mCaMS trading history 

Not many gave much heed on Shares and Dividend chapter in high school and so did I. Those who took it not only for exam point of view but in practical aspect of life are the shareholders of listed companies. The few business elites and practical people owns the stock and majority of the Bhutanese are still not aware of the stock market. They must have heard it but never traded or owns one. The Shares which is the Initial Public offering (IPO) floated by listed companies to raise the capital is the primary market. Most of the Bhutanese shareholders own the primary market and wait for the good dividend. For example, some mining companies in the past gave huge dividend up to 500% in the final years of their lease period and the shareholders earned a good return on their investment. Those shareholders got an exit price of about Nu.532 per share when the company was formally closed down on expiry of the mining lease period.

This was seen a lucrative investment by the no risk takers later and all jumped into the business. Because most of us took it a risky business or may be with no idea in shares neglected the IPO and the company had to bring down the face value to attract the investors but only few with luck turned up to be successful later. Thus, declaration of huge dividend attracted more investors for new IPOs to be oversubscribed and the brokers had to limit to 500 or 1000 shares for individual. So, IPOs unlike in the past who could get more than 10,000 shares for an individual due to less investors are not so lucrative as new investors see it now. They are quite late but not too late as they have better opportunity in the secondary market.  

Secondary market is where the investors buy the shares from the other investors once the IPOs or new securities are sold in the primary market at the prevailing market price or the price agreed upon by both the sellers and buyers. The secondary market is regulated by Royal Securities Exchange of Bhutan (RSEB) and are facilitated for trade through the stock exchange brokers.  Bhutan National Bank Ltd. (BNBL), Bank of Bhutan (BoB) and Royal Insurance Corporation Ltd. (RICBL) are major stock brokers of the country. One can choose any of the above brokers depending upon your saving accounts in the respective banks for easy trading. I would recommend BNB if you have account as I feel comfortable and their service is reliable. The brokers keep 1% commission from each trading value which is reasonable and the transaction are completed within 2 to 3 working days.

In secondary market one doesn’t need to own a huge volume of shares and can fairly earn in trading if one keeps on tracking the trading trends of the companies. In fact, the earning is more in secondary market than in primary market through dividend now. The hefty return like in above classic scenario of 500% dividend was a history and may not repeat in Bhutanese stock market unless same promotor starts a new company in the same sector. Such high dividend gives higher return if one has large volume of shares but trading in secondary market with lesser volume and higher price always fetch good profit over a short period of time. For example, if one has 1500 shares and the company declares 65% dividend. The dividend amount would be Nu. 9,750 only. Now, if it is traded in the secondary market where one bought at Nu. 133.50 per share and sold at Nu. 154.40 per share after a week or a month as per market trading price. One gets a profit of Nu.20.9 per share and for 1500 shares, its Nu. 31,350 against the dividend amount of Nu. 9,750 only for same volume of shares in a year. Thus, it is the era of secondary market and not the safe saving in primary market in the hope of dividend. Buy small volume depending upon your affordability when market prices are less and sell when it goes up near the dividend declaration period.

It is good to have more volume of shares beyond 1000 for both dividend and secondary market trade price if one can afford. However, small volume can also be traded for significant amount of profit in short time and is worthwhile than playing a lottery. People always believed in the fact of its definition of legalized gambling and skeptical in investing in the stock market as it is still uncertain in the market price fluctuation. Nevertheless, one can still hold its face value amount even if the company failed to make profit and declare dividend for quite some time. Yes, it is obvious that many listed companies could not declare dividend since the pandemic and offered bonus shares to the shareholders while other offered right share issue. The bonus shares are directly allotted to the shareholders if company decides to issue in place of dividend while right shares issues are floated at the initial IPOs face value rate of Nu.10 per share. It is good to get the IPOs which are competitive market price than the higher secondary market price but as mentioned above one is limited to buy the large volume unlike in the past with only few investors. One has no limit in secondary market if you can get the ordered volumes from the sellers.   

The IPOs are normally off line through brokers in hard copy filled forms whereas the secondary shares are online through digital transaction which is popular these days. The secondary market trade also used to be off line in paper earlier but now people prefer business in their fingertips. The secondary market shares auctions also happen online in the RSEBL website with their fixed base price. For example, the RICBL and BNBL secondary shares last year was oversubscribed and had to refloat the shares for second time. This means people are slowly knowing the stock market but still participate less in the secondary market share trading. Majority of the people are still with the concept of dividend and long term investment rather than trading weekly or monthly for more profit.

To start the secondary market trading, one can simply choose the broker and open the CD account for trading. The brokers will help in filling the form and submit to RSEB for the credentials. They usually take 2 to 3 working days to create the CD account of the applicant and issue the user name and temporary password. They will mail the credentials and one need to change the password through the link in the mail. After the successful change of password from the link, one can login to the mCaMS app with that user name and new password. One can down load the above app from Play Store or App Store. The trading will be on the screen and in the fingertips. Its handy and reliable app. One can start trading right away if there are shares for trade. One can sell and buy in few press and the executed orders will be displayed in the app page. The transaction of the traded value will be completed in 2 to 3 working days or even earlier sometimes in the registered saving account.  One best feature of the app is, there will be already a loaded amount in your CD account for trading depending upon your trading trend or your requested amount. They will trade from the CD account and later on debit or credit from the registered account. One has to keep the sufficient amount for trading. This is the beauty of this app and has made it digital transaction more efficient.

However, the Bhutanese investors are yet to grow in the stock market and many lack awareness in the business. There are lots of unclaimed dividends and slowly shareholders are following up with their unclaimed dividends. The concerned companies and brokers claim that they could not deposit to the shareholders account due to non-availability of the shareholders account and address details.  Further, most new companies decline floating shares and they go for bond which people don’t prefer. The company might be fearing for dividend claim by shareholders and play safe in giving some fixed interest for the bond which may not be fair for the investors. Some SOEs companies were supposed to float IPOs as per the auction clauses but that didn’t happen which was another blow for the ready and new investors. The IPOs must be mandatory for all SOEs and Private owned new companies in future for the growth of Bhutanese Stock Market.