The total market value of shares in the country has increased from Nu 28B in mid June to Nu 31.29B today, up by over Nu 3B in a period of about two months.
Market capitalisation, which is the total worth of shares at prevailing market price, has touched record high. This also means that the stocks of 21 listed companies are worth Nu 31.29B, according to the figures from the Royal Securities Exchange of Bhutan.
This is attributed to improvement of share trading in the secondary market. Share market has two components including the primary market where the initial public offering (IPO) takes place and the secondary market where existing shares are traded. When the existing shares are traded in the market, the price at which the transaction takes place becomes the new market price of a share.
For the market capitalisation to increase, either the market price of shares has to go up or more shares should be issued.
However, there were no new IPOs floated from the previous year till date, meaning the volume of share did not increase significantly. Some of the listed companies have issued bonus shares and rights that contributed to trivial increase in volume.
According to the RSEB, share trading in the secondary market has increased by about 300 percent in the first five months this year compared with the same period in 2017.
Record show that as of May this year, shares worth Nu 125M was traded in the secondary market. Last five years data (as on May for each year) revealed that there is a huge improvement in transaction pattern in the secondary market.
This transaction in the secondary market has driven the market price of shares. For instance, the face value of Druk PNB share is Nu 10 per share but the current market price is Nu 31. In mid-June the company’s market price of shares was recorded at Nu 28. This is because of the trading in the secondary market. However, there are also instances when market price goes down. After the last trading day on August 15, BNB shares went down by Nu 9. The current market price stands at Nu 31.
According to the officials from RSEB, the improvement in the secondary market could be due to change in the trading process from continuous to call market, which discouraged the negotiated trade as practiced earlier.
The stock exchange developed an online platform last year, wherein the buyers of shares can place order with a preferred price and sellers can quote the price. The whole process is visible in the RSEB website at a real time and such transaction leads to discovering new market price of shares of individual companies.
As of August 15, the live market revealed that there was a demand of 627,298 shares of the listed companies, which meant a buying order had been placed. However, the supply or sellers put only 284,895 shares for sale. Transaction could not take place because the price quoted by the buyers and sellers did not match.