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Secondary trading doubled in 2012

Stock Market : Stock trading in the secondary market almost doubled in 2012, compared to the previous year, but there are differing views on what contributed to heightened activity.

Secondary trading increased to Nu 219M from Nu 132M in 2011, according to the Royal Securities Exchange Board.  In the past years, the increase in trading was not more than Nu 15M in terms of value.

Some attribute this huge increase to the liquidity crunch, while others said there was no connection between the two situations.

An official from a private bank said, due to the unavailability of loans, it was logical to argue that people let go off some of their shareholdings when they needed cash.

But chief executive officer of the exchange board, Dorji Phuntsho, said the liquidity crunch would not have contributed to the increased transaction.

“Trading at an individual level had never crossed Nu 15M, and businessmen need more money than that,” he said. “The only reason for increased trading is the increased supply of shares in the market, and trading automatically increases as shareholders, who receive bonus shares, can afford to sell of some of their stock.”

A shareholder of the Bhutan national bank said, since the liquidity crunch made money unavailable from banks, people who received bonus shares sold their shares for cash.

Most of these people required money to either complete their projects or service their loans.

BNB did not declare dividends last year, as it did not fulfill several requirements because of a shortage of cash, and instead issued bonus stock to shareholders.  Shareholders were therefore more at ease to sell off their shares, as their holdings had increased.

Buying and selling also increased, because people needed to meet loan repayment obligations, as demanded by the banks lest they are categorised as less credit worthy, a shareholder with a bank said.

In 2012, bonus and rights offers amounted to Nu 1.6B.

The Bhutan Insurance ltd, BNB, the Druk PNB and the State Trading corporation gave bonus shares and made rights offers.

The most actively traded shares were those of the BNB, after it issued bonus shares, as well as floated a rights offer.

Out of the total Nu 219M traded shares, BNB’s contribution amounted to Nu 181M.  Next is the Royal Insurance Corporation of Bhutan limited (RICBL) with Nu 2.7M.   RICBL did not float a rights offer or issued bonus shares.

By Nidup Gyeltshen

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