Stock market peeping out for greater trading

December 29, 2009: The possibly-smallest stock market in the world is likely to get out of box in near future as government starts mulling for allowing private brokerage firms to operate.

The small stock market

The only stock exchange of the country, Royal Securities Exchange of Bhutan Ltd. (RSEBL), established in 1993 still operates in dormant with four computers in a room in Thimphu. Further more, it operates only two days a week – Tuesdays and Fridays.

For activating the sleeping stock market, the Royal Monetary Authority (RMA), the central bank of the country, has drafted financial services bill, likely to be tabled in the next session of the parliament for debate.

The bill allows any individual or private firms to set up brokerage firms for trading shares of the listed companies in the secondary market.

The four computers in the room belong to each of the four brokerage firms of the four financial institutions – BNB securities limited, BOB securities limited, RICB securities limited and Drook securities limited.

Only 1 percent brokerage commission on every transaction means people give less attention to this profession. Today, the brokers rarely earn a month’s salary in annual transactions.

However, since the Exchange Board are the CEOs of the financial institutions who operate brokerage firms at the stock market, which may invite conflict of interest unless the market is restructured.

Besides inviting private brokers into the market, there is necessity for the government and the RMA to train people about market operation method and raise awareness on importance of share trading.

Very few sellers get limited buyers. Buyers and sellers rarely get in contact. This year, of the 20 listed companies with the stock exchange, the shares of only six companies were traded. Many large corporations, owned by the government have entered into the share market compelling the secondary market to remain as small as it was during its launch.

According to Sanjeev Metha, Economics professor at the Royal Thimphu College, the restrictions imposed on the capital account movement have placed a ceiling on the magnitude of the market capitalization.