Never in history has the Bhutanese stock market received so much attention as it has now, thanks to the recent auction of BNB and RICB shares held by the HM’s Secretariat which prompted even villagers from the remotest regions of the country, to chime in to contribute to the HM’s fund.
One could hear people outright justify their purchase of the shares by praising the noble cause of His Majesty and how they are hoping to be part of it. It is indeed heartwarming to witness people from all walks of life, from gelongs to shopkeepers, from teachers to villagers, and from corporations to housewives, chip in to buy the shares that are up for grabs. However, as noble a cause as it is, people buying them should think twice about what it means to put money in it and what opportunities and risks live inherent within.
BNB and RICB are integral part of the financial landscape in Bhutan. The former is strictly in the banking business whereas the latter partakes in both insurance and lending business. It should be interesting to note that BNB was born out of RICB in the form of unit trust which later on became the first commercial banking entity in the country. RICB was established in 1975 whereas BNB started off in 1997.
Pros and Cons of buying shares in Bhutan.
Pros.
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You’ll get a dividend if the company declares it.
For example, if you have 100 shares of BNB and it declares a dividend rate of 10%, you would get 10% of the face value of your shares. Most Bhutanese shares have a face value of Nu. 10 which means that the face value of all shares would be 100X10 = 1,000.
Therefore the dividend you would be eligible for would be 10% X 1000 = 100.
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Sometimes companies tend to give any amount of bonus shares, which increases shares in your portfolio.
If they give you shares in the ratio 1:2 which means that you would get 2 shares of every 1 of your shares, your 100 shares will become (100+(2*100))=300 shares. Although, such high bonus shares seem implausible these days, companies like BNB have given it to their shareholders in the past.
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Right shares are also floated to the existing shareholders at a discounted rate which can be bought to reap future benefits. Right shares give existing shareholders rights but not the obligation to buy shares at a discounted rates.
Cons.
If you don’t time your purchase properly, especially in the Bhutanese context, you might not be able to make short-term gains. However, long-term benefits in the Bhutanese stocks are almost always guaranteed.
I have over the past few years noticed that share prices usually go up as AGMs (Annual General Meetings) of respective companies near and dip during other times of the year. For instance, the share price of DFAL which was as low as Nu. 59 just a few months ago has increased to Nu. 90 today, which I attribute to the renewed interest of people in stocks and the anticipation of an upcoming profit declaration. The sudden gain of ((90-59)/59*100)=52.5 % is quite substantial.
However, if you don’t time it properly, short-term gains might go down the drain.
