Royal Securities Exchange of Bhutan is planning to launch spot commodities trading by September 2016, according to Dorji Phuntsho, chief executive officer of the exchange. Only domestic agricultural products will be traded, among them potatoes, cardamom and cordyceps – a rare fungus valued for its medicinal properties.
Branching into this new area will improve the economics of the country’s agricultural production. “We want to do away with the middleman, we want the farmers to enjoy the ultimate benefit,” says Dorji Phuntsho. It also represents a growth opportunity for Bhutan’s securities exchange, which has seen the number of equity listings stagnate at 21 for several years, with low trading volumes.
Bhutan’s securities exchange, established in 1993, today trades domestic equities and debt instruments. At the end of 2014 the market capitalization of listed equities was BTN 22.5 billion (US$337 million), while the annual trading volume on the secondary market amounted to BTN 1.07 billion (US$16 million). With activity this low, the exchange opens for trading only three days a week.
Dorji Phuntsho attributes the low trading to Bhutanese investors’ buy-and-hold approach. “The listed companies are offering exorbitant amounts as dividend,” he says. Of the 21 companies listed, nine declared 2014 dividends exceeding 30% yield, with three surpassing 100%.
Bhutan does not permit foreign ownership of shares in public companies and foreign investment banks do no business in the country. While Bhutan’s economy is closely tied to that of India, via among others a de facto currency union, Bhutan’s securities exchange is insulated from the stock market turmoil that shook exchanges in Shanghai, London and New York. “In 2009 nothing happened, nothing is happening now,” says Dorji Phuntsho.
