Bhutan’s Fledgling Bourse

Via Reuters, an interesting look at Bhutan’s stock exchange, where stocks are traded on just four computers — when they have not crashed — only twice a week.  As the article notes:

“…I’ve got one order to sell 2,820 shares,” said 23-year-old Deki Peldon, the only broker for today’s short trading hours in Thimphu, the capital of the tiny Himalayan kingdom.

“It’s taken 2 to 3 weeks to find a buyer.”

Welcome to the Royal Bhutan stock exchange, where just four brokers work and which will trade about $3 million shares this year, about what many financiers may deal with in the blink of an eye. The average daily trade in New York is more than 1 billion.

In a Buddhist country where national wealth is measured by Gross National Happiness — an idea that spiritual and environmental health are just as important as material well-being — the exchange is crawling slowly along as the country and its $1.3 billion economy tentatively embraces globalization.

The outside world is coming to Bhutan, slowly. Television arrived here in 1999 and there are now around 10,000 Internet connections in a country of under 700,000 people.

Bhutan still has no traffic lights since the first one was withdrawn after protests from residents that it was unsightly.

In the stock exchange’s bare trading floor, computers sit on sparse wooden desks. There are no TVs on the walls, no shouts into telephones, no empty coffee cups or discarded paper.

Peldon, dressed in traditional Bhutanese dress, typed in her one trade for the day before an 11 am deadline, when buy and sell orders are matched up by computer software that has not been updated since 1993.

Total market capitalization in 2008 was around $171 million, with 19 listed companies that include cement firms, banks and a newspaper. That compares with the capitalization of nearly $67 billion for Mcdonalds.

There is no stock index, but compilers of company listings say prices will often not change for three months.

Still, trade is on an upward curve, sort of.

“The concept of what is a market is poor in Bhutan,” said stock exchange chief executive office Tashi Yezer, dressed in a gho, a traditional knee-length robe. “But it’s picking up.”

“Twenty years ago people put money under their pillows,” said Yezer. The fact there was no hard currency until 35 years ago probably helped. “Now we get civil servants, even some farmers.”

People do invest, but hardly sell. Here investors buy to reap good returns on share dividends in a country where the only other investment opportunities are bank deposits.

The slow pace does have an advantage. During this year of financial turmoil prices of most shares have hardly moved, helped by the fact that foreign investors are not allowed to trade.

“We should feel proud we have not followed the West,” said Yezer. “If we had had foreign investors here I don’t know what would have happened.”

But Yezer may represent the older generation. Peldon, who says she watches televised market reports from Asia with amazement, reflects a new generation that is far more globalized and ambitious. Nearly a third of Bhutan’s people are under the age of 14.

“I would like to work abroad, in Hong Kong” said Peldon. “I hear there is a lot going on there. It’s too quiet here. We need more exposure so that our country develops faster,” she said.

But Bhutan’s authorities are taking a cautious approach.

There is talk of allowing online trading. There are also talks of more IPOs in Bhutan’s state companies. Courses in how stock exchanges work are now offered at high school.

But the question does remain how Bhutan can fit any expansion of stock trading into their deeply held concept of Gross National Happiness, or as it is known here, GNH.

Yezer had the answer: isolation from global markets means little price movements. People just collect their dividends, content with the return while companies just raise capital, the original idea of stock exchanges, he said.

“If people make money, that makes them happy. If they lose, it makes them sad.”

This entry was posted on Friday, December 18th, 2009 at 10:17 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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