Why did a mutual fund sell Forward Microfinance for Rs 1,051 only when they know the scrip is valued much higher?
Mon, May 22, 2017 3:11 PM on Latest, Featured, Stock Market,
Trading of Forward Community Microfinance Bittiya Sanstha Limited (FOWAD) started from yesterday. On the first ever transaction of the FOWAD stock, 100 units shares was sold by Broker No.47 and bought by Broker No.16 for a price of Rs 1,051 per share.
What’s interesting about this first transaction is that the share was possibly sold by a mutual fund. A maximum of 26 units was allotted to the general public and stocks allocated to staffs have a lock-in period. However, mutual funds were allocated 30,000 units shares. As there are 10 mutual fund schemes, each was allocated 3,000 units shares of FOWAD. This makes it clear that it was a mutual fund that sold 100 units. Details of which mutual fund sold the share can probably be seen next month in the mutual funds’ monthly NAV report of Jestha 2074.
FOWAD, along with new microfinance companies listed in NEPSE, is in very high demand. Mero Microfinance Bittiya Sanstha Limited (MERO), that commenced trading one year ago, cannot be purchased easily since the demand is so high and it rarely gets sellers. Similar is the situation with National Microfinance Bittiya Sanstha (NMFBS) and RSDC Laghubitta Bittiya Sanstha Limited (RSDC). MERO’s stock price has reached Rs 2,805 per share and shows no symptom of stopping anytime soon.
[caption id="attachment_97981" align="aligncenter" width="800"]
Marketdepth of Forward Community shows no sellers. On the other hand, buyers are willing to pay more than the last traded price[/caption]
Mutual fund managers clearly know the effect of supply and demand in the stock market. So, why did they choose to sell the FOWAD shares in such a low price? Did the fund managers, appointed to maximize public fund, sell the shares for personal gain? It’s time regulatory authorities investigate the continued exploitation in the stock market and mutual fund managers come with appropriate explanation. If such exploits are not brought under regulation, the authorities can rest assured that they will lose public trust completely.
[Update: As confirmed by Primo Securities (Broker No. 16), this transaction was carried out by the broker's Birgunj branch. The order was mistakenly entered as "sell" order whereas the client wanted to buy 100 units of FOWAD. The transaction was eventually marked as "close-out" since the seller did not have 100 shares of Forward Microfinance to sell, and the seller broker (Broker No.16) settled the transaction by paying fine amounting to 20% of the transaction value.]
Marketdepth of Forward Community shows no sellers. On the other hand, buyers are willing to pay more than the last traded price[/caption]
Mutual fund managers clearly know the effect of supply and demand in the stock market. So, why did they choose to sell the FOWAD shares in such a low price? Did the fund managers, appointed to maximize public fund, sell the shares for personal gain? It’s time regulatory authorities investigate the continued exploitation in the stock market and mutual fund managers come with appropriate explanation. If such exploits are not brought under regulation, the authorities can rest assured that they will lose public trust completely.
[Update: As confirmed by Primo Securities (Broker No. 16), this transaction was carried out by the broker's Birgunj branch. The order was mistakenly entered as "sell" order whereas the client wanted to buy 100 units of FOWAD. The transaction was eventually marked as "close-out" since the seller did not have 100 shares of Forward Microfinance to sell, and the seller broker (Broker No.16) settled the transaction by paying fine amounting to 20% of the transaction value.]
