The bonus/rights share effect
The short term investors/traders could celebrate higher bonus/rights shares from a company as for them it may give good capital gain in a bonus/rights share crazy market environment. But for long term investors the same may not be true. Added capital demands growth for absorption of such fund to provide better return for the investors. However, our companies, particularly the BFIs are facing situation of excess liquidity/limited growth prospect.
For sustainable growth, the BFIs, which form the largest percentage in weight in NEPSE, need financially viable projects, competent human resource, business friendly environment, where there is political stability and economic growth and technological/technical/managerial capacity. This is possible gradually. Hence, in banking sector higher percentage of bonus/rights shares may not be something an issue to rejoice and celebrate for the long term investors.
The excess money was a major problem in the banking system last year.
This year also it has been continuing. How the BFIs will use the
additional money generated as bonus/rights shares will make a big
difference in regard to the return in coming years.
Therefore, friends, who are long term investors should consider more fundamental factors before investment rather than limiting to percentage of bonus/rights shares the companies are declaring. But for short term investors who invest for less than a year in a company or for the traders the percentage of bonus/rights shares could be a good motivation still.
Therefore, friends, who are long term investors should consider more fundamental factors before investment rather than limiting to percentage of bonus/rights shares the companies are declaring. But for short term investors who invest for less than a year in a company or for the traders the percentage of bonus/rights shares could be a good motivation still.
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