Last week’s article was on to buying shares on the Port Moresby Stock Exchange (PomSox). This article sets out the basic steps people who hold shares and want to offload or sell their shares have to go through. The steps are basically the opposite to those of buying shares.
Here the basic steps to selling shares:
Step # 1: Contact your broker by phone or email and advise them that you want to sell shares. Confirm with them the number of shares you currently hold in the particular company whose shares you want to sell.
Step # 2: Place a “sell” order with stock broker. The order is either “at market” or “at limit”. Once again, a “at market” order tells the broker that the transaction is to be completed at or near the prevailing market price. For example, if the closing price on the last trading day was K1.20, that is the price the broker will attempt to sell at. Failing that, a “at market” sell order gives him the freedom to sell at K1.15 toea if he cannot attract any buyers at K1.20/share. If you say that your sell order is “at limit”, you will also need to state the exact price or price the range within which the broker will sell your shares.
Once again, your instructions to the broker must be very clear, and verbal orders must also be confirmed in writing (fax or email). Good brokers should repeat the order back to you to verify what you have asked them to do.
Step # 4: The sell order is then placed on the market through the electronic trading system. The matches your “sell” order with “buy” orders. A trade occurs when “sell” and “buy” orders are matched by the electronic system. Please note that the matching process takes place immediately as information is entered into the system, but that does not necessarily mean that a transaction takes place. Sometimes (and this is especially so in an illiquid market such as PomSox) orders will takes days, weeks and months to be completed, simply because there aren’t any “buy” orders in the system that match your “sell” order.
Step # 5: Once a transaction is successfully executed, the broker should send you a note specifying relevant particulars of the transaction, especially the number of shares he has sold on your behalf. The note should also show the broker’s charges associated with the transaction.
Payment of the shares sold and the brokerage charges are required to be settled within 3 days of transaction being completed. The broker should credit your account with the proceeds of the sale, minus his charges. He will then send you a cheque or deposit the money into your bank account and advise you accordingly.
Step # 6: Once settlement is made, the broker arranges with the company’s share registry for the shares to be registered in the buyer’s name and your name to be struck off the list of shareholders.
The steps to buying and selling shares are straight forward, but the secret to making money on the share market is timing. In other words, when to buy or sell is very important. Your reason or motive for wanting to buy or sell shares is also important. If you just want to feel the pride of owing shares, I guess timing isn’t important. You can buy shares in any company at any time and at any price. But if your objective is to make money, your entry and exit times are vital.
I have referred to the PomSox as being an illiquid share market. This means that the number or participants is very small, such that you cannot buy or sell shares as easily as when there are many buyers and sellers. If you look at the list of shareholders of the companies that are listed on PomSox (you can obtain the information from individual companies’ annual reports which are published on the PomSox website), you will realize that the bulk of shares are owned by corporate entities such as the super funds rather than individuals.
There may be many reasons for this, but I suspect that one reason is lack of information and understanding on the part of Papua New Guineans of how the share market works. Because people don’t understand, they don’t participate. I hope that this column will shed some light.
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