THE inactivity on Barbados’ stock market, along with the delisting of some companies, is inarguably a cause for concern.
And while several reasons have been advanced for these occurrences, there are few noticeable signs that the relevant authorities have been successful in encouraging companies togo public.
Last year’s November 1 BARBADOS BUSINESS AUTHORITY noted that the Barbados Stock Exchange (BSE) needed some kind of Government help or its listing board would shrink even further.
Chris Callender, a senior executive of Fortress Funds, the island’s largest mutual fund manager, suggested that the Jamaica example might be a good one to follow where that government had provided tax incentives for companies to list on the Jamaica Stock Exchange.
He said the recent listing of regional company Lasco was a positive result of the Jamaica initiative. His comments came against the backdrop of delistings by Barbados Dairy Industries Limited and GraceKennedy earlier.
Callender told BARBADOS BUSINESS AUTHORITY that even more institutional investors might shift from equities to corporate bonds as share values continue to decline.
He also said investors might be tempted to shift to other, more active markets like Jamaica or Trinidad and Tobago, though currency shifts in those markets could be a disincentive to local investors who don’t face that in Barbados.
“It really is a guessing game about who might go next. I am worried about the cross-listed companies Neal & Massy and Trinidad Cement Limited and how long they go before they decide to come off the exchange because there is very little activity and maybe take the same action as GraceKennedy, which delisted earlier this year,” Callender said.
Raised profile
Meanwhile, Dr Grenville Phillips, chairmanof the Barbados Stock Exchange and Barbados Central Securities Depository Inc., called on investment brokers to raise their profile bypublicly analysing and reporting on securities.
In the June 28, 2010 BARBADOS BUSINESS AUTHORITY, Phillips said this was one way to address the illiquid capital market.
“In terms of actively promoting the tradingof securities and so forth, we are reliant on the brokerage community. . . ,” he said, noting that Barbadians had a culture of buying securities with the intention of passing them on to future generations.
“The culture of actively trading securities is something that we have to continue to prod and develop. Unfortunately, if you sell, sometimes you may not be able to get anything to buy,” he said.
Therefore, Phillips said, brokers should not merely provide credible, honest service but also publish reports on which securities to buy, sell or hold on to.
He noted that when the Barbados Stock Exchange was established, it was suggested that the Central Bank of Barbados create and fund a company that would be a buyer of last resort.
“I think there is a need for us to revisit [this] to see how we can deepen that and add some market liquidity by some system whereby we can have buyers of last resort,” Phillips said.
Another suggestion came from Securities Commission chairman Sir Neville Nicholls in the June 21, 2010 BARBADOSBUSINESS AUTHORITY.
He said Government might have to offer tax incentives to investors to encourage trading, and to companies to list on the BSE andraise capital there.
“The individual national markets are really very small markets and, inevitably, what is emerging is the need for one regional market,” Sir Neville said.
“There is not yet a culture of investors buying and selling shares in an active manner similar to what obtains in developed markets, and so, more and more listed companies are going to questionthe need or desirability or the effectiveness of being listed if it is not impacting on the market valueof their shares,” he pointed out.
According to the attorney-at-law, established companies found borrowing from commercial banks easier than “going through the process and procedures required to raise capital on the stock market by issuing shares”.
What’s more, Sir Neville said it was not for regulators like the Securities Commissionto take a lead role in the establishmentof a regional stock exchange.
“The role of the regulators is to approve the arrangements that are agreed on by the various stock exchanges; Government has a supportive and facilitating role . . . but it is not something that the regulators can enforce. We cannot take a lead role. It is for the national stock exchanges to take the lead in this,” he contended.
As far back as 2007 BSE general manager Marlon Yarde disclosed that the BSE was actively pursuing the development of an over-the-counter market to facilitate small and medium enterprises (SMEs) in the capital market.
“An over-the-counter market is a market where brokers buy and sell shares of public companies that are not listed on the stock exchange,” he said.
Already, he added, the BSE board had conceded that there was a need for such a market and money was spent to get it established.
He explained the new market would act as the incubator to allow companies to meet the necessary regulations to become listed.
However, Yarde noted, the regulatory framework to govern the over-the-counter market still needed to be worked out.
