Taking Stock

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Barbados is looking to strengthen its capital markets, encouraging more firms to list on the stock exchange, pushing for greater regional co-operation and greater participation by locals in the market.

The main focal point for the country's capital markets is the Barbados Stock Exchange (BSE), known until 2001 as the Securities Exchange of Barbados. Though well structured and regulated, the exchange is small by regional standards, with only half the listings of the Jamaica exchange.

There are currently less than 30 companies listed on the BSE, including 22 local firms trading and a further six cross-listed. Tellingly, no new company has listed on the BSE since late 2005 and only seven firms have listed since the turn of the century, while at least three have de-listed during that time and another two are expected to remove their names from the trading board as they are the subject of takeover bids.

Like other exchanges across the world, the BSE has been affected by the global financial crisis. As of February 19, the total capitalisation on the BSE was $6.76bn, well down on the $9.4bn of a year before.

In an address to a seminar on strengthening institutional development in regional capital markets, held in Jamaica in late January, BSE General Manager Marlon Yarde, said the Barbados exchange and those across the Caribbean had to attract new types of products and market activities in order to expand.

Among the products that should be considered, Yarde said, were derivatives, the commodities market and the foreign exchange market. He added that more needed to be done to boost the numbers of companies listed on the exchanges.

The BSE is moving in this direction. In the middle of last year, the exchange announced it would launch a new trading platform, unveiling plans for an over-the- counter (OTC) market that would allow companies not listed or traded on the official BSE board to trade their securities.

The plan, which was to come into effect by the end of 2008, has yet to be implemented, but BSE officials hope the measure will encourage firms to eventually list on the exchange.

According to Terry Williams, the BSE's operations supervisor of business development, the OTC market would meet the needs of some companies which might not be willing to go to the extent of listing. It would "open the sphere to a lot of companies that under normal circumstances would not be of the size requirement to be listed on the stock market", he told the local press in June.

Barbados has also long been an advocate of promoting closer ties between the capital markets of the region, going as far as backing proposals for a Caribbean stock exchange. The latest push for greater integration came from Senator Maxine McClean, Barbados's minister of foreign affairs and a former director of the BSE.

Speaking at the regional capital markets conference in Jamaica on January 27, she said the government of Barbados stood firmly behind the initiative to develop a regional capital market and would support the process of reforming investment policies at the national and regional levels to increase capital market activity.

"Furthermore, the development of a properly functioning regional stock exchange will improve the marketability of securities, facilitate the achievement of greater liquidity, more realistic valuation of company securities, market efficiency, and the diversification of risks," McClean said.

Another way the BSE hopes to increase trading activity is by developing an environment of confidence and trust in the activities of the capital markets to encourage Barbadians to invest in financial instruments.

"We need to educate the masses of our citizens about what exactly it is we do and why we are important and necessary to them," Yarde said. Along the same lines, McClean said, "We need to educate the public about the benefits of investing and most importantly the difference between saving and investing."

With the global economy in a recession, and liquidity tight around the world, it might be hard to convince Barbadians of the merits of buying into the local stock market or for companies to consider listing on the exchange at the present time. But that might change if the BSE gets its OTC market up and running.

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