Capital Markets
From The Report: Colombia 2017
View in Online Reader

Developments in Colombia’s capital markets in recent years reflect those in the wider economy. The well-established sovereign fixed-income market has seen increased issuance as the government seeks to finance its widening budget deficit while rolling over its existing stock of debt. Increased global economic uncertainty, with bouts of extreme market volatility that particularly impact emerging markets, would suggest that the immediate future for the development of the Colombian derivatives market is bright. While traded volumes are likely to continue to ebb and flow, the overarching trend is likely to continue upwards as the country’s capital markets become increasingly sophisticated and a wider range of derivative products are available. This chapter includes an interview with Juan Pablo Córdoba, President, Colombian Stock Exchange.

Articles from this Chapter

Overview

Up and coming: The sector is performing well despite recent challenges
OBG
plus

Developments in Colombia’s capital markets in recent years reflect those in the wider economy. The well-established sovereign fixed-income market has seen increased issuance as the government seeks to finance its widening budget deficit while rolling over its existing stock of debt. Albeit much smaller in scale, corporate debt issuance also picked up in 2016, amid an inflationary and monetary-tightening environment that has slowed bank lending to firms, but it remains some way off its 2010…

Analysis

Hedging risk: The bourse is working to diversify the derivatives market
OBG
plus

Derivatives are financial instruments that are derived from an underlying asset, such as a stock, an exchange index, bonds, currency, interest rates and raw materials, among other things. There are two categories of derivatives: standardised, which are traded through a stock exchange such as the Colombia Stock Exchange (Bolsa de Valores de Colombia, BVC); and non-standardised, which are tailor-made products traded outside a formal exchange on an over-the-counter (OTC) basis. As well as developing…

Interview

Making it worthwhile: Juan Pablo Córdoba, President, Colombian Stock Exchange (Bolsa de Valores de Colombia, BVC), on new institutional investors and funding for infrastructure
OBG
plus

Interview:Juan Pablo Córdoba As local companies diversify their sources of funding, how can capital markets be better utilised? JUAN PABLO CÓRDOBA: The investment focus in Colombia is shifting from extractive industries to the manufacturing and agricultural sectors. As a result, we need to channel resources into those sectors, and provide positive conditions for local businesses to grow and expand. The country’s capital markets can play a role in providing financing opportunities for…

Analysis

Trading up: Equity market
OBG
plus

The Colombian Stock Exchange (Bolsa de Valores de Colombia, BVC) was created in 2001 by merging the three independent stock exchanges that had been operating simultaneously since 1983. Market capitalisation increased consistently after its creation – helped by several state-owned companies going public – before reaching an all-time high of 70.9% of GDP in 2012; the steep drop in oil prices explains part of its recent decline. According to the World Bank, Colombia’s market capitalisation of 29.4% of GDP in 2015 was among the strongest in the region, but below the 42.8% average of Brazil, Chile, Mexico and Peru. Market capitalisation…

Analysis

Backing business: Corporate bonds
OBG
plus

Colombia’s corporate bond segment is an important component of the country’s capital market, despite its relatively small size and liquidity. The total amount outstanding at the end of 2016 was COP48.1tn ($14.4bn), or an estimated 5.5% of GDP. All corporate bond trading is registered on the Colombian Stock Exchange (Bolsa de Valores de Colombia, BVC). The average monthly traded volume in 2016 was COP16.4trn ($4.9bn), which is about 14.2% of the total traded volume of local public debt. However, it is worth noting that the country’s public debt market is among the largest and most liquid of its kind in the region (see dedicated share…

Analysis

Converting currencies: Foreign exchange
OBG
plus

Colombia has a floating exchange regime, which allows the currency to work as a shock absorber under local and global economic events. Transactions in the foreign exchange market are done through the Exchange Market Intermediaries (Intermediarios del Mercado Cambiario, IMC) and are registered in the SET-FX electronic trading platform. The Colombian peso spot can be traded same day on weekdays from 8.00am to 1.00pm, as well as T+1, T+2 and T+3 until 4.30pm. The official fixing rate, the Tasa Representativa del Mercado (TRM), is calculated as the average of all transactions that passed through the SET-FX on the prior day and is published…

Analysis

Government offers: Public debt
OBG
plus

The Colombian government debt segment is the largest in the country in terms of traded volume, and one of the largest and most liquid of its kind in Latin America – with a total amount outstanding of COP230trn ($69bn), or 26.3% of GDP, and an average monthly traded volume of COP100trn ($30bn) in 2016. Colombian government bonds, widely known as TES, are issued by the Ministry of Finance to finance the budget deficit; however, the ministry also issues short-term bonds in coordination with the central bank for liquidity management purposes. Background There are two types of TES bonds: fixed-rate, which held a 69% share of outstanding…