Bogotá — Colombia’s stock exchange (BCV) is in the doldrums, with fewer and fewer issuers playing a leading role, trading volumes continue to fall, and the government has failed to implement the changes needed to give the BCV a new lease of life.
Four years ago, the BCV traded an average of 160 billion pesos ($32.5 billion) per day on the equities market, and currently, trading totals around 40 billion pesos ($8.13 billion) daily.
One of the major concerns is that the Colombian market could be considered to be a so-called ‘frontier’ market, which is what happened a few years ago with the Peruvian stock market, which came to be classified as a frontier market because the volumes traded daily were very small, making it unattractive to large foreign investors.
A frontier market is a type of developing country that is more advanced than less developed countries, but still too small to be considered an emerging market. It could be said that all countries that are not included in the MSCI All Country World Index are considered, at least from the point of view of developed market institutional investors, frontier countries.
If trading volumes continue to decline, and if the BCV continues to lose participation in the MSCI indices, Colombia runs the risk of being considered a frontier market, along with countries such as Argentina, Jamaica, Bulgaria, Kenya, Lebanon and Sir Lanka, among others.
A flight of issuers
It has been more than a decade since the last primary equity issuance on the Colombian stock exchangem, and which was by airline Avianca in 2011.
But in addition to the difficulties in attracting new issuers of shares, those that were already listed have cancelled their registration in the National Registry of Securities and Issuers. In fact, in the last 25 years more than 100 issuers have left the local stock exchange.
This year alone, Coomeva EPS, Productos Familia and Fondo Ganadero del Tolima delisted. In addition, the delisting of Valores Industriales and Cemex Latam Holdings shares has already been approved.
In 2021, Avianca Holdings delisted after Chapter 11 bankruptcy proceedings, and a year before, in the middle of the pandemic, Gas Natural and Tecnoglass delisted, while prior to that, Biomax delisted in 2019, and Valorem and Odinsa in 2018.
Other issuers that have delisted include Tejicondor (in 2022), Colpatria and Bavaria (in 2007), Cine Colombia (in 2008), Carulla (in 2010), Telefónica (in 2012), Interbolsa (in 2013), Helm Bank and Petrominerales (both in 2014), and Pacific Rubiales in 2016 and Isagén in 2017.
A dry market
In addition to the already low liquidity of the Colombian market, the recent takeover bids launched by the Gilinski family for two GEA companies also took the shine off the local market, as the takeover bids further reduced the list of leading issuers. Grupo Sura and Grupo Nutresa became stocks of very low liquidity in which small amounts traded produce price variations of up to two digits.
According to the classification by the Financial Superintendency of Colombia, the country’s financial regulatory body, there are only seven shares of high liquidity on the Colombian market: Ecopetrol, Bancolombia Preference and Ordinary, ISA, Grupo Aval Preference, Celsia and Grupo Argos Ordinary.
There are 24 others that are of ‘medium marketability’, seven of low marketability, nine of minimum marketability, and 28 others that are never traded on the Colombian market.