Financial analysts described as “fundamentally flawed” the assumption that the privatisation of the Bahamas Telecommunications Company or any other business will increase volume on the Bahamas International Securities Exchange.
They told The Guardian on Monday that to increase trading activity, one would need firms to commit capital to the process, as under the current structure there is absolutely no incentive to put money in trading for a living.
They were responding to Prime Minister Perry Christie’s Budget Communication in which he said that the further development of domestic capital markets will introduce more efficiency and competitiveness to the local financial system, and facilitate increased savings and investments by Bahamians in this economy.
Last Wednesday, the Prime Minister also stated that a marked decline in trading volume and the voluntary de-listing of a company has reduced the total number of publicly listed businesses to 16 on the Bahamas International Securities Exchange.
The volume of shares traded on BISX decreased by 23 per cent to 3.02 million in 2002, corresponding to a 38 per cent decline in the total value of shares traded to $14.6 million from $23.5 million in 2001.
Mr. Christie also noted that in view of general weakness in the economy, activity was diminished during 2002. Apart from the marked decline in trading volume on BISX, there was also a continued falloff in equity prices.
Because BISX has been encountering financial difficulties, the Government last December appointed a Select Committee, headed by the Governor of the Central Bank, to determine its viability.
The Prime Minister announced that the final report on BISX is expected soon.
“The privatization of Government corporations and the subsequent listing and trading of any shares widely held by the public can only serve to accelerate the pace of capital markets development in The Bahamas,” the Prime Minister said. “In particular, any increased volume of trading of local securities is likely to lead to more efficient valuations of such securities, thereby encouraging more Bahamians to invest in such instruments. These are issues which the Government and the regulatory authorities have under continuing consideration.”
Analysts said that what the country would get is another listing, which pays a fee of $10,000 or whatever the fee is today, and no increase in volume.
According to the analysts, there are more fundamental issues which need to be addressed before BISX can go forward. They are:
* The leader, and by leadership, the board;
* A business plan which is realistic and achievable;
* Government needs to list its bonds on BISX;
* Relaxation of exchange control;
There were about 18 companies on the exchange, with a capital of $1.4 billion.
The exchange is a 100-per-cent private-sector entity, which was launched at the beginning of 2000 with some $5 million of private capital funding.
Prior to October, 2002, the only public-sector financial support provided to BISX was a credit of $213,250, in December, 1998, by the Central Bank of The Bahamas to finance the development of computer software applications, and a Government grant of $72,500 the same year for the same purpose.
Meanwhile, the Fidelity Forum economic newsletter for April 2003 reported that BISX showed a modest loss for the first three months of the year of 2.6 per cent. Apart from J.S. Johnson, Finco and Bahamas Waste, all three stocks were in negative territory, with Abaco Markets, Doctors Hospital and Freeport Concrete (the poor performers for several quarters) posting quarterly losses of 10 per cent or more each. Commonwealth Bank too, posted a double-digit loss of 10.9 per cent for the quarter.
By Lindsay Thompson, The Nassau Guardian
