jueves, 22 de septiembre de 2011

Andean Market Struggles to Lift Stock Trading Dwarfed by Brazi


Trading in a market created to combine stocks from Colombia, Chile and Peru is languishing as transactions in the first four months totaled $2.9 million, or the equivalent of about 20 seconds of average volume in Brazil.

Juan Pablo Cordoba, president of Bolsa de Valores de Colombia, said he aims to fix that.

“The biggest challenge moving forward is how to get volumes to pick up,” Cordoba, who passed up a post in President Juan Manuel Santos’s cabinet to help spearhead the project, said in a Sept. 14 interview in Bogota. “The baby was born but needs to be nurtured.”


Cordoba said 23 cross-border accords between brokerages in the Andean nations are a sign that trading in Mila, as Latin America’s first combined trading platform is known, will gain momentum. In May he said the new exchange would act as an “alternative” to investing in Brazil, home to Latin America’s largest equity market where daily trading averages $4 billion, according to data compiled by Bloomberg.


The Mila platform has generated 183 transactions totaling $2.9 million since its May 30 start through Sept. 16, according to data compiled by the Santiago exchange.

Chilean, Colombian and Peruvian stocks have a combined value of $578 billion, surpassing Mexico’s $387 billion, according to data compiled by Bloomberg. Brazil’s BM&F Bovespa has a market value of $1.2 trillion.


Average daily traded volume in the past three months was $193 million in Chile, $83 million in Colombia and $25 million in Peru, Bloomberg data show. That compares with $723 million in Mexico.


Growth Slows


Mila executives aim to tap into some of the fastest growth rates in the region to spur demand for equities. The economies of Chile, Peru and Colombia will expand 6.5 percent, 6.2 percent and 4.9 percent, respectively, this year driven by commodity exports and surging domestic consumption, according to a Sept. 20 report by the International Monetary Fund. Growth is poised to slow to 4.7 percent, 5.6 percent and 4.5 percent next year, respectively, the IMF said.


Exchange officials aim to convert Mila into a single trading platform in the coming years from its current form as an order-routing system that enables investors in one country to trade stocks in the others through their local brokers.


Colombia’s benchmark index, the IGBC, is beating its Mila peers this year, having fallen 12 percent after a 34 percent surge in 2010. Peru’s IGBVL has declined 15 percent this year while Chile’s IPSA has slumped 18 percent as the global economic slowdown crimps demand for emerging-market assets. Brazil’s Bovespa is down 19 percent and Mexico’s main index 12 percent.


Share Offerings


Companies probably will begin tailoring share offerings to the Andean region this year, Cordoba said. Pension funds and brokerages in each of the countries have begun designing products tailored for cross-border investing and Standard & Poor’s began its Mila 40 Index last month.


Trading on the Mila platform may have been damped by global market turmoil and as the election of Ollanta Humala as Peru’s president triggered concern the one-time ally of Venezuelan President Hugo Chavez would boost state control of the economy, said Rupert Stebbings, Colombia country manager for Celfin Capital SA. Peru’s benchmark stock index plunged 12 percent the day after Humala won in a June 5 runoff vote.


Bolsa de Valores de Colombia, the operator of the Bogota exchange known as BVC, fell 1.6 percent on June 9 after then economic adviser Kurt Burneo said Humala might renegotiate parts of the Mila arrangement if benefits weren’t fairly shared.


“When there’s a lack of confidence, people tend to invest in what’s close to home,” Stebbings said.


Shelved Plans


BVC shareholders postponed June 16 a vote on a proposed corporate merger with the Lima bourse and the two exchanges shelved the plan last month, saying they would focus instead on strengthening Mila.


“It was a joint decision, to be politically correct,” Cordoba said.


Mila trading may pick up should Humala prove over time to favor capital market growth, Stebbings said.


Resolving regulatory issues, such as restrictions on Chilean pension funds’ foreign holdings and differences in tax treatment, can help deepen integration, Manuel Bulnes, the head of Larrain Vial SA’s brokerage unit, said at the Bloomberg Chile Economic Summit in Santiago last month.


It takes time for investors to warm to new products, as was the case with Novo Mercado, a listing segment of BM&F Bovespa for companies that issue only voting shares, said Guillermo Larrain, former Chile chief securities regulator. Novo Mercado, which now has 122 listings and accounted for 10 of the 11 initial public offerings in Brazil this year, garnered little interest in its first two years of operation, Larrain said at the same summit.


Cross-Border Deals


Beyond Mila, Andean region integration is reflected in cross-border expansions of financial-services firms including Larrain Vial and Celfin Capital and companies such as Grupo de Inversiones Suramericana SA, Lan Airlines SA, Colombia’s Interconexion Electrica SA and Peru’s Grana y Montero SA.


ING Groep NV created a mutual fund that invests in the three countries and Global X Funds started a regional exchange- traded fund. The increase in regional investments by companies has triggered cross-border capital raising. A unit of Chilean retailer SACI Falabella sold bonds in Colombia this month while Banco de Credito del Peru tapped Chile’s debt market in 2009.


ING agreed in July to sell most of its Latin American insurance operations to Suramericana, the parent company of Colombia’s largest bank, for about 2.7 billion euros ($3.9 billion). Suramericana, which plans to offer shares worth as much as $2.1 billion in October, may lead the way in tailoring share sales to investors across the Andean region, Cordoba said.


“You can’t increase volumes out of thin air between the three countries,” Stebbings said. “Where Mila has been a winner is at a more corporate level. Companies realize there are huge funds in Latin America and they don’t have to go to London or New York.”

Business Week

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