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Caribbean Management Talk

The Promise of Transition

Author: Staff
Last Update: Jan 16, 11:36 AM ET

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Marlon Yarde
In just over 20 years Barbados has set the foundations of securities trading as the Eastern Caribbean nation has witnessed a major shift in its economy from the export of sugar to tourism.
Barbados Stock Exchange
Q: What is the history of the Barbados exchange and what was the original mission of the exchange?

The stock exchange was originally called the Securities Exchange of Barbados. It was first established in 1986 but we started trading in 1987 with 10 listed companies. The Securities Exchange of Barbados was both the regulator for the capital markets in Barbados and the facilitator of trading equities on our board. In 2001, the enactment of the Securities Act 2001-13 marked the establishment of the Securities Commission. We reincorporated in 2001 and became known as the Barbados Stock Exchange with only trading responsibilities while the Securities Commission had responsibility for regulating the entire capital market.

The BSE is an association of member brokers so we are a mutual company at this time, but we are investigating and working towards demutualizing the stock exchange. We currently have 24 companies listed on our board and we have a market capitalization of approximately US$8 billion.

Q: Can you also explain to us where the Barbados economy is today, how has it changed in the last five years, and what could change again in the next five years?

We have been an independent nation since 1966 and have a democratically elected parliamentary system. Previously, we were under the U.K. rule and our economy was mainly a sugar crop based one. Since independence and especially in the last 15 years we have moved away from agriculture based economy to tourism based. Agriculture is still done on the island but it is not as strong as it was in earlier years. Our gross domestic product is approximately US$27 billion and the country’s per capita income is currently at US$9,800.

Recently Government has placed increased emphasis on the development of the international business sector. Among the initiatives they have implemented include signing double taxation treaties with several countries around the world, primarily the U.S., Canada, the U.K., as well as some South American and European countries. This has led to many International Business Corporations (known as IBCs) being established here. As a result this segment of the economy is taking on an increasing importance.

Q: What is the population and investor base of Barbados? What does the exchange do to educate investors?

The population has been stable at approximately 270,000 to 280,000 people with a workforce of about 109,000 people. The country’s size is 166 square miles so it has relatively dense population. Like many of the developed countries, our population tend to be an aging one.

The active investor base is about 30,000 people. A few years ago, we had one of our major financial institutions, an insurance company, demutualizing. This created a whole group of investors in our marketplace. There are still a lot of people who are not part of the investing culture. In our market, many people tend to put their money in savings accounts in the commercial bank and real estate. What we at the stock exchange are trying to do is to create a class of equity investors and we are doing that through education. We are going out there and continually educating people about the stock exchange, about investing as a whole. To assist in this goal we hold panel discussions at least once quarterly as well as creating educational brochures and booklets for distribution to the public.

Our vision is to be a great and lasting Caribbean institution by facilitating wealth creation through trading on an efficient and cost effective exchange. We intend to do this through education. As a consequence we hope to foster an environment of confidence and trust in the trading of financial instruments.

Q: What initiatives does the exchange have to broaden its footprint in the region?

Our primary initiative to achieve this goal is the establishment of the Caribbean Exchange Network (CXN). It involves the linking of the Barbados, Jamaica and Trinidad & Tobago exchanges enabling brokers in each of these territories to trade through their exchange on the other participating exchanges in the region. The whole idea is to improve market liquidity and price discovery in the region. To this end, we have developed a body of rules, decided on a settlement bank for the region and have submitted the documentation to our regulators for approval. While our regulator here in Barbados responded, we are waiting for a response from the other two regulators. Once they have made their comments, we will make the various changes or amendments to our rules and agreements and resubmit them to the regulators for approval. This is something that we have been working on for some time and we are eager to get it going.

Q: How many of the 24 securities trade every day?

Not all of them trade every day. The markets are not as liquid as we would want them to be, but we are seeing some improvements in this area. This is why our educational program is so critical to get out there and let people know about the benefits of trading on our Exchange. You will find that they would all trade within a quarter, but you would not find that all of them trade every day.

Q: What industry groups are these 24 listed companies in and what is the range of market cap of these companies?

We have companies from a cross-section of the economy stretching from areas from agriculture, banking and finance, manufacturing to conglomerates to name a few. The primary areas tend to be in the financial sector, which includes banks and insurance companies; manufacturing and conglomerates. The company with the largest market capitalization would be FirstCaribbean International Bank. They have about 1.5 billion shares outstanding and their market cap is about US$3.1 billion.

FirstCaribbean was created by a merger between Barclays Bank out of the U.K. and Canadian Imperial Bank out of Canada. The major shareholder in that company is now CIBC because Barclays sold their portion of that bank late in 2006. The two next largest companies by market capitalization are Sagicor Financial Corporation with a market cap of US$800 million and Cable & Wireless (Barbados) Limited with a market cap of US$309 million.

There is one hotel, Almond Resorts, Inc., listed on the board of the exchange. There is not a predominance of tourism-based companies on our board despite the fact that tourism is the leading sector in our economy however you will find the conglomerates might have something within their portfolio of companies that would be tourism related.

The smallest company listed on our board is Sunbeach Communications, Inc. They are an Internet access provider, and their market cap is approximately US$6.5 million. They provide the Internet connectivity and compete with Cable & Wireless.

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