GREASING THE WHEELS

Colombia 2013 | FINANCE | REVIEW: CAPITAL MARKETS

Through regional link ups and listings on other foreign exchanges, the BVC is looking to improve the outlook for IPOs over the coming years.

The Colombian Stock Exchange, better known by its Spanish name Bolsa de Valores de Colombia (BVC), is swiftly emerging as a key source of capital and means of privatization within the local economy. The BVC commenced operations in 2001 following the merger of the stock exchanges in Bogotá, Cali, and Medellín, and at the end of 1Q2013 it reported a market capitalization of some $237.09 billion. The equities market features 81 listed shares, though one company alone—Ecopetrol—represents some 41.5% of the total market cap, meaning the main market is strongly influenced by developments in the oil and gas market. The BVC offers fixed market instruments, such as bonds, a limited derivatives exchange, and a growing equities offering.

EQUITIES

The main indices for the market include the COLCAP, the COL20, and the more broad-based IGBC. Over 2012, the main IGBC index rose 16.19% in US dollar terms at 14,715.84 points, though over 1Q2013 the market as a whole saw a 9% fall back to 13.390.27 points. The reasons for the decline were mainly sourced from the global economic environment and its impact on the commodities-heavy BVC.

As of end-May 2013, the largest stock on the index, Ecopetrol, had a market cap of $91.12 billion, shadowing over the other financial stocks that feature in the top 10 stocks by size. Ecopetrol joined the market in 2007, although the government still retains an 88.5% stake in the company. In order to access alternative levels of liquidity, the company listed itself on the New York and Toronto markets, with the latter being well known for its attraction to resource stocks. The company has the ability to sell off an additional 8.5% share to the public, and the government is also thinking of drawing down its own stake and using the funds for infrastructure and education projects.

Grupo Aval Acciones y Valores came in second place, with a market cap of $13.83 billion. The Colombian financial group has used growth opportunities both at home and in the region to make good on its expansion plans over the past five years. The company is looking to strengthen its activities in the growing pensions segment through its subsidiary Porvenir after it brings the operations of BBVA Horizonte under its wings, in a deal worth some $530 million.

Prior to Ecopetrol's listing, Bancolombia regularly headed up the BVC's market cap list, though by end-May 2013 it had slipped down to third place at $12.77 billion. The bank remains popular with investors, and was the third most traded stock over 2012 in volume terms. The financial group also has its shares listed on the NYSE, and has operations in El Salvador, Panama, the Cayman Islands, and Puerto Rico.

When its preference shares are added into the mix, Grupo Sura comes in at fourth place in market cap terms, boasting some $11.65 billion. It also has a listing on the NYSE. Grupo Sura has a 26.6% shareholding in Bancolombia, and acts as a broad financial market actor, with specific interests in the insurance market.

Rounding off the top five by market cap is Banco de Bogotá at $10.58 billion. The bank's main shareholder is Grupo Aval, which had a 64.4% share of the bank at end-2012. The bank has activities in 11 countries in both North and South America.

MARKET DEVELOPMENT

In order to improve liquidity levels—the bane of many smaller equity markets—the BVC joined up with the Lima Stock Exchange (LSE) in Peru and the Bolsa de Comercio de Santiago (BCS) in Chile. Through the link up, which was established end-2011 and is known as MILA, the three markets have now formed the third largest pool of liquidity in Central and South America after the Brazilian and Mexican markets. As Juan Pablo Córdoba Garcés, President of the BVC, sees it, “MILA has been very successful at… making everybody that is looking at these markets see the three countries as a region… and they are designing their strategies for the three markets as a whole."

As well, IPOs have also been on the agenda for the BVC, with seven given the green light over 2012, and more in the pipeline for 2013 depending on market conditions. Of note was CEMEX's listing of its local Latam unit on the exchange. The IPO saw $1.1 billion raised, more than expected, and 29% of the company's shares were sold to the public.