Capital Market Development: What’s keeping T&T back?

30 July 2012


A very useful visual I thought, amidst the Olympic hype. While I think Trinidad and Tobago has come out of the starting blocks, there remains much to be done to improve our capital markets.

Some may be tempted to rest on their laurels as T&T currently enjoys relative economic prosperity in comparison with our Caribbean neighbours, but I urge you to look at the potential benefits of a well-functioning market.

From politics to finance (or even sport), we can often easily identify the obstacles faced, but few can properly articulate the benefits of changing tack (intentional sailing reference for T&T’s Andrew Lewis). Active participation in capital markets by you the investor or borrower on both an individual and collective basis allows for:

1.) Informational efficiency and;

2.) Improved access to investment funds

These can translate to better prices on securities your institution wishes to purchase, cheaper rates at which you borrow and overall, accurate and easily obtained information with regard to the behavior of other market participants.

With an appreciation of what we stand to gain, let’s look at some of the headwinds which we currently face.

  • TTSE Market Capitalization was estimated at TT$83.5 billion (US$13 billion) in May 2011. As a portion of GDP, this is 57.8%. Compare this to the stock market capitalization in the U.S. representing over 100% of their GDP.

  • Number of Participants – only 40 listings. While there has been talk of state-owned enterprises being listed, this is yet to materialize.

  • Approval Process. I’m not sure if this boils down to being conservative, but local institutions often lack the flexibility needed to make quick decisions and are in many ways constrained by their own risk policies. In larger markets, prices on stocks and bonds change within seconds once information becomes available. In other words, your price target quickly becomes out of context and the lengthy approval cycle restarts.
  • Cultural Shortcomings. Why is it that so few financial institutions provide research data on competitors? Are we afraid to burn bridges given how tightly knit the industry is? If substantially larger U.S. corporates can provide information on other firms (positive and negative), who are we? Developing a culture of full disclosure locally may expand investment options outside of T&T and/or the Caribbean.
  • Main drivers of the economy not represented. NGC and Petrotrin both have Eurobond issues, but what of the other players on either the bond or equity markets?

I can only hope that this topic remains not only hotly debated in the public, but within the walls of Parliament for imminent implementation. You as the investor/ borrower also have a duty; to demand timely, pertinent and readily available data and research so that decisions can be made quickly and to the benefit of stakeholders. Be mindful that your transactions drive the success of firms, and they in turn should perform in line with this closing quote:

To my customer: I may not have the answer, but I’ll find it. I may not have the time, but I’ll make it. I may not be the biggest, but I’ll be the most committed to your success.” ~ Unknown

For more information on how you can benefit from these trends, contact me at gerard.stephens@nullfirstlinesecurities.com or at 868-628-1175.

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