Colombia’s stock exchange second-best loser of Latin America

Posted on Jan 14 2014 - 2:33pm by Editor
(Photo: Bolsa de Valores de Colombia)

Colombia came out the second most unharmed out of the Latin American economies whose stock markets fell 2013, suffering the least amount of loss in market value behind Mexico.

Economic newspaper Portfolio reported on Sunday that despite the severe losses that many of the world’s main emerging markets have been experiencing since mid-2013, Colombia has come out relatively unscathed, with the second least damaging stock market losses of the region.

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Coming in immediately after Mexico among the negative markets in the region, whose stock index fell a mere 2%, Colombian businesses’ overall value decreased by 12.3% last year, according to Portfolio.

With, as Portfolio describes,  investors flying out of the region in search of the more profitable opportunities offered by the world’s stronger economies, Latin America witnessed an almost all-round drop in stock market value over the last year, with the worst figures being displayed by Peru with a 23.6% decline.

A separate report on global stock markets in 2014 by Yardeni Research, Inc. shows that Argentina did however show a positive share price index in the past year, with a steep 88.9% rise in value.

The region did not fare well on a worldwide level either as, according to the Yardeni report, the share price index for Latin America fell by 7.2%, while on average the world saw a 26.3% rise. The figures are also negative in comparison to other Emerging Markets, as Asia experienced a 3% increase and all Emerging Markets combined saw 0.9% growth.

The stock market results are partly a consequence of having underestimated the value of raw materials which, in the hands of more developed countries such as the US, saw market prices reach historically high levels, Colombian stockbroker firm Asesores en Valores analyst Omar Escorcia told Portfolio.

The US stock exchange NASDAQ did, in fact, close 2013 with a positive value of 38.2%, Portfolio reports. Europe also boasted encouraging results, with Germany seeing a 25.5% rise and Madrid, despite Spain’s precarious economy, experiencing a 21.4% increase.

As one of the least affected countries, Colombia has high hopes for its 2014 economic prospects despite its initial poor performance during the first few days of the new year. According to Portfolio, international financial organizations such as the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) and the International Monetary Fund (IMF) predict that Colombian GDP should increase between 4.2% and 4.5% in the coming year, with the national government more optimistic at 5%.

Nonetheless, some Colombian investors worry that the negative stock market trend that has been devastating the economies of emerging markets since May 2013 is set to continue, with the Colombia Stock Exchange (BVC) not showing any signs of changing course.

In fact, the South American nation suffered a further 4% drop in stock market value in the first six days of 2014, with its most important market indicator Colcap falling 1.37% on the previous Friday alone.

And with 2014 promising a stronger recovery of the world’s more economically developed nations, such as the US, it could be very difficult to determine when the Colombian stock market will enter the road to recovery, stockbroker firm Acciones & Valores analyst Fabian Perdomo told Portfolio.

Nonetheless, Perdomo believes that the emerging markets face an imminent upturn with the improving situation of internal aggregate demand.

“In other words, this means that the positive performance of the stock market index will depend more on local economy and not the external one, which should cause a recovery in asset prices starting from the second semester of 2014,” Perdomo explains.

The new year could be just the right the time to start buying shares, according to Rupert Stebbings, vice president of equity sales at Colombia’s largest commercial bank Grupo Bancolombia. Stebbings told Portfolio that following the Christmas period, the volume of negotiations should improve with more shares being sold at relatively low prices. Which despite being bad news for shareholders, should bring a positive outlook to those looking to invest.

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Sources

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