Divest state holdings to boost stock market

Trinidad and Tobago Stock Exchange (TTSE) chairwoman Kathleen Dhannyram is calling on the government to help boost activity on the Exchange by divesting more of its holdings in State-controlled companies. A  lack of volume in shares is putting the squeeze on more aggressive trading, she said, noting  that divesting of shareholding in state companies was the norm in developing countries. While the demand for stocks on the TTSE now  outweigh  their availability,  Dhannyram, managing director of Reliance Stock Brokers, does not feel it is a matter of grave concern. The TTSE Chairman described this as a “common issue in a developing market.” The major problem, she thinks, is the resistance of local companies to list on the Exchange. “Many of our companies are family-owned operations and as such there is an inherent  reluctance to put their companies’ shareholding on the public market. A company would list when it is beneficial for it to do so,” she added.

She acknowledged that when a family-owned operation is doing well on its own and there’s no need for raising capital, that company would not be moved to go public. Another problem which contributes to the present scenario is shares not being made available because holders prefer to hold on to their shares rather than sell them. “Most serious investors tend to lock up their shares, especially if you’re building a portfolio. And this applies to institutional buyers as well as the much smaller investors,” said Dhannyram. Another factor which has to be considered is the low interest rates now prevailing, she said, noting that interest rates are just too low. In the TTSE report at the end of the financial year, Dhannyram stated, “It is imperative that other opportunities be made available to the investing public if the Exchange is to meet its objectives of facilitating the efficient mobilisation  and allocation of capital. “To this end,” she continued, “the Exchange is keenly aware that it supplies only a miniscule portion of the investment needs of local investors and that it must of necessity offer other instruments for trading.

“The Exchange’s position is that while the trading mechanisms themselves will result in a more liquid stock market, it is imperative that it does all in its power to bring non-equity products to the marketplace,” she added. As it stands, there has been very positive market movement since the beginning of the year, with  a levelling off during the second quarter, as is evidenced by the non-movement of some of the larger stocks like RBTT Financial and Lever Brothers. Some of the smaller stocks have been making impressive gains. Dhannyram forecasts that as the last quarter looms there should be some acceleration in the blue chips and greater interest being placed in the smaller stocks and that is mainly due to the buoyancy of the economy and the low interest rate environment.

Additionally, there is the factor of many of the listed companies reporting their six-month figures and this should have some impact on trading. West Indies Stock Brokers (WISE) forecasts modest increases in share prices during the last quarter, being fuelled by the continuing low interest rates, high oil prices and increased activity in the construction sector. But the statistics present an anomaly of sorts in the market, because while the total volume of shares traded for the first half of this year was 14.1 percent lower than the same period last year, the total value of shares traded on the floor had increased by 113 percent over the same period in 2003. According to the Wise Chronicle newsletter, more than 154 million shares, valued at $1.3 billion were traded for the first half of this year, while the 180 million shares traded in the first half of 2003 were valued at just a tad over $610 million.