Opportunities to Invest in the Colombian Stock Market
Colombia began the 21st century with serious doubts about its institutional stability. Illegal groups had taken advantage of the bad times in the economy and tried to get to power by arms. The situation resulted in a social movement that promoted important political changes.
In the last decade, the number of kidnappings fell by 90% and total terrorism attacks decreased by 65%. Although there is still a difficult road ahead, the captures or deaths of many of the principal leaders’ illegal groups may prove that a final solution is close.
At the same time, the economy has had an outstanding revival and rivals that of the high-growth countries. It has low debt and a dynamic domestic market that has offset the effects of an adverse external environment. Growth has averaged 4.5%, the ratio debt to GDP is less than 40% and the domestic consumption rises from 62 to 64% of GDP.
This has also been accompanied by the deepening of capital markets and a proliferation of local companies seeking fund sources with low costs to finance projects in Colombia and around the world. There are numerous examples of this process, including the purchase of ING operations in Latin America by Grupo Suramericana de Inversiones, or the acquisition of Lafarge operations in the South East of the United States by the Colombian cement company, Cemargos. Both transactions accounted for investments of more than $4 billion USD.
Other examples are acquisitions that Colombian banks have done in Central America, which include those made by Bancolombia, Davivienda and Grupo Aval. Several companies are taking the step to become “Multilatinas” enterprises by taking advantage of the Colombian stock market and issuing bonds or shares. Opportunities for investors have multiplied and stock market returns have had no comparison in the world during the last decade.
Bloomberg service describes the Colombian returns as follows: “The BLOOMBERG RISKLESS RETURN RANKING shows the IGBC index returned 69 percent in the past 10 years after adjusting for volatility, the most among six major benchmark indexes in the region. Colombia, the top performer also over five years and three years, had a volatility-adjusted return of almost six times that of the Bovespa gauge in Brazil in the past decade”.
The market is still receiving new issuers, leaving more options open to investors. Investors will have exposure to one of the best-positioned economies and with one of the best outlooks in the world.
It has not only been a matter of performance, but also an improvement in liquidity. The Colombian stock market trades over $100 million USD daily, when a decade ago it did not exceed $2 million USD. It looks like it will continue to uphold this trend.
There are alternatives to invest in fixed income assets which can give yields as high as 8% in Colombian pesos. The international economic situation of low interest rates is a clear invitation for investors to take advantage of these returns, and some have already begun to do so. Foreign investors have increased their participation in the volume traded of the stock market in a short time, rising from 2% to 7%.
The foreign direct investment has increased five times, reaching $14 billion USD last year, and has focused on exploring and exploiting natural resources like oil and coal. Colombia is a country virtually unexplored and has a vast territory, greater in size to that of their neighbors who are top ranked in terms of oil reserves.
Many petroleum companies that are listed on the stock market have significant exploration and developing fields. The main players are Ecopetrol and Pacific Rubiales, but there are also smaller-scale companies like Petrominerales and Canacol and it is possible that new companies may appear in the near future.
Since its debut back in 2007, the Ecopetrol’s stock has generated a return above 300%. That number includes the revenues from dividends, which are among the highest in the oil industry.
Colombia is no longer a promise and has become a reality. Global Securities Colombia is part of this reality, which is taking place right now. From a wide array of instruments, including listed securities as well as investment funds and structured products, customers can buy stocks and bonds. They can also make foreign currency transfers from and to Colombia.
Global Securities offers a client-based approach is built within the design of tailor-made solutions to meet each client’s specific needs by implementing strategies with independence and objectivity, which will provide them a global insight with local experience, and the necessary support when making financial decisions. Contact www.investmentgroupcolombia.com for more info.
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