Jun 2009 Financial News

SEC survives on market momentum

Jun 26, 2009

Even with global stock markets taking a beating and investor confidence on shaky ground, the Securities and Exchange Commission (SEC) in 2007-2008 saw an increase in the number of securities registered — from 55 in 2006-2007 to 75 for the period under review.

And the total value of securities registered $22 billion, up from $7.8 billion in the previous financial year, the SEC said. Equities accounted for approximately $14.5 billion of the value of $22 billion

According to the report, the large increase was attributed to the issue of shares and bonds to finance mergers and acquisitions, which occurred throughout the year. Most notable was the amalgamation of RBTT Financial Holdings and the Caribbean arm of the Royal Bank of Canada that was finalised a little over one year ago.

When RBTT was delisted from the Trinidad and Tobago Stock Exchange(TTSE), it impacted significantly on the market as RBTT shares represented 10.91 percent or $12.6 billion of the capitalisation on the first tier market.

Three other mergers and acquisitions between local and regional stakeholders also affected the market, including the acquisition of Barbados Shipping and Trading by Neal and Massy Holdings, Sagicor Financial Holdings gaining majority shareholding in Barbados Farms Limited and the acquisition of Jamaican rum company Lascelles de Mercado by Angostura Holdings Limited.

Another factor adding to the increase in value of securities was the Initial Public Offering (IPO) by Supreme Ventures Limited, a Jamaican gaming and lotteries company, which registered 2.6 billion shares for a total value of TT$649 million last August.

Thirty-two equity issues in all were registered for the period, which represented 3.7 billion shares. In the previous financial year only 77 million shares were registered with an estimated value of $1.04 billion.

Debt securities showed an increase with19 securities with a value of TT$6.4 billion, compared to 13 securities at TT$6.2 billion in the 2006/2007 fiscal year. Private sector companies were the largest issuers of debt securities, in contrast to previous years with a total of $3.6 billion being raised through 14 issues. Government accounted for five issues of debt securities with an aggregate value of $2.6 billion. The debt issues were used in part to fund developmental and infrastructure projects for the Urban Development Corporation of Trinidad and Tobago (Udecott) Housing Development Corporation and the Water and Sewerage Authority (WASA)

The derivatives market also showed an increase in activity with ten securities registering for the 2007-2008 period, as compared to three in the previous year. The value of these securities more than doubled from TT$603 million to $1.3billion in the 2007-2008 period, the SEC said.

SEC Chairman Osborne Nurse said the end of financial 2008 saw the Composite Index increasing by 13.8 percent to stand at 1065.62 points, compared to 936.57 at the end of the previous period.

This was as a result of the introduction of a five-day trading in April, thereby offering investors and market participants two additional days on which to conduct trading and the amalgamation of RBTT Financial Holdings Limited with the Royal Bank of Canada, he explained.

Earlier in the year, the TTSE and the Central Bank launched a secondary market for the trading of government securities but at the end of the period, there was minimal activity.

Despite much activity and the introduction of various schemes, the effects of the financial crisis however have overshadowed this healthy performance for the period just ended. Following the four-month period of growth was a period of constant decline that stretched until the end of the financial year in September and into the new period, it was noted..

As global markets tanked, so did the local ones and cast a long, dark. The average daily trading volume for August-September was 332,700, less than half the average of 801,140 for the previous ten months signalling that investors had adopted a cautious approach.

The SEC expects a further slowdown in activity considering the anticipated weakening of economic conditions because of the crisis.

Nurse deflected criticism that it should have intervened in the financial system.

On the contrary, he said the SEC had been involved in moves to strengthen the market’s regulation rather than relax it over the past two years, which includes the making of recommendations and participating in consultations of the proposed Securities Act.

The SEC, he said, has succeeded in creating for the first time a regime for the regulation of the mutual fund industry which has grown exponentially without any regulation at all. The Commission has been working on establishing regimes for the repurchase and sale of securities (Repos)

The proposed Securities Act, he said, is expected to increase regulatory powers and a greater obligation to disclose information.

Enforcement tools will be enhanced to allow increased penalties and repayment of ill-gotten gains and investors will have the ability to take civil action against reporting issuers for misrepresentations, he said, noting that directors and senior officers can be held responsible for a reporting issuers failure to comply with its disclosure obligation. The power to regulate cross-border financial activity will also be enhanced, Nurse said.

Article by: Leiselle Maraj
Source: Trinidad Newsday
http://www.newsday.co.tt/businessday/0,102697.html
25-06-09