Activity on the Barbados stock market has dwindled significantly over the past decade, and there are concerns that if urgent measures are not taken to turn the situation around, the investment option could disappear.
There has been a glaring reduction in the level of trading of shares and the number of listed companies on the Barbados Stock Exchange (BSE). There are currently 15 companies listed on the regular stock market, down from close to 30 just over ten years ago.
Some days, no security trading takes place on the regular stock market and other days, the number of shares changing hands average in the hundreds, often from one security.
One company came close to being delisted recently, while another recently indicated the possibility of it being delisted, and Barbados TODAY understands that the fate of another currently hangs in the balance.
Douglas Skeete, representative of the Barbados Association of Corporate Shareholders, said incentives from the Government could bring about some change.
“Up to ten years ago, you had reasonably robust trading on the exchange because of the tax incentives that were given by Government. Those were removed probably around 10 to 12 years ago, and with the removal of those incentives we saw the activity plunge. Folks were not keen to invest in the exchange because of the lack of incentives,” he said.
The other side of the coin is that several local companies have been taken over by overseas firms, who then decide to delist from the BSE.
Some of the most notable firms to be delisted in recent times were Trinidad Cement Ltd, Sagicor Financial Corporation Ltd, Barbados Light and Power Company (EMERA Caribbean Inc.), Banks Holdings Ltd, and West Indies Rum Distillery Ltd.
Giving his assessment of the situation, Skeete told Barbados TODAY the buyout of companies could also be a deterrent to people buying and selling stocks like they used to.
“Prospective investors are not going to find the Stock Exchange as an attractive place to go and buy shares, simply because of those reasons – the lack of tax incentives and the constant buyouts and the unfair prices being offered. Those are reasons no one will gravitate to the Exchange,” said Skeete.
“One of the critical reasons you have to consider is that the Stock Exchange has not attracted the attention of any Government in recent times, where Government has looked at it and said ‘this is an area we need to concentrate resources or attention’,” he added.
Skeete said until Government comes to the rescue, “what you are going to have is a slow spiral down, to a state eventually where the Stock Exchange may become non-existent”.
“I see the potential for it to be less active,” he added.
Started in the 1980s as the Securities Exchange of Barbados, the trading facility was later reincorporated as the BSE in 2001. It was in 2015 that it became a shareholder-owned, for-profit organisation.
Skeete said it was time for a detailed assessment of the BSE to identify the failings and the opportunities for improvement.
He suggested that lessons could be learned from the more vibrant Jamaica Stock Exchange and the Trinidad & Tobago Stock Exchange.
Skeete also believes the BSE could take a leaf from the book of the credit union movement, which he said has been constantly upgrading itself to benefit members.
“We know what the vision was back in 80s, but what is the vision today? What do we want it to do, is it just for people to own a few shares, to have a few companies listed, shouldn’t we broaden it?” he questioned.
The senior chartered accountant said he was not optimistic that a junior stock market would do the trick since there were still no incentives.
There have also been talks of a regional stock market, with the Caribbean Community (CARICOM) up to last year agreeing that a series of national consultations should be undertaken. A regional securities exchange would allow for cross-border trading on the Jamaica, Barbados, Trinidad & Tobago and Eastern Caribbean exchanges.
However, Skeete is pessimistic about this materialising, based on CARICOM’s lack of implementation in the past.
“I don’t see that taking place – the regional stock exchange – if it hasn’t happened in the 20 years we have been talking. And not that is impossible, but it is less likely,” he said.
Meanwhile, economist Jeremy Stephen told Barbados TODAY he believed the local stock market could become more active if ordinary shareholders were getting more dividends, adding that tax incentives may be more of an “issue” for wealthier individuals.
“To make stocks an attractive prospect again, one stands to figure that should the economy across the Caribbean and in Barbados starts to grow, that stocks become a little more appealing based on the ability of companies to pay dividends,” he said.
He also attributed the low levels of activity on the BSE to risk tolerance and general financial literacy.
As for companies delisting, Stephen agreed buyouts played a role, but quickly added that some companies were also concerned about not making profits commensurate with their annual BSE fees, cumbersome regulations, low shareholder interest, and some “just wanted to exist in the market generally”.
He told Barbados TODAY he believes if the process for trading was easier for both companies and individuals, the BSE could attract more activity.
“There are a lot of barriers, not just to trade but to investing in these small islands, that pretty much take away from a lot of the potential to benefit from capital returns. On the surface level, this is also reflected in the inability of companies to trade quite easily across borders,” the economist added.
The former lecturer said a harmonised regional stock exchange could lead to more Barbadians investing in stocks. However, he was cynical of the region harmonising laws for a regional stock exchange coming to fruition.
His dream is to see Barbados and the rest of the region incorporating blockchain technology on their exchanges.
“This would allow them to reach a wider range of people and allow them to be a leader there. It would allow a cheaper listing cost for companies and allow them to get listing from companies that are not in the region,” Stephen explained.
Up to this year, the BSE indicated that it was looking at the prospects of enabling security token trading.