The "Trump effect", added to the upward pressure caused by inflation in US interest rates, explains the upward trend in the performance of Costa Rican bonds and the fall in their price.
A resumption of the upward trend seen in debt securities traded on the international market could make it difficult for the government access external financing, in a context in which most bonds from emerging market countries are experiencing the same situation.If the government decides to resort to financing in the international market, the cost of doing so would be higher if bond yields continue to rise.
Trading in 2015 surpassed the amount registered in 2014 by 7%, and the primary market grew by 6%, recording transactions for $8.272 million.
The stock market in Costa Rica has still not captivated the private sector, which mostly prefers to seek financing in the country's banking system or from abroad, before resorting to registering debt or share issuances in the local market.
On January 14, the Ministry of Finance will turn to the local market to place an issue in colones which matures in September 2033 and has a fixed rate of 8.51%.
The Ministry of Finance intends to sell a surprisingly high amount using the electronic platform on Thursday 14 January. The issue is called Title Deed Issue Fixed Rate in Colones G210933.
Information sent by the Ministry of Finance states that they will use the rule of "first come, first served" on all applications received during the reception period for the issue. The maximum amount which can be allocated per investor applying the above rule will be 1% (it can not exceed 1%). Offers at or below the maximum percentage which can be allocated per investor will be allocated immediately.
Public consultation is being undertaken for the reform the regulation of Market Makers, with which it is intended to attract more stock brokers to the program to provide more liquidity to the market and stabilize prices of securities.
This reform also seeks to establish a reference price, a guarantee of "... minimum level of liquidity for emissions with little market presence "and amend the rules that are in effect, with the aim of improving the conditions for brokerage firms. It is expected that this project will be executed before the end of the year.
Banks authorized by the Superintendency of Securities may perform operations of clearing and settlement of securities in the stock market, which until now has only been done by brokerage houses.
With this modification in the regulations banks may provide more support for trading by its investors, providing the service of clearing and settlement of securities transactions which previously were only handled by brokerage houses.
The proposal to create a market for direct trading of securities has been rejected by the authorities, yielding to pressure from industry participants themselves.
Although the World Bank itself proposed analyzing the creation of a market where investors could directly buy and sell securities, the government bowed to pressure from the National Stock Exchange and stock brokers, and chose not to include the proposal in the initiative for modernization of the Law Regulating the Securities Market.
A draft bill on the stock market currently being discussed may not be consistent with what has been planned for the development of the financial sector.
Incorporating mechanisms for access to the stock market for small savers is part of the initiatives contemplated in the reform bill sent for consultation in December, one which industry representatives considered difficult to implement, because of the costs involved.
The fall in interest rates has caused an increase in bond prices, encouraging holders to make profits.
During the first quarter of 2013, the stock market in Costa Rica grew by 18%, with the secondary debt market being the best performing, going from $1.34 billion in the first three months of 2012 to $3.459 billion in the same period of 2013.
Starting March 13 there will be a negotiation floor for bills of exchange endorsed by a bank, which will be issued as a payment commitment in exchange for resources.
Elfinancierocr.com reports that "The National Stock Exchange (BNV) also reported that on March 11 the ACEP will unveil instructional operations which will detail that the transactions will be in colones and dollars, the negotiation and valuation will be conducted by simple discount mechanism, the issuing bank will be guarantor and the seller will be the brokerage firm which offers the sale. The selling amount will be the face value amount. "
These instruments would prevent banks from filling up their credit portfolios as the funds are provided by investors.
"The National Stock Exchange (BNV by its initials in Spanish) and the Costa Rican banking sector are reviving a type of share called "bankers acceptances" as a way to provide short-term funds to companies that need them, without having to apply for a formal loan," reported Elfinancierocr.com.
The visible part is the red tape and high costs of participation. The hidden part is the conflict of interest of its owner, the same commercial banks that offer loans for greater profit.
A recent Costa Rican executive decree, which declared the stock market to be of public interest, raises the need to examine why its development has stagnated, as it is vital to economic growth in terms of a source of financial resource allocation for businesses.
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