The Tribune

By NEIL HARTNELL

Tribune Business Editor

A LEADING investment banker yesterday said Bahamian share prices had "bottomed" and that the market was starting to "rebound", with collective trading volumes for all BISX-listed securities up 71.4 per cent year-over-year in the 2012 first quarter.

Michael Anderson, RoyalFidelity Merchant Bank's president, told Tribune Business there was "a consistently high level of trading" currently taking place in the Bahamian equities market, with the rising of large 'block trades' indicating that institutional investors and high net worth individuals were becoming increasingly active.

The long running 'supply overhang', where the number of sellers in the Bahamian equities market far exceeded available buyers, was being eliminated, Mr Anderson, with those seeking an exit better able to obtain the prevailing market price.

Suggesting that "a base for prices" was now being set, he added that Bahamian investors were now able to obtain both dividend yields and capital appreciation returns on equity investments, as the risk of price declines was falling.

Together, Mr Anderson said the dividend yields on most BISX-listed stocks were much higher than the returns available on Certificates of Deposit (CDs) and other fixed income securities, especially when capital appreciation (share price increases) were added to the mix.

Data provided to Tribune Business by RoyalFidelity Capital Markets showed that, collectively, some 898,810 securities listed on BISX's Main Board were traded during the three months to March 31, 2012, a 71.4 per cent increase over the 524,517 that changed hands during the 2011 first quarter.

"If you look at the two periods, the number of trades is not significantly different, but there's a consistently higher level of trading taking place in the market now compared to last year, and the number of shares being traded," Mr Anderson said.

"We're seeing large trades taking place, which would indicate institutions are buying or high net worth individuals are coming to the market.

"Share prices have been dropping over the past year, and people are now willing to invest larger amounts and buy blocks of shares at current prices, with an increased level of activity."

Describing buying in the BISX-listed equities market as "fairly broad based", with stocks in a number of companies changing hands, the RoyalFidelity president recalled how trends had changed compared to the 2009-2011 period.

"If previously you were a seller, there were not many buyers coming to the market, and you were having to drop prices more and more," Mr Anderson told Tribune Business. "People are now able to sell at market prices, and are able to sell without dropping prices.

"We believe this has set a base for prices in the market, and as we go forward we will see a rebound take place."

He added: "I think the Commonwealth Brewery transaction that took place, and which was well-received by the market, and the Arawak Port Development Company (APD) offering that raised over $30 million more than the IPO target, were indicative of investors' desire to buy equities. It brought equities back into the light as an investment alternative.

"The other investment options are not as attractive as they used to be, and people are looking at alternatives. Dividend yields are fairly high, 4-5 per cent on most stocks that are being bought, compared to 2-3 per cent on CDs."

Investor sentiment had also been boosted by the capital appreciation that was set to come from stability, and future increases, in the share prices of BISX-listed companies, Mr Anderson said.

The RoyalFidelity president added: "People are back in, looking at equities as places where they can get dividend yields and capital appreciation.

"To some extent, we believe the equities in the market have bottomed in prices, and there is no significant risk of declines in prices taking place. As people perceive there is a lower risk of getting into equities, that will push prices higher.

"You don't have the risk of dividends being offset by further reductions in share prices."