The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) is aiming to “speed up” its growth rate and achieve ‘critical mass’ of 50-100 main board listings, more than double current levels, its chief executive calling for “creative ways” to bring international participants into the market.

Emphasising that he was not advocating the total abolition of exchange controls, as the Bahamian capital markets would be “unable to withstand this”, Keith Davies instead called for this nation to take a leaf out of Barbados’s book and find ways to bring global players in.

Asked what would create ‘critical mass’ for BISX, Mr Davies told Tribune Business it would be “greater than 50 equity listings, and the closer we get to 100 equity listings, it benefits not only BISX but the market”.

Emphasising that more listings brought more investor options, and helped diversify portfolios, Mr Davies said this - and new products and services - worked ‘hand in glove’ with the wider market by helping to attract in more players and increase activity levels for all concerned.

Pointing out that the 12 year-old exchange was now moving into its ‘teen years’, and leaving behind its infant ‘growing pains’, Mr Davies told Tribune Business: “What we’re seeing here is the potential for the exponential growth and development of BISX.....”

Acknowledging the concerns of many Bahamian capital markets participants as to their illiquid nature, the BISX chief executive said this was a function of the country’s 350,000-strong population, plus relatively limited institutional investor and asset pools.

“Liquidity is a factor of numbers. There is no way to get around illiquidity with our market without introducing more people into it,” Mr Davies told Tribune Business. “There is no magic pill, and no amount of complaining, that is going to do that.”

Still, he acknowledged that more investor education, more products and services, reduced costs and new ways to access the domestic Bahamian capital markets were all key to attracting more people in.

But Mr Davies added that the greatest boost would come from allowing international retail and institutional investors to participate in the Bahamas.

“The other solution is to allow, in some creative way, is to allow international persons - individuals and companies - to access our market,” he told Tribune Business, “as your population increases and, by extension, liquidity and activity increases as well.”

Mr Davies said Barbados had a similar system of exchange controls, but had come up with methods to allow international capital to flow “in and out at any time”.

“I think we need to seriously consider avenues for allowing investment into this country from the outside world,” Mr Davies told Tribune Business.

“It might be a shock to people, but I’m not advocating the abolition of exchange controls. I understand very well the impact if that were to occur, and it’s not something the capital markets can withstand.

“There are ways to relax exchange controls to facilitate inward investment that our market lacks, given the size of it.”

Noting that the relatively low levels of savings and investments in the Bahamas generally, impacted the capital markets, Holland Grant, BISX’s listings manager, said the Government’s planned pension reforms would likely boost the pool of capital looking to invest in listed Bahamian equities.

Looking ahead, Mr Davies said BISX had already received indications of “one or two new equity listings early next year. We anticipate there will be some activity and are looking forward to it”.

Noting that an increase in market participants had to be matched by growth in the number of products and services available for them to put money in, he added: “We’ve also got some interest in terms of mutual fund activity and, I can say, an innovative new approach to mutual funds and what can be filed, listed on the exchange.

“It’s from a new player looking to do some innovative things in the market.”

BISX’s main board currently has 20 ordinary share (equity) listings, three preference share issues and four bonds, making a grand total of 27.

“We started with nine on May 12, 2000, and are now at 27,” Mr Davies told Tribune Business. “I did a review in 2003, and our rate of growth was faster than any other Caribbean country from inception to that point. If you looked at the amount of years it took them to get there, it took them far longer.

“The potential we have for growth, expansion and success is there. It’s positive. I want to match, mirror that early success over the next 10-12 years.

“We want to improve the opportunities we have. I want to speed the growth rate to a shorter term of years. This adolescent growth spurt is something we can take advantage of.”

Mr Davies also acknowledged the need for diversification away from BISX’s heavy reliance on banking and insurance stocks, agreeing that the exchange needed a greater mix of retail, franchise, technology, medicine and agricultural-type listings.