Give us incentives

Government told it must do more to encourage investment

A financial expert is calling on the Government to provide incentives to private citizens to trade on the Barbados Stock Exchange (BES), which he lamented, remains undersubscribed.

Against the backdrop of a two-way take over battle for Banks Holdings Limited (BHL) between the Trinidad and Tobago conglomerate ANSA McAL and the Brazilian-owned AMBEV, Investment Director at OurInterest Advisors Inc, Craig Harewood questioned the rate at which shares were sold on the exchange.

He argued that the listed share price was not on par with the value recorded on the companies’ books and blamed the low market value on the infrequent level of trading on the BSE.

Citing BHL as an example, Harewood noted that the initial offer made by SLU Beverages Limited was $4.00, way below the fair value, which was estimated by BHL’s valuator KPMG at $5.20.

Earlier in September, SLU Beverages acquired 13.1 million BHL Shares in a block trade after purchasing the shares at $2.49.

Director at OurInterest Advisors Inc, Craig Harewood
Director at OurInterest Advisors Inc, Craig Harewood

“The problem with the share price not reflecting the true value of BHL or other listed companies on the stock exchange had to do with the lack of trading. That lack of trading is caused by a few persons at no fault of their own,” Harewood said.

He pointed out that there were few large entities, trading on the BES and they were engaging in what he called “a buy-and-hold strategy”, which resulted in little movement on the stock exchange.

“It is one of concentration in that we have a few entities or persons owning most of everything and therefore the market is less efficient than it should be.”

Harewood said the problem could be corrected if private citizens were encouraged to trade on the stock exchange and he urged the Government and the BES to take a second look at the rules of raising capital.

“So for example if an investment company is raising capital via private placement in Barbados under our current legislation only certain entities who can invest over a hundred thousand dollars can participate, so we have to find ways to include smaller investors from an early stage.

“The only way to get the prices up on the exchange on a regular basis where they are trading at near share value is if we incentivize persons to trade. Basically, that would entail lowering the concentration between smaller investors and larger investors. The implication is that smaller investors would hold on to shares not for a long time period, maybe a year or two, and then sell them at a higher price for example. So that is how you would go about correcting it and the Barbados Stock Exchange and the Government would have to find ways to incentivize the public and dis-incentivize larger entities from holding on to the shares for too long.”

In an earlier interview with Barbados TODAY, noted economist and Dean of the Faculty of Social Sciences at the University of the West Indies, Dr Justin Robinson, had also argued that infrequent trading on the BSE meant that stock prices were not being regularly updated to reflect the current book value and future growth potential of companies.

But amid the scrutiny, General Manager of the BSE Marlon Yarde insisted that share prices were determined by the interaction of investors and while he wanted to see “greater volumes” trading on the exchange, he pointed out that activity was up for the first nine months of the year.

“The total volume of shares traded increased by 284 per cent while total value of shares traded increased 456 per cent when compared with the corresponding period in 2014. The Regular and Put Through Markets recorded increases in terms of both volume and value while there was no activity on the Junior Market,” he told Barbados TODAY.

5 Responses to Give us incentives

  1. Tony Webster October 28, 2015 at 6:29 am

    “The problem” is NOT “infrequent trading” on the BSE. This- or even a total lack of trading- is merely a symptom of a much deeper malaise in the psyche of Bajans.

    Five will get you ten, that you will not find any students who “sucessfully” complete their secondary education, who can explain (a) what is a “company limited by shares”, or (b) the difference betweena publicly-held company, and that privately-held, or © why any country in the world with an economic future , MUST have a lively stock-exchange! I did so, when encountering “Civics” at first form in grammar school, Grenada, 1957!

    This does NOT reflect much “success” in 50 years of nation-building. True, some investors might have been put-off by dabacles such as Trade Confirmers, or Barbados Foundry Ltd etc etc, but I see no real effort over the last couple administrations, to apply a serious effort to change the mind-set. if we have been able to develop our credit unions, why can we not apply ourselves to similary remove the scales from our eyes regarding investments generally? We have had serious private sector efforts (witness Fortress Fund), but our leaders clearly do not rate a lively stock-market highly. Most unfortunatley, CLICO, and the current take-over rucktions, has put further dents in the confidence of investors.

    I would welcome David Ellis having a joint on-air discussion with both Mr. Arthur, and Mr. Stuart, present…and in full voice. Without our own viable BSE, we shall languish, and the heights of the economy, shall ever remain in the gullies of lost opportunity…amongst the gently rolling hills and fields that shall belong to someone else.

  2. Sue Donym October 28, 2015 at 7:59 am

    Mr. Craig Harewood, Financial expert in an advisory corporation, you’re new to this, aren’t you?

    Did you just ask the government to do your job for you? Pound the pavement or get techy and make some contacts to advise!
    Ask yourself what an expert can do for his clients.

    While waiting for the legislation to change, have you suggested ways that your clients could find similarly interested people to create trading blocs? Have you advised them to diversify and to look further afield? Do they know that trading is not always that fast-paced, dog-eat-dog exciting fare seen on TV but that they can become more aggressive traders, initiating market excitement through their own offers?

    Or maybe you advised them to resign themselves to the fact that Bajans like to sit on their hands and wait on government.

  3. Watchman October 28, 2015 at 8:31 am

    Isn’t getting a return on investment sufficient incentive ?

    Some people really think the government is to do it all, do you need the government to pick the stocks too ?

    The BSE is stagnant because it only has on 6 half dead companies that have done little differently since Adam was in short pants. I hazard if there was money to be made there via dividends or share trading people would notice it.

  4. jrsmith October 28, 2015 at 10:04 am

    You want from a government who , cannot manage Barbados LTD. to teach what , they themselves don’t know or understand. Bajans will always be the workers, no real chance of being the management, because it takes effort and responsibility. that they don’t want, as I always say ,Barbados is prep and is there for the taking, but not by bajans.

    What would this present government say to bajans, just mention CLICO and that alone put the scare in them. all you could think ,our politicians are in over they heads. we need people who with logic could determine , whether a light bulb , glows or shines.

    Look what the politicians has done to the only real asset ,which could have been saved, our sugar cane industry and in return never had the insight to replace the same with something else.
    this small minded attitude ,is strangling bajans , a bunch of people put together to build a house , but they are all painters. no one cant read the drawings to start.

  5. CHARLES WORRELL October 28, 2015 at 12:01 pm

    Mr/s. Smith;
    This is the second note which I have ridden on your back. You made much sense in your comments and I happen to agree with you.
    Mr. Harewood, hopefully, will soon relax the title and get to the work it entails. What he has submitted for our consideration or digestion, is clearly a misunderstanding of what SE activity is all about.
    The answer is not incentivisation largely because of the nature of Investment. The wealthy or those that can participate are those with the resources or money. Even if offerings were found where prices came within the reach of the middle level man, these ‘bargains’ would or might still be eaten up by the wealthy.
    Regarding the frequency of activity, please understand that this too, is the nature of the SE. it is heated and bustling in the USA because of the size of the market, local and international. We, on the other hand are so very much smaller. There may be reason to wonder WHY or IF the CARIBBEAN as a Group could not operate a single SE? This would certainly increase activity as there would now be more participation.
    There is also another thought that may find less affection among you people who continue to treat Barbados as some huge conglomerate only to find, as in this case, that we are not yet there and are indeed very limited in many areas of our economy. FACT IS, you people have not done our country well. You have pushed for everything you see overseas WITHOUT INVESTIGATING its place in our country. I had occasion to sit with a friend of mine a few years ago and he was all out of joint about $210,000.00, I had to remind him that businessmen in the USA, talk millions and Billions over coffee. It was clear that we are not ready for certain economic activity and it is TIME we reckon with this and let our country be great at what it is gifted with.


    WHY are they not asking about TRINIDAD’S eating up of our business and economy, THE SAME T & T that would not even allow us to get a few fish our of their water; the SAME T&T THAT HOUSES THE COURT OF JUSTICE without being a signatory thereto but getting a BIG CHEQUE EVERY YEAR( if they have since sign on, please forgive me),CEMENT PLANT, OUR SHIPPING AND TRADING our BANK AND ON AND ON WE COULD GO. Yet our government has not done anything to show that the situation is being addressed. AT WHAT POINT WILL IT BECOME CLEAR THAT BARBADOS IS NO LONGER INDEPENDENT and working in the interest of its people. COME DEMOCRATIC LABOR PARTY..WE CAN FIX THIS THING. JAMES, MICHAEL, INNISS ET AL..WE WERE ALL AT UWI NAD WE KNOW THE DANGERS WE ARE CURRENTLY ENGAGING IN and we know also, that we are not getting any favorite treatment, WHEN WILL WE HEAR YOU OPENING YOUR MOUTHS. THIS IS ABOUT BARBADOS AND right now, EVERYBODY IS GETING WHAT THEY WANT BUT US….


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