GUYANA officially launched its Stock Exchange yesterday, charging the Guyana Association of Securities Companies and Intermediaries Incorporated (GASCI) to foster increases in direct investments and hasten a rise in the standard of living of all for whom Guyana is home.
Acting President Samuel Hinds, who declared the exchange open in the presence of corporate leaders and members of the Diplomatic Corps, said he hoped the Stock Exchange would result in the reduction of liquidity through its facilitation of increased direct investments.
He pinned "great hope" on the GASCI for Guyana's growth and development.
The acting President said for the Stock Exchange to do well, "managers must understand the Guyana situation and help in the forward movement of the country from where we are." Currently, Mr. Hinds said, the Guyanese population is less than one million, with a Gross Domestic Product (GDP) below one billion US dollars and a per capita GDP of less than US$1,000.
The Prime Minister, who is standing in for President Bharrat Jagdeo, currently in New York attending the 58th Session of the United Nations General Assembly, suggested that requirements essential for steady growth and development are narrowing of the income tax spreads, high savings and investments - mainly in education and training - approaching 40 percent of the GDP, and a significant increase in exports of goods and services.
The World Bank website has stated that low per capita savings is not unique to Guyana. The World Bank website shows that the average per capita savings in Latin America and the Caribbean is 20 percent of the GDP.
Mr. Hinds said before today, excuses given by family-oriented companies for not going public, were that there was no institution to facilitate such moves. That excuse should no longer be there with the existence of a local stock exchange, he said.
The United Kingdom's Department for International Development (DFID) has facilitated funding and technical assistance up to the end of December 2003. The Government of Guyana has since pledged strong commitment to finding sources of funding for the exchange, once the support provided by the DFID has ended.
Acting Chief Executive Officer of GASCI, Mr. Patrick van Beek, said he believes the exchange can achieve a level of self-sufficiency. Mr. van Beek refers to the G$12M per annum budget as extremely modest.
There are three main sources of income for the three-month old exchange. Those are membership fees, transaction charges and listing fees. Mr. van Beek said if the exchange was to rely entirely on the minimum transaction charges of G$500, 461 transactions per week or 24,000 transactions per annum would be needed for the exchange to sustain itself. To date, there has been an average of eleven transactions per week. By extension, 0.25 percent charge on consideration alone, G$100M in shares would have to change hands per week as compared to the current G$2.4M.
In response to the question of the exchange's ability to handle a capacity to trade 400 shares per week, Mr. van Beek said an extremely flexible organization that can be scaled to meet the needs of the market has been built. He added that should the need arise for increased transactions by members of the stock exchange, various facilities exist. That includes the ability to move to more than one trading session per week. Mr. van Beek added that the functionality is in place to absorb a sudden surge in orders by invoking a single price auction.
It is also projected that the issuance of Settlement Trades is one that will become more relevant as volumes of transactions increase. In the long-term, Mr. van Beek noted, we may see a Central Securities Depository (CSD) established as in the cases of Barbados, Trinidad and Tobago and Jamaica. In the meantime, he called for close collaboration among the council, the exchange, brokers, lawyers, accountants and company registrars to design a settlement process, which allows for secure, prompt and final transfer of title.
Director of GASCI, Anand Beharry, remarked that over fifteen years of hard work, planning and facilitation of the enabling legislation has culminated in yesterday's launch. He said over the twelve trading days so far for the exchange, there has been a grand total of 3.5 million shares traded at a total of $29.3 million, establishing an increasing trend.
The Demerara Tobacco Company Limited, Demerara Distillers Limited and Banks DIH Limited have been the more popular of the companies traded on the exchange since its existence.
Chairperson of GASCI, Mrs. Chandra Gajraj, said Guyana now joins the ranks of other Caribbean countries with stock exchanges. She said that the main source of financing for most businesses are the domestic traders, mobilized by commercial banks, supplemented by foreign savings in the form of loans from multilateral or bilateral institutions or foreign banks. She noted that businesses are therefore vulnerable to high interest rates, which negatively impact their performance.
Mrs. Gajraj noted that a stock market is central to a capital market system. She said the objective of GASCI is to build a strong exchange for the equitable trading of securities, while policies and practices employed are geared to build investor confidence mainly through transparency in its operations. She noted too, that this is done at the same time making sure the market works fairly and provides equal opportunity for all investors.
Head of the privatization unit, Winston Brassington told the gathering of Government officials, members of the diplomatic corps and representatives of the corporate community, of efforts to steer the process to formulate the enabling legislation in 1998.
Brassington has been regarded as the Godfather of the Exchange, initiating the legislative process until its completion.
He alluded to the personal sacrifice and commitment of President Bharrat Jagdeo, when he was Minister of Finance to have the enabling legislation passed in the National Assembly. Brassington said the Securities Industries Act has been modeled after that of Trinidad and Tobago.
Mr. Jonathan Miller, Consultant of the Adam Smith Institute, contracted by the British Government, said he first came to Guyana in 1988 for the establishment of the exchange, a direct initiative of the Margaret Thatcher administration. He referred to Guyana's as the new kid on the block, following closely on the heels of the recent establishment of the Eastern Caribbean Stock Exchange.
Acting President Hinds challenged the managers and traders of the stock exchange to invest in the electricity utility, Guyana Power and Light Inc. He said the time for such an investment is now, "for us to try paddling our own canoe."
He also called for the widening of economic activities to meet the ordinary person. Mr. Hinds said over-investment is taking place in a number of areas, including street vending, speedboats, minibuses and bush trucks.
A legislative monitoring mechanism is in place through the Securities Commission. However, the Stock Exchange is self-regulatory. (Guyana Information News Agency)