A Highly Profitable Scenario


A Highly Profitable Scenario

State securities dominate the stock market and offer the best benefits. Investment funds continue to gain ground.
Investment funds are becoming a very attractive instrument on the stock market stage.
Transactions made during 2015 in the Stock Exchange Dominican Republic (BVRD) show two main considerations: increased State participation and high availability for the growth of corporate bonds. Moreover, there is a fact related to the same circumstances: the significant growth of the secondary market.
According to information from BVRD on its Web site (bvrd.com.do), negotiations with fixed income securities totaled RD$ 130.684 million in 2015, an amount that represents RD$ 23.652 million more than in 2014, that is, an annual growth of 22%. Fixed income continues to have market dominance, since it represents 92% of all trades in the Stoc k market, considering that equity totaled RD$ 3.355 billion. Of the total negotiated in fixed income, 93% was conducted through the secondary market and 7% in the primary. In the first, transactions totaled RD$ 121.471 million, higher by 34% than in 2014. However, in the primary, which reached RD$ 9,213 million, there is a decrease of 45% compared to the volume achieved the previous year.
According to the transaction currency the revision of the 2015 negotiation figures, shows that RD$ 117,561 million was in Dominican pesos, while securities traded in dollars amounted to RD$13.123 billion. That means 90% of the trading volume corresponded to securities issued in local currency.
The instruments that captured the greater volume of negotiations were special investment certificates of the Central Bank, which accounted for 33% of the market, with RD$ 42.807 billion. They were followed by the debt bonds of the Ministry of Finance under Act 58-13, which traded RD$ 22,427 million, which is 17.2% of the market. Between the two securities mentioned, more than RD$ 65.000 billion was accumulated, almost 50% of everything negotiated in 2015.
Debt bonds traded last year corresponded to laws 366-09, 131-11, 175-12, 58-13, 152-14 and 548- 14. The values traded through them amounted to 42% of the entire year. Central Bank´s fixed income securities accounted for RD$ 20.432 million and treasury bills of the same institution totaled RD$ 68.8 million in last year´s market.
As for corporate bonds, they had operations for RD$ 11.330 billion, a figure that means only 8.7% of the total. According to recorded figures, they represented 16.7%, with RD$ 17.857 billion, in 2014.
Last year, the primary market issued three types of instruments: corporate bonds, with RD$ 8.062 million, securities and RD$ 1.000 million and subordinated bonds for RD$ 151 million.
The Central Bank securities mobilized RD$ 63.308 billion, while those of the Ministry of Finance totaled RD$ 54.895 billion. The first case accounted for 48% while the latter for 42% of the total. The value corresponding to the Central Bank accrues trades in the secondary market in special investment certificates, fixed income securities and treasury bills. The securities of the Ministry of Finance are debt bonds.
The importance of securities issued by the State is reflected in another indicator: the values of the two major issuing organisms, the Central Bank and Ministry of Finance, accounted for 97% of the secondary market.

Bonds on stage

During 2015 transactions of corporate bond corresponded to six issuers: electricity generators EGE Haina and Energy Consortium Punta Cana-Macao, Parval and United Capital brokers, La Vega Real Association, Alaver, and Consorcio Remix Construction Company.
EGE Haina bonds had the highest trading volumes, with RD$ 7.125 million, of which RD$ 4.481 million were placed in the primary market. In fact, these bonds meant 5.5% of the total transactions of fixed income securities of the y ear.
In CEPM bonds RD$ 1,136 million were traded; those of Parval totaled RD$ 1,131 million; United’s RD$ 1.117 million and those of Alaver, RD$ 731 million.
In the 2015 market RD$ 1.000 million were also traded in commercial paper from Alpha Compañía de Valores and subordinated bonds from Banco Caribe, for RD$ 150.9 million.
In the primary market, Inversiones & Reservas (Grupo Banreservas) was the brokerage with the greatest volume in trading purchases with RD$ 2.438 million, slightly more than 26% of the total emissions placed.
The second largest buyer was United Capital, with RD$ 2.079 million. The list of the top five is occupied by BHD Leon (RD$ 1.367), Parval (RD$ 1.331) and Alpha Valores (RD$ 898).
In its progress report for the year, the Stock Exchange highlights the first emissions of closed-ended funds in real estate investment, mutual funds and real estate trust in public stock offering as invigorating elements of the market.
Another positive element was the authorization of RDVAL Proveedor de Precios, as an independent entity. Also considered relevant to the market, is the introduction of the government debt index Gobix.

Desired roles

Currently there is a very strong instrument, which looks eye-catching to large investors and is difficult to match with offers of better returns: government securities.
An investor who places capital in securities issued by the State will find some superior benefits than those he can get in the financial sector. Neither, in term deposits nor in savings accounts will investors find an entity that offers higher interests than those they can get in the stock market. Naturally, there are some risk levels, but in practice, they are very low since placing resources into securities backed by the State. The State is the ultimate guarantor that both, the interests and the principal are properly covered.
There is also another advantage in state paper investments, which prevail in the Dominican market; their high trading facility in the secondary market. It is a feature greatly considered by investors, since, now, they want to regain liquidity through the negotiation of these papers, and it can be done quickly. There is always demand for securities offered in the secondary market.