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EEB 1
The future of the capital markets in Guyana
By Enid E Bissember
GASCI
EEB 2
FUTURE OF CAPITAL MARKETS IN GUYANA
• WHY DO WE NEED DOMESTIC CAPITAL MARKETS?
• LARGE FIRMS CAN RAISE CAPITAL IN GLOBAL MARKETS
• WHAT HAPPENS TO THE CAPITAL RAISING PROCESS OF SMALL/MEDIUM FIRMS?
EEB 3
Four Functions of Capital Market1. Resource Allocation
– Allocate resources efficiently to maximize welfare
2. Price Discovery– Generate transparent price signals consistent with
efficient use of resources
3. Risk Management– Encourage good risk management that diversifies losses
and profits
4. Corporate Governance– Promote sound corporate governance that provides
proper incentives.
EEB 4
Characteristics of Capital Market
– Accurate, timely and accessible
information
– Educated investor
– Efficient and robust infrastructure
– Efficient intermediaries
– Strong issuer
– Strong prudential framework with
enforcement
EEB 5
Market Infrastructure
• Market infrastructure includes– the institutional arrangements that are
necessary for the smooth functioning of the market
– the trade execution system
– the systems used in clearing
– payments and settlement
EEB 6
Current situation
• Bond market shallow
• heavily dominated by government debt
• Stock markets featured no new issues
• most equities not been traded with any frequency
• the banking sector main source of finance for both public and private borrowers
EEB 7
The bond market
The development of a bond market is an essential element in ensuring that long-term funds are available for infrastructure investments
EEB 8
Expectation
Developed domestic capital markets will lower dependence on volatile foreign capital inflows
EEB 9
THE CHANGING MARKETPLACE
• GLOBALIZATION
• TECHNOLOGY
• EXCHANGE GOVERNANCE
• The CSME
EEB 10
Support
Macroeconomic environment must provide the basis for the development of a sound microeconomic structure
EEB 11
THE IPO MARKET
• MARKET ACTORS • REGULATOR
• DEVELOPMENT OF VENTURE CAPITAL
• ROLE OF BANKS
• PRICING & ALLOCATION MECHANISMS
• EQUITY CULTURE & EDUCATION
EEB 12
THE OBJECTIVES OF SECURITIES REGULATION
•The protection of investors
•Ensuring that markets are fair, efficient and transparent,
•The reduction of systemic risk
EEB 13
THE IPO MARKET
• PREPARE” TO GO PUBLIC
• STRATEGIC PARTNERS
• SELECT UNDERWRITER
• CORPORATE GOVERNANCE
EEB 14
Benefits from development of IPO market
• ISSUERS
• INVESTORS
• EXCHANGE
• ECONOMY
EEB 15
Domestic Debt Market Development
Lack of robust capital markets leads to weak and unstable corporate financial structures
EEB 16
Why?
The efforts to develop local securities markets have been motivated by a number of considerations
EEB 17
Why?
• Desire to stimulate domestic savings
• New financial instruments
• New investment opportunities
• Better portfolio diversification
EEB 18
Why?• Alternative sources of funding
for both the public and corporate sectors
• A vehicle for managing financial risks
EEB 19
Recent Trends in regional Securities Markets
• In Trinidad and Tobago bond market used by regional and domestic borrowers
• growth driven by the need to recapitalize some firms and to finance expansionary fiscal policies
• Large refinancing needs of the corporate sector in a difficult external environment
EEB 20
Want is happening
• A number of countries have adopted measures to improve transparency and corporate governance, as they see these as critical for local capital markets development
• Caribbean Corporate Governance Forum
EEB 21
Recommendation
• Strengthen domestic financial institutions
• Enhance prudential supervision and regulation in order to increase resilience to volatility
EEB 22
Recommendation
• Develop local securities markets to provide an alternative source of funding for public and corporate sectors and to facilitate the management of the financial risks associated with periods of high asset price volatility
EEB 23
Recommendation cont’d
• Create a “consensus” about the importance of the capital market to attract new participants
companies and investors
EEB 24
Recommendation cont’d
• Enlarge individual’s investment by facilitating the access to different instruments
EEB 25
Recommendation Cont’d
• Strengthen the domestic investment
• Improve the knowledge about the market mechanisms through Strong and sustained educational activities for investors
EEB 26
Recommendation cont’d
• Enhance market infrastructure • Improve corporate governance
requirements • Remove policy distortions that affect
the efficient allocation of domestic savings
• Introduce new financial products and services
EEB 27
Recommendation cont’d
• There should be clear and unambiguous rules and procedures that govern all major aspects of the market
• All participants must clearly understand their respective roles within the system, with well-defined procedures specifying where the responsibility for action rests
EEB 28