Dec 2008 Financial News

BSE not fearful of crisis

Dec 08, 2008

THE Barbados Stock Exchange (BSE) does not foresee any major impact on its operations as a result of the global financial crisis.

This was stated by Marlon Yarde in the company’s third quarter report, which argued that any impact is likely to be similar to that felt by the wider economy.

Yarde argued in the report that the casual observer would view the developments in the global economy as very unnerving, and would therefore question the impact that this may have on Barbados and the local market.

However, the BSE believes that it is unlikely that Barbados will be impacted directly by the crisis in the way it has started in the United States and spread to Europe and Asia.

The reason for this, which has been stated by a number of financial officials so far, is that Barbadian banks did not hold any of the “exotic securitized instruments which were built upon the faulty subprime mortgages”.

“As a result they were sheltered from the impact when these securities proved to be ‘toxic’. In addition, due to Exchange Controls enforced by the Central Bank of Barbados exposure to institutions which have collapsed is likely to be limited,” Yarde said in the report.

As has been stated previously, the impact on the economy is expected to be seen in the important tourism sector.

This is due to the fact that many potential visitors to the island may have suffered investment losses, and reduced incomes as a result of job losses; and due to the fact that credit is being tightened internationally, therefore forcing them to make difficult decisions when it comes to spending their money and as a result travelling to long-haul destinations like Barbados.

The BSE expects the impact on the local companies listed on the exchange to be small, however, should there be any material exposure, listed companies are required to notify the exchange promptly and we in turn will notify the brokerage community and the media about the situation.

The argument is that this will enable investors to make informed decisions regarding their investments.

“Listed companies may also be affected indirectly should the Barbados economy feel the effects of a global recession. Under these conditions companies may find it difficult to maintain their revenues at their current levels which in turn can impact on their bottom line and eventually their share price,” he noted.

The report argued that in times like these, it is necessary to be reminded that equity investing is a long-term exercise and while in the short-term there tend to be fluctuations, the market has consistently produced returns over the long-term.

“Taking this into account those investors who maintain a long-term perspective during the current market climate may be rewarded for their patience,” he noted.


Source:
The Barbados Advocate
Monday December 8, 2008
http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=780