Jun 2004 Financial News

CMMB has plans for Eastern Caribbean

Jun 28, 2004

Caribbean Money Market Brokers (CMMB), a full service brokerage house offering fixed income and equity investments, is planning to extend its reach across the Eastern Caribbean, as well as southward into markets such as Guyana and Surinam.

The company, which was officially launched in Barbados last week at the Sandy Lane Country Club, is seeking to create an active market for the trading of bonds across the entire Caribbean region, where its parent company Jamaica Money Market Brokers (JMMB) would cover the Jamaican market and CMMB would cover the rest of the region.

This was revealed by Ram Ramesh, the company’s Managing Director and CEO, during an interview with Business Monday at the company’s Barbados offices in Whitepark Road, St. Michael.

Ramesh, however, highlighted a number of issues which need to be addressed to ensure the continued growth and development of the regional capital markets.

“When we invest in these bonds we need to know the correct quality of these bonds. How do I know, for example, if the bond issued by the Grenada government is a good one? How do I compare a St. Kitts bond with a Grenada bond? These are questions that can be answered only by a rating of the bond itself. In the international markets we have Standard & Poors (S&P) and Moodys, who rate the bond issues. Likewise we need to have a rating agency in the Caribbean that will provide us with that information, independently from the persons who sell the bond.”

According to Ramesh CMMB has joined hands with about twenty-three other financial institutions in the Caribbean to create a rating agency, based in Trinidad and Tobago, which will cover the entire Caribbean market. The rating agency has been set up with an affiliate company of S&P out of India.

“They are in the process of actually setting up the benchmarks and putting in the place the necessary technical framework. By October of this year the rating company will be off the ground and will begin issuing ratings,” he revealed.

The setting up of a depository where the bonds can be safely kept and maintained would also greatly assist the development of the regional capital markets, as well as a clearing house where these bonds can be traded and cleared.

“We are actively working with the regional central banks to develop this infrastructure, in fact the Central Bank of Barbados is one of the key promoters of the rating agency,” said Ramesh.

CMMB Barbados will focus its attention initially to the creation of a secondary market for the trading of government bonds. In explaining the advantages of investing in a bond, Ramesh said that a bond gives you a certainty of return, as opposed to a stock.

“If you were to compare stocks to bonds, a stock is an ownership in a company, so if the company does well you do well because your investment will appreciate and you may get dividends as well. Fixed income investments such as bonds are fixed investments and you get interest on a periodic basis.”

According to him if a bond is a ten-year bond, an investor may not want to hold the bond for the entire ten years. The investor, for example may only be interested in holding it for only six months or one year.

“What we (CMMB) would do is sell the bond to you for a period of six months, with a specific understanding that we will buy it back from you at a fixed price, so that you do not carry the risk of changing prices, and your return is fixed for the six month period. Your liquidity is assured, so that at the end of the six months you do not need to go around shopping for someone to buy the bond. That is the unique feature that we offer, what is known as a repurchase agreement,” explained Ramesh.

Source: http://www.barbadosadvocate.com/NewViewNewsleft.cfm?Record=18056