Foreign Holdings In Colombia Stocks Up In May Amid Equity Rise
July 03 2009 - 5:34PM
Dow Jones News
Foreign portfolio holdings in Colombian stocks rose in May from
the previous month on foreign investors' renewed risk appetite.
Offshore investors also deposited their money in the Colombian
equity market taking advantage of the 13.2% rise reported by the
local stock market in the fifth month of the year.
According to preliminary data released by the Colombian
securities regulator Superintendencia Financiera Friday, foreign
portfolio holdings in Colombian stocks rose 22% to $2.14 billion in
May, up from $1.75 billion in April but much less than the $3.21
billion reported in May 2008.
"When international investors realized that the worst had
happened in the financial markets, they sold their assets in U.S.
treasury bonds to invest it in emerging economies because they
generate them more profitability," said Julian Cardenas, head of
research at local brokerage Corredores Asociados.
Cardenas noted that the stock market rose 23% in the January-May
period, "few markets in the world gave such a high
profitability."
Investors also poured money in Colombian companies that trade in
the local stock market on expectation that profitability will rise,
thanks to lower interest rates.
Lower interest rates will prompt Colombians to consume more
forcing companies to increase their production, Cardenas.
The Colombian central bank has cut rates by 550 basis points
since December last year. The central bank's intervention rate
currently stands at 4.5%.
Meanwhile, foreign portfolio holdings in Colombian bonds fell to
$733 million in May from $835 million in April but half than the
$1.44 billion reported in May 2008.
Foreign investors sold peso-denominated treasury bonds, known as
TES, after the central bank said during its May monetary meeting
that it doesn't intend to keep cutting rates in the near future as
the current 4.5% level is the right level for Colombia's economic
recovery.
"Such announcement prompted foreign investors to sell a big
stake of Colombian bonds, money that was reinvested in stocks,"
Cardenas concluded.
-By Diana Delgado, Dow Jones Newswires; 57-1 6107044- ext 1132;
diana.delgado@dowjones.com