REUTERS SUMMIT-Colombia aims to "internationalize" bourse

Mon May 20, 2013 6:42pm EDT

* Stock exchange expects two foreign listings next year

* Says four local companies could offer shares by year-end

* Calls for better regulations in Colombia capital markets

By Helen Murphy and Nelson Bocanegra

BOGOTA, May 20 (Reuters) - Colombia aims to "internationalize" its capital markets further in the coming years, attracting more foreign companies to its stock market and bring in overseas investors seeking to tap into higher yielding emerging markets, the head of the stock exchange said on Monday.

The Andean nation, which currently has five international companies listed on its stock exchange, is seeking to bring at least two more overseas offerings next year to trade alongside Mexico's Cemex and Canada's Pacific Rubiales on Bogota's stock exchange, Juan Pablo Cordoba said at the Reuters Latin America Investment Summit.

He also hopes to clinch another four local listings this year, following cement maker Argos, which issued $765 million worth of shares earlier this month.

"The Colombian market will benefit from having more players," Cordoba told the Latin American Investment Summit. "To achieve that there are two paths - one is to wait for them to come and other is to make it happen and seek greater internationalization of Colombia's capital markets."

Colombia wants to bolster the volume of foreign investment in its stock market and attract new interest to the corporate bond market in a bid to raise the Andean nation's profile and boost liquidity, said Cordoba. In 2012 the stock market had 14 percent foreign participation, up from 3 percent in 2008.

"There's a couple of (international) companies that are contemplating the possibility (of participating in the market), he said.

The stock market had a traded volume of $40 billion in 2012 and a market capitalization of $254 billion at the end of March this year.

Fixed income markets traded average daily volume of $3.4 billion in 2012. Cordoba expects as much as 12 trillion pesos ($6.5 billion) in corporate debt issues this year, up from 10 trillion pesos in 2010.

ATTRACTING INVESTORS

Interest in Colombia's capital markets has soared since 2002 when former President Alvaro Uribe took office and launched a heavy military offensive against drug-funded insurgents who back then controlled much of Colombia's resource-rich mountains.

A decade ago, Colombia was considered too risky for many investors, as Marxist rebels and right-wing paramilitaries battled for control of the nation's lucrative cocaine industry, kidnapping company executives and massacring rural residents.

A strong financial regulatory environment as well as major improvements to Colombia's security and three investment-grade ratings helped attract a record $16.7 billion in foreign direct investment and cash to its stock and bond markets last year.

Cordoba reckons that while a successful outcome to peace talks with the Revolutionary Armed Forces of Colombia will further improve the nation's reputation, investors have already largely priced-in the security issue in money decisions.

"The peace talks and the general security situation has been discounted as far as the vision of investors is concerned," Cordoba said.

A new tax reform should help clinch more overseas interest to Colombia's fixed income and derivatives market, he said.

Events are planned in New York and London next month to explain to investors why they should be tapping its capital markets.

BETTER REGULATION

Cordoba said a scandal that engulfed the nation's biggest brokerage, Interbolsa, has had limited impact on the market's reputation.

Interbolsa was intervened and dissolved last year following a liquidity problem that left it unable to make $11 million in bank payments. A criminal investigation is under way to establish if there were possible conflicts of interest, share price manipulation and "hiding" of information by the brokerage.

"In any country, there's always this challenge, I don't think it's an issue of more regulation, but better regulation. It's understanding better the market operations and anticipate," said Cordoba.

A lawmaker has also alleged Interbolsa was laundering money for drug traffickers.

Cordoba forecast that the extra liquidity central banks in developed nations injected to their economies to boost growth will continue to flood into countries like Colombia for the foreseeable future.

The additional capital flows helped strengthen the peso about 9 percent in 2012 until verbal and actual intervention by the finance ministry and central bank weakened more than 4 percent this year.

"For at least the next 20 years we will see capital flows to emerging markets for obvious reasons," said Cordoba, who expects the economy to grow about 4 percent this year. "Growth rates and investment rates will be higher than in developed nations and so dollars will continue to flow into the region."

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For other news from Reuters Latin America Investment Summit, click here (Reporting by Helen Murphy; Editing by Bob Burgdorfer)