Wednesday 28 September 2022

Costa Rica Stock Market Activity Shrinking

The contraction is based on official figures from the Annual Bulletin of the National Securities Exchange for 2016 and 2017.

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28 September 2022 - At The Banks - BCCR

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The failure of the Central Government’s latest effort sell bonds on the local financial market leads analysts to believe stock market activity in the country is shrinking.

The delay of some hours in the central government depositing salaries and pensions of the 132,000 civil servants, among them teachers, had many worried that the government could not meet is obligations for the first bi-monthly pay period. Photo by: Diana Méndez, La Nacion

On Wednesday, December 13, the Ministerio de Hacienda failed to raise the needed ¢80 billion colones to pay the salaries and pensions of 132,000 public employees.

On Thursday the Deputy Minister of Expenditures of the Ministry of Finance and National Treasurer, Martha Cubillo, explained that the Government is working “day by day”.

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She added that Hacienda had planned to place bonds in the institutional market, but they were not bought up on Wednesday, having to wait until Thursday morning, when “an institution released resources.”

The official, in a statement issued by the Treasury at noon Thursday attributed to the impact of fiscal deficit (the negative difference between income and expenses) in the delay of several hours in the deposit of wages and pensions. By later Thursday evening civil servants began seeing the direct deposits in their accounts.

Back to the stock market. Between January and November 2017, the volume traded on the stock exchange was US$43.153 billion, 4% less than the amount traded in the same period in 2016, according to figures from the Bolsa Nacional de Valores (BNV) – National Securities Exchange.

As of November of this year, 78,836 operations were recorded, 4% lower than the $44.911 billion transacted in the same period in 2016.

Regarding this decrease, José Rafael Brenes, manager of the BNV, explained to Elfinancierocr.com that “… the decrease is justified, mainly, by the fundraising policy of the Ministry of Finance (the country’s main issuer), which favored direct placements with instruments that are not easy to negotiate in the secondary market, making the value traded lower. ”

” In addition, this year the composition of transactions changed, since 48% was placed in national currency and 52% in foreign currency, contrary to what was seen in the last five years when the national currency was the main protagonist in transactions. ”

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“… In 2018, the picture may not be different and in the view of the authorities it is worrisome that the Treasury has announced that it will try to finance itself with foreign resources through local mechanisms, which will reduce liquidity in the local market.”

Sources: La Nacion; El Financiero

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