• February 2013
    M T W T F S S
    « Jan   Mar »
     123
    45678910
    11121314151617
    18192021222324
    25262728  
  • Pages

  • Marginalia

  • Accumulations

Bovespa 750 | Priming the Pump

bmf_bovespa

Source: Infomoney, via Fusões & Aquisições.

The story is essentially a Ctl-C Ctl-V of prepared talking points from its principal source — a source worth paying attention to, however.

The listing of more and more small and medium enterprises could help BM&F-Bovespa improve its ranking from 26th position currently — one place below the Mongolian Stock Exchange.

BM&F-Bovespa currently lists 353 companies, which makes the Brazilian stock market the 26th largest in the world. The market’s own estimates suggest that a number of companies are waiting for the best moment in which to launch their IPO, but it is not impossible to assume that small and medium enterprises — SMEs — are also waiting for the right moment to list their shares.

The creation of a healthy capital market is a practical necesssity for the growth of a capitalist economy. It was to promotion of these conditions that PAC-PME — a growth acceleration program for SMEs — has been dedicated, in an effort to create the dynamic conditions necesary to economic growth.

The movement, subscribed by such heavy hitters as Itaú Unibanco (ITUB4), Bradesco (BBDC4), Banco do Brasil (BBAS3), BTG Pactual (BBTG11), FIESP , MBC (Movimento Brasil Competitivo), PwC and Deloitte, seeks to make it easier for SMEs to list their shares, raise capital, and grow and develop, contributing to economic growth in general.

“Bovespa could have 750 listed companies and cease to be a pitiful exchange. Currently, we are the 7th largest economy in the world, but our exchange occupies 26th place, with only 353 listed companies. Access to the capital markets is completely out of reach [to many companies],”says Rodolfo Zabisky, CEO of @ttitude, the largest independent investor relations company in the world.

@ttitude is the parent company of The MZ Group — a S. Paulo-based international IR agency with a near monopoly on multilingual IR services, from 10-Ks and 13-Ds to ADRs and Material Events. 

Zabisky is the coordinator of the portal and one of the principal backers of the movement, which is calling on the government and related agencies — BM&F Bovespa, the CVM and BNDES — to enact stock market-friendly measures.

These measures, Zabisky estimates, would lead 750 companies to list their shares on the Bovespa in the next five years, raising some R$ 90 billion in private investment that would be reinvested in the real economy, bolstering economic growth in general. “It is a gradual process that would expedite economic growth, and most importantly, would do so in a sustainable manner.

Brazil’s exchange is very small.

Despite Brazil’s 200 million inhabitants, its stock exchange lists fewer companies than does the Mongolian Stock Exchange, although the latter is smaller in terms of market capital. In a country of  3 million inhabitants, 410 companies are traded, significantly more than are listed in Brazil, with its 190 million inhabitants.

You have to wonder what the Mongolian equivalent of the SEC or CVM might be like. According to Google Translator, the exchange’s Web site is in Bulgarian.

“If we are to grow and develop, we need to sweeten the pot in order to attract [SMEs] and investors,” he says. To that end, the movement has proposed measures that should enable companies to skirt obstacles to participation, ranging from tax credits to the creation of a new governance standard Level 2, as part of Bovespa+, a special segment of the exchange designed for companies adhering to this standard of governance.

“Despite an unprecedented mobilization of industry players, we still need the assistance of the government. Government participation is essential to the development of the exchange; we need to get our proposals into the hands of President Dilma,”the executive says.

There is a hint of rumor in the air that someone is planning to create a second stock exchange in Rio de Janeiro. In August, Exame magazine reported,

Daniel Dantas of the Opportunity Group will become a partner in a stock exchange venture. He has signed a memorandum of intent with Bovesba — the late Bolsa de Valores da Bahia — and the London Stock Exchange. The division of shares in the deal will depend on  two other interested parties — a Swiss bak and an American bank — which have yet to decide on whether to back the venture. Estimates are that a total investment of R$100 million — US$50 million — will be required. Dantas wants the new exchange located in Rio de Janeiro.

Somewhere here I have a photograph of myself standing in front of the Bolsa de Valores de Pernambuco, in Old Town Recife.

According to the Web site of the market regulator, the CVM, there are currently 9 IPOs or follow-on offerings registered and awaiting regulatory clearances

  1. NET SERVIÇOS DE COMUNICAÇÃO S.A.
  2. EXCELSIOR ALIMENTOS SA
  3. LLX LOGISTICA SA
  4. RASIP AGRO PASTORIL SA
  5. AMIL PARTICIPAÇÕES S/A
  6. TELE NORTE CELULAR PARTICIPAÇÕES SA
  7. COMPANHIA DE GÁS DE SÃO PAULO — COMGÁS
  8. ARTERIS S.A.
  9. SEB PARTICIPAÇÕES S.A

Captura de Tela 2013-02-05 às 13.52.36

Comparative M&A, January 2012 and January 2013. Source not identified.

Whether falling fixed-income yields, driven by cuts in the SELIC rate, will be sufficiently attractive to drive the kind of growth imagined … well, we shall see.

It will also be interesting to see whether the Brazilian bourse engages in future partnerships like the mutual market-access commodities trading platform it has established with the CME.