Membership
The Guyana Stock Exchange opened for business in July 2003 and by November 8, 2010, it had completed 381 trading sessions. Over the seven plus years of its existence, the membership of the Stock Exchange has not changed significantly from what it was at the inception. The Exchange started trading activities with 12 companies in its secondary list on June 30, 2003. By its ninth session in August of the same year, it had added two companies, namely Property Holdings, Inc. and the now defunct Globe Trust and Investment Company, thus bringing its total number of participants to 14. It removed the Guyana National Coopera-tive Bank (GNCB) by its 20th session which brought the number of companies in its secondary list to 13 where it stands now. So for most of its existence, the Guyana Stock Exchange looked no different than it did when it first started operations. Moreover, the high variability in trading activity among the stocks that using the market raises the possibility that many companies might be missing a great opportunity to grow and become competitive.
Access to Money
According to published articles of the Guyana Association of Securities Companies and Intermediaries (GASCI), there are clear advantages to being a part of the local stock market. The advantages are more obvious to businesses than they are to individuals who might be looking for better returns for their money. The biggest draw for Guyanese businesses is the extent to which participation in the stock market lowers the cost of borrowing money and removes the obligation of having to make obligatory periodic payments to a creditor. By allowing others to own its shares, a company gets access to money and only makes payments in the form of dividends if it makes a profit and decides to distribute some or all of it. Decisions on dividend distribution are left to the discretion of company directors which puts the company in the driver’s seat. In contrast, if a company borrowed money from a bank, it would have to make periodic payments at specific times placing greater restrictions on how it uses its money and the amount available for use.
Lacks Dynamism
To take advantage of this benefit, companies have to be actively using the market. Despite the potential benefits for companies, trading on the Guyana Stock Exchange lacks dynamism. This lethargy is reflected in the relatively few companies whose stocks are traded during a single session. For example, only seven times out of the 381 occurrences did the stocks of 50 percent of the companies trade in the same session.
In trading data kept by the GASCI, the shares of an alarming number of companies trade very infrequently. This reality might be obvious to those Guyanese who monitor the performance of the stock market. But, it might surprise many that the shares of nearly half of the companies on the secondary list have traded in less than 25 percent of the sessions and nearly 85 percent have traded in less than half of the sessions. With such a record, companies do not seem to be induced by the benefits of the stock market as articulated by GASCI.
Other Benefits
The value of the market to a participating business is not limited to the cost of borrowing. With the setting of a trading price for their shares in the market, companies are able to obtain a good idea of their market value. Without the market to provide pricing information, companies would have to rely on book value or a reasonable guess as to the true worth of the business. If we were to put aside everything else, the operation of the stock exchange tells us that the companies listed were worth about G$70 billion or US$340 million at the end of October 2010. The stocks making up the Lucas Stock Index (LSI) were valued at $67 billion at the same time period and represented about 97 percent of the value of the listed companies. GASCI identifies other benefits which companies can enjoy by trading their shares on the local stock exchange. In addition to attracting overseas and institutional investors, participation in the exchange gives companies free publicity and a chance to enhance their image in the local and overseas market.
Alternative
For individual Guyanese, the stock exchange represents an alternative way of saving money. Instead of depending exclusively on bank deposits, Guyanese could hold some of their money in the form of stocks. Many do since payment of dividends and the appreciation of the stock price are often greater than the interest earned on bank deposits. Stock ownership comes with the added benefit of dividend distributions to resident Guyanese not being subject to withholding taxes. Even though stock ownership comes with a greater risk of losing money, it is an option that is worth pursuing in light of the tax benefits that accrue to Guyanese living in Guyana. The chances are not that great with such infrequent trading on the market.
Marginal
No one expects the shares of the Globe Trust to be trading on the exchange since no one thinks of it as a going concern. So, it is not the inactivity of Globe Trust that stands out on the exchange. It is that of J. P. Santos and Company. According to GASCI data, the shares of that company have never recorded a trade on the stock exchange. Even where some trading activity of the stocks of other companies has occurred, participation appears marginal. Among some of the most inactive stocks are those of Citizens Bank and Property Holdings Inc. Despite being long-standing members of the exchange, the shares of these two companies have traded about four percent of the time on the exchange. It should be noted though that quite recently, the stocks of Citizens Bank have become very active.
On the other hand, prior to March 22, 2010, the stock of Property Holdings had not traded in nearly two years. Other companies that have lackluster performances include Guyana Stockfeeds Inc which traded 8 percent of the time and Caribbean Container Inc which traded 12 percent of the time. Doing slightly better are the stocks of Sterling Products Limited and Demerara Bank Limited which traded 19 and 23 percent of the time respectively.
Star of the Exchange
The weekly reporting of GASCI also reveals that the stocks of only two companies have traded more than 50 percent of the time. They are Demerara Distillers Limited and Banks DIH both of which are known for their high quality beverages.
These two companies for the most part have been responsible for the majority of the activity of the stock exchange. The star of the exchange is DIH whose stocks have traded over 97 percent of the time while those of DDL traded in over 84 percent of the sessions. Both DIH and DDL are important members of the exchange. Using data from the LSI, DIH makes up 18 percent of the value of the market capitalization while DDL makes up 12 percent. Without these two companies, the stock market might become idle and the opportunities that the market has to offer might slip away from aspiring companies and interested Guyanese investors.
