After reaching records levels on Monday, Colombia’s stock market has continued to tumble this week on concerns about the Greek economic crisis.
Colombia’s stock index, the IGBC, dropped below 12,000 points on Thursday, around a 5.5% fall from the record high of 12,697.7 reached on Monday, reports Portofolio.
On Thursday alone, the Colombian market dropped 2.84%, the largest single day drop since November 2008.
The record high witnessed at the start of the week was attributed to the surprise announcement last Friday of an interest rate cut by Colombia’s Central Bank, bringing rates down from 3.5% to a new historic low of 3%.
The passivity of the European Central Bank was considered by Colombian analysts to be one of the primary causes of the market downfall this week. “The market was waiting for the ECB to lower the interest rate and reactivate the economy, but that didn’t happen,” explained analyst Andrea Camacho of Acciones y Valores.
Another reason, as explained by analyst Daniel Muñoz of Profesionales de Bolsa, was that Colombian investors did not react quickly enough in restructuring their portfolios as the Greek debt crisis unraveled, “Although Colombia does not have such direct exposure [to Greece], we must remember that there are investors who do, and for that we have to restructure our portfolios accordingly.”
The Colombian companies most affected over the week were Pacific Rubiales, which fell 11.9%; Sociedad de Inversiones en Energia and Colinversiones, which both fell over 7%; Fabicato, falling 6.6%; and Biomax, Exito, Bolsa de Valores de Colombia, Banco de Bogota, and Grupo Sura, who all fell over 5%.
Regardless of the drops experienced this week, Portafolio reports that the IGBC remains up 2.8% since January 1, 2010.
Assuaging concerns over the country’s exposure to the Greek crisis, the Colombian Finance Minister announced Friday afternoon that his country is “well prepared” to whether the storm.
“Although Colombia has seen a drop in the stock market and further [currency] devaluations, the economy is well prepared to confront this shock, and it presents no major worries at the moment,” revealed Minister Oscar Ivan Zuluaga.
The minister went on to explain that Colombia hasn’t been the only country affected by the Greek crisis, nothing that it has been “a difficult week for all international markets.”
According to some analysts, however, the Colombian economy, and most other international economies, could be further affected if the Greek crisis spreads to other European countries.
“The worst case scenario would be if Greece defaulted on its debts, that would be catastrophic, much worse than the bankruptcy of Lehman Brothers. In that sense, the entire world would be affected,” warned analyst Alberto Bernal of Bulltick Capital Markets,
The director of Fedesarrollo, a Colombian economics research organization, Roberto Steiner, added that “Obviously, if this [crisis] extends to other highly indebted economies of Europe, the impact could be very serious.”
