Colombian stocks surged in 2010, fueled by strong optimism over the economic and political outlook of the Andean nation in a year marked by the exit of Alvaro Uribe, the president credited for the country’s economic success and security for much of the last decade.
Colombia’s key market barometer, the IGBC index, gained 33.4% in 2010, closing Thursday, the last trading day of the year, at 15496.77, down 0.29% on the day. In a year of presidential elections, investors were confident that the path of market-friendly economic policies set out by Uribe during his eight-year rule would be extended by his successor.
As Antanas Mockus, a dark-horse candidate who pledged to raise taxes during the campaign, rose in the polls, stocks continued moving up as investors bet that even a victory for the underdog wouldn’t represent a major economic-policy shift.
But in a second-round vote, Juan Manuel Santos, a former defense minister under Uribe and a darling of Wall Street, pummeled Mockus and emerged as president in August. As Santos’s approval ratings remained above 70%, investors continued to bet on an improved economic outlook and market-friendly policies.
Santos continued Uribe’s take-no-prisoners approach to dealing with the government’s decades-old problem with Marxist guerillas. And as the continued security gains made Colombia increasingly attractive to foreign investors, the local bourse reaped the rewards.
Energy companies like Ecopetrol SA, the state-run oil firm, continued to increase output and explore areas once controlled by guerrillas. Ecopetrol remained as one of the most highly traded stocks in the exchange’s key index and closed the year at COP4,100.
Ecopetrol’s gains came despite concerns over the government’s plans to sell a 20% stake in the firm, potentially flooding the bourse with Ecopetrol stocks. The government is likely to sell a 10% share next year to finance Ecopetrol’s capital investments and expansion plans as it seeks to raise oil output to one million barrels a day by 2015. The government is also planning an additional 10% stake sale to pay for infrastructure projects and finance some of the rebuilding it will undertake in the wake of the deadly rains that lashed the country this year.
Energy stock Pacific Rubiales Energy, which is listed in Toronto and Bogota, “was a phenomenon in 2010,” said Celfin Capital, a brokerage firm, in a research note. The price of the stock more than doubled in the year to close at COP63,200, as the company continued to increase production and recovery rates at oil fields in Colombia.
Canacol Energy tried to replicate some of the successes of Pacific Rubiales and also listed its shares, which trade in Toronto, in Bogota. It started trading in Bogota at COP1,950 in July and closed the year at COP2,970.
Other oil and mining companies are likely to follow suit in 2011. Energy firm Alange is readying to list its stock traded in Toronto on the Bogota bourse by the first quarter next year.
Banco Davivienda, Colombia’s third-largest bank by assets, launched in October the country’s first initial public offering since 2007 and raised $228 million in the IPO that was 13 times oversubscribed.
The Colombian peso, meanwhile, saw a rocky year. Its appreciation spawned speculation that the Santos administration would impose capital controls to curb the currency’s strength.
But the central bank and the government dismissed that option. Instead, the central bank in September restarted its dollar purchases to mop up U.S. currency in the spot market and the government opted to keep some of its dollar income from Ecopetrol dividends abroad.
The moves, along with sovereign-debt concerns in Europe that fueled aversion toward emerging-market assets, helped the government rein in the peso’s surge. On Thursday, the peso closed at COP1,920.00 to the dollar, compared with COP2043.00 at the end of 2009.
In 2010, investors also gobbled up Colombian debt as the country’s sovereign bonds appeared poised to receive investment-grade ratings’ status from credit-ratings agencies in 2011. The appetite for Colombian debt helped push yields down, with the peso-denominated 2020 bond, known as TES, closing Thursday at 7.7%. (Darcy Crow / Dow Jones Newswires)