Colombia’s stock exchange is seen softening next year but keeping up strong growth after soaring since 2009, raising questions about whether the market is in a “bubble,” analysts said on Tuesday.
The Andean nation’s bourse index has hit historic highs this year, nearing 16,000 points, given low interest rates, ample liquidity and good economic performance — surging some 53 percent in 2009 and 37 percent so far this year.
While some experts warn of a possible bubble driven by strong capital inflows due to fragile markets in developed nations, low interest rates and the falling U.S. dollar, brokerages and the bourse say the market is only recovering.
“It’s one thing to say that some shares are expensive; it’s another to say that there’s a bubble,” Colombian Stock Market President Juan Pablo Cordoba said on local radio.
“It seems to me unjust and irresponsible to make these type of generalizations,” he said. “Let’s not forget that the market had fallen 30 percent in the year before the 2008 financial crisis. A big part of what we’re seeing now is a recovery.”
Growth was been driven by oil firms Ecopetrol and Pacific Rubiales as well as the Grupo de Inversiones Suramericana and Bancolombia. Average daily trading volume has broken $100 million, an historic high.
Brokerages said market growth will be more moderate in the coming months due to solid economic fundamentals and the integration of bourses in Santiago, Lima and Bogota. Colombia’s economy is seen growing around 4.5 percent this year after expanding 0.8 percent in 2009.
The integration of the three stock platforms should draw more investment, especially from foreign companies looking to list their shares overseas.
Other emerging markets have seen so-called “hot” money flow into their nations, which has also put pressure on domestic currencies and seen some countries intervene in their foreign exchange markets to try to control the appreciation.
While Colombia is enjoying strong demand thanks to growing expectations its debt may soon regain an investment-grade rating, net foreign portfolio inflows were $179 million from January to September, with $951 million coming in and $772 million going out, according to central bank data.
“The market could take an occasional breather but in general the tendency will continue being positive for a while because there’s the context of global liquidity that will be maintained possibly until the first half of 2011,” said Stefania Leon, an analyst with Correval. (Jack Kimball / Reuters)