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Guyana Stock Exchange Under Scrutiny

Guyana Stock Exchange Under Scrutiny

Guyana’s slumping stock exchange has come under scrutiny for a wide range of improprieties and inefficiencies, among them price fixing, frontrunning, archaic trade execution capabilities, the failure of public companies trading on the exchange to be listed, and most important, inadequate regulatory supervision and controls.

In early February, Vice President Bharrat Jagdeo announced that the government would be willing to fund improvements to the privately-owned Guyana Stock Exchange (GSE), while criticizing its management for running the operations with the same technology it has used since its inception more than 20 years ago. 

Incidentally, the GSE was established in 1993 in accordance with the objectives of the IMF’s Guyana Poverty Reduction Strategy, with the aim of encouraging and/or supporting the private sector to raise local financing for investment. At that point in time the country was overburdened by debt and its recovery was being supervised by the IMF.

VP Jagdeo told the local press that though the GSE is private, the government has been providing it with “tens of millions” of dollars annually and is prepared to provide it with more funds to support its modernization. He acknowledged the importance of the stock exchange in raising financing and was ready to work with the private sector to improve the secondary market. “Given that we want to have this happen, we’re prepared to work with the stock exchange and the private sector and everyone else to modernise it and if it requires money we will put in the resources too,” he added.

Ironically, this is not the first time that the government has announced plans to modernize the country’s securities infrastructure. In 2018, the government announced that it recognized that the legal and regulatory framework governing the operations of the securities sector has not kept pace with developments with global best practices.

As a result, it planned to introduce a modern and comprehensive legislative framework to improve the regulatory regime, enhance investor protection and strengthen cross-border supervision and cooperation among financial regulators, in order to reduce systemic risk.

This, it said, will involve rewriting the Securities Industry Act (SIA) by the Guyana Securities Council to address the following areas:

  • Improved licensing regimes for self-regulatory organisations, securities exchanges and securities intermediaries;
  • Extension of regulatory authority over the entire securities marketplace, including quotation and trade reporting systems and alternative trading schemes;
  • Institution of a licensing regime for collective investment schemes;
  • Establishment of a Central Securities Depository to record and maintain securities and register the transfer of ownership of securities; and
  • Conferral on the regulator (to be renamed the Securities Commission) of such powers and duties as would enable it to promote the orderly development of the securities market and to protect the integrity of the market from abuse.

Although some headway has been made in other areas, it is evident that changes have not been made to the operations of the GSE, which remains private. By modernizing the GSE and its regulatory regime, the country’s stock market can become a tradable market for investors globally.

Mr. Jagdeo also criticized companies trading on the exchange for failing to be listed in order to avoid enhanced scrutiny and regular publishing of the accounts. “Even now, the public companies are not listed on the exchange because when you list on the exchange, there is a greater level of scrutiny over your accounts when you list on the exchange,” he said.

The public companies, which are privately-owned, include Banks DIH Limited, Caribbean Containers, Citizens Bank, Demerara Bank, Demerara Distillers Limited, Demerara Tobacco Company, Guyana Bank for Trade and Industry Limited, Guyana Stock Feeds Inc; J.P. Santos and Company Limited, Property Holdings Inc; Republic Bank Guyana Limited, Rupununi Development Company Limited, and Sterling Products Limited. 

Of these companies, only eight are actively traded, among them Banks DIH (DIH), Demerara Distilleries Limited (DDL), Demerara Bank Limited (DBL), Guyana Bank for Trade and Industry Limited (GBTI), Citizens Bank Incorporated (CBI), Republic Banks (Guyana) Limited (RBL), Demerara Tobacco Limited (DTC), and Sterling Products Limited (SPL).

Mr. Jagdeo said the GSE should ask existing companies to list on the exchange, noting that though they are public, they are currently operating more like private companies. He suggested that if the companies were listed on the GSE, the shares would be “more reflective of the (companies) fundamentals” such as growth, increased profits and higher price earning ratio. As a result, share prices would better reflect these parameters.

Typically, listing is a precondition to trading on an established stock exchange. In Guyana’s case, trade facilitation has taken place, resulting in price fixing and frontrunning, wherein stock prices are not subject to market forces. In addition, there is no regulatory supervision of trading activities. For instance, stock prices have moved significantly without any material developments or company announcements, and regulatory intervention to a significant extents has been sparse or non-existent.  

On any stock exchange, listing should come with reporting and disclosure requirements which companies in Guyana avoid by not being listed, making them less transparent. In addition, companies must pay stipulated fees to remain listed. Obviously, these requirements would place additional costs on the companies currently being traded but are essential in terms of investor protection and corporate accountability.

Ever since the GSE has come under scrutiny, share prices for traded securities have fallen dramatically. After soaring from $580.1 billion at the end of 2021 to $915.4 billion at the end of 2022, the market cap of the exchange has declined to $780.4 billion at the end of March 2024. It had previously reached a high of $1014.4 trillion at the end of April 2022.

Note: the writer owns securities mentioned in this article.

Dwarka Lakhan

Dwarka Lakhan

Dwarka Lakhan is a pioneer in emerging markets journalism in Canada. His first emerging markets article, “Africa Joins Ranks of the Emerging,” appeared in Investment Executive, Canada’s leading newspaper for financial advisors, in September 1994. Since then he has written hundreds of articles on the full spectrum of emerging markets and has conducted more than two thousand interviews with emerging and frontier markets investment professionals.


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