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9/1/08

The Colombia stock market and IGBC index: An overview

Way back when I ran two posts, one giving an outline of the Peru stock market, and another being general on Argentina's market. So when I saw the good news out of Colombia today, namely that the country has confirmed the strong rumours bandied about and finally done away with capital controls on foreign investment money wishing to invest in equities there, I thought it a good time to pick up the thread and write a general overview of the Colombian market. But before we get there, a quick word on the news today. As reported here by Bloomie, Colombia has stripped away the 50% capital investment lock-up program that was very off-putting for foreign capitals. The news popped the main IGBC index by 3.5% today on the news, and Colombian investors now expect to be awash with foreign dollars....a bit like their army, I suppose.

So now that's out of the way, let's have a closer look at how stocks trade in Colombia and we'll concentrate on the main IGBC index to do so. It's worth mentioning right now that the Bolsa de Valores de Colombia (BVC), does the vast majority of its business in bonds, but even though between 85% and 90% of the money that flows through the BVC is in the debt market we're concentrating on equities today.

Here's a home-made chart that tracks the IGBC index from January 2007 to date (and click on any of the charts in this post to enlarge, by the way).

As we can see, 2008 has not been a good year for Colombian stocks, the main waterfall moment having come late January. Since then the index has moved roughly between the 9,000 and 10,000 level, so today's 300 point move to 9,709 means it is still very much in the recent trading range.

The IGBC is currently made up of 29 stocks. Here's a list of them all that shows the ticker, the company name and the weighting it has towards the IGBC.
Ticker Company Sector % weight 3q08
ECOPETROL ECOPETROL Energy 37.09
SURAMINV SURAMERICANA DE INVERSIONES S.A. Investment Holding 10.11
BCOLOMBIA BANCOLOMBIA S.A Banking 6.23
PFBCOLOM BANCOLOM PREF ADR´S Banking 5.63
ISA INTERCONEXION ELECTRICA S.A. ISA Energy Infrastructure 5.08
FABRICATO TEXTILES FABRICATO TEJICONDOR S.A Textiles 4.97
CEMARGOS CEMENTOS ARGOS Construction 4.31
INVERARGOS INVERSIONES ARGOS Construction/inv. 3.79
COLINVERS COMPAÑIA COLOMBIANA DE INVERSIONES S.A. Investment Holding 3.55
PAZRIO ACERIAS PAZ DEL RIO Construction/Steel 2.65
EXITO ALMACENES EXITO S.A. Retail 2.49
BVC BOLSA DE VALORES DE COLOMBIA S.A. Investment Holding 2.03
TABLEMAC TABLEROS Y MADERAS DE CALDAS Construction/Wood 2.01
CHOCOLATES GRUPO NACIONAL DE CHOCOLATES S.A Food 1.79
CORFICOLCF CORPORACION FINANCIERA COLOMBIANA Banking 1.51
ETB EMPRESA DE TELECOMUNICACIONES DE BOGOTA S.A. E.S.P. Telecoms 1.27
POPULAR BCO.POPULAR Banking 1.12
GRUPOAVAL AVAL S.A. Banking 0.96
INTERBOLSA INTERBOLSA COMISIONISTA DE BOLSA Investment Holding 0.91
ISAGEN ISAGEN S.A. E.S.P. Energy 0.68
BOGOTA BCO. DE BOGOTA Banking 0.47
ENKA ENKA DE COLOMBIA S.A. Petrochem/Plastics 0.41
PFBCREDITO BANCO DE CREDITO S.A. HELM FINANCIAL SERVICES Banking 0.37
MINEROS MINEROS S.A. Mining 0.25
ODINSA ORGANIZACION DE INGENIERIA INTERNACIONAL S.A. GRUPO ODINSA Infrastructure 0.13
PFCORFICOL CORPORACION FINANCIERA COLOMBIANA S.A. Banking 0.1
VALOREM VALOREM S.A. Investment Holding 0.08
SDCORFIC08 CORPORACION FINANCIERA COLOMBIANA Banking 0.003
SDPFCORF08 CORPORACION FINANCIERA COLOMBIANA Banking 0.0005

Below is chart that shows just how heavily weighted the index is towards just three companies, namely Ecopetrol, Suramerica de Inversiones and Bancolombia (note that Bancolombia holds third and fourth post on the weighting with its common and preferred stock in turn).

Between them, these three companies control a full 59.06% of the IGBC index, which nevertheless pretends to be the index that most represents the Colombian stock exchange. Shades of Tenaris in the Argentine Merval, I fear. This next chart shows all the other stocks bar the big three and their index weightings, as otherwise they are a little difficult to spot

So now let's move on and have a very quick look at a few of the main stocks in the index. Each one is accompanied by a 60 day price chart ripped directly from the BVC website that gives a bit of context. Click to enlarge charts as always.

As we can plainly see above, Ecopetrol is the 800lb gorilla in Colombian investments.
Ecopetrol is Colombia's own mini Petrobras, and with 37.09% of the total index weighting its influence has recently been called too great by local analysts. It has only recently gone public, and it's the first traded stock to be held by the wider general public; for the IPO its service stations were offering share certificates at the time.

Next comes Suramericana de Inversiones with a 10.11% index weighting.
This is an investment holding company with a wide range of holdings in local businesses. Its largest holding is Bancolombia which takes up 35% of its portfolio. It's very tightly held by other local investment houses and institutions, many of which also quote on the BVC (eg Argos holds 38% of suraminv).

Next is Bancolombia. Here's the chart for the common stock.....
...and here's the preferred stock evolution.
Between them they hold a 11.86% index weighting. Bancolombia is also available as an ADR in the USA, its ticker being CIB.

Next is Interconexion Electrica S.A. (ISA), with 5.08% index weighting.
ISA is one of the stocks that deserves a closer look. Although the recent high country inflation has taken the edge of Colombia's growth figures recently, there's much to like about holding infrastructure stocks in the longer term. Consider this a simple starting point for further DD.

Another infrastructure company to consider is Argos that has two IGBC listings. The cement listing shown here....
....and its investment company. Together they cover 8.1% of the index weighting.

The final example (leaving many out, obviously) is Almacenes Exito S.A. with 2.49% of current weighting.
Exito is a supermarket chain in Colombia that has been a traditional favourite for foreign investment. It's also available on the US pinksheets, the ticker being ALAXL.pk.

So that wraps up this quick look at the Colombian IGBC index and a few of its components. This type of post is not meant to provide solid investment advice, but it does serve to introduce the subject and give you a feel for what's on offer in Colombia's capital exchanges. One final thing to keep in mind is the currency forex, because as this final chart shows there has been plenty of volatility in the Colombian Peso recently....
....and any influx of foreign capital will be a currency strengthening influence. Now the capital controls that have been in place for nearly 18 months have been lifted, there will be plenty of foreign money sniffing around the BVC. DYODD, and see if you can pick up a bargain yourself.



Related Posts:
Argentina's Merval Index: An Overview
The Peru Stock Market (BVL): An Overview