Strength in Numbers

Capital Markets

BVC data indicates that the Colombian market has grown by 18% annually since 2013, at the end of which year trading volume had registered at Ps1,102 billion. The average daily […]

BVC data indicates that the Colombian market has grown by 18% annually since 2013, at the end of which year trading volume had registered at Ps1,102 billion. The average daily trading volume (ADTV) as of May 2014 is Ps4.1 billion. Moreover, investment carries almost a 30% weight in GDP.


The BVC represents a multi-product exchange servicing the value chain of the Colombian capital market from equities and derivatives to bonds and currency trading. It was developed with a view to providing a diverse array of investment instruments with which to generate liquidity for the broader economy. Indeed, over the past five years Colombia and its productive matrix have generated resources in excess of Ps84 trillion according to the bourse. May 2014 ranked third-best in volume terms for private debt issuances over the past five years, with total allocations of Ps2.67 trillion, and where demand exceeded Ps6 trillion. The performance was only trumped by the Ps5.46 trillion volume of February, 2013 and Ps2.96 trillion of December, 2010.


The equity market hosts 78 listed stocks (72 domestic and six foreign), prominent among which is Ecopetrol, listed in 2007. By far the heaviest presence on the index, with a market capitalization (MCap) of $91.1 billion, it is a strategic asset and still 88.5% state-owned. Ecopetrol enjoys further liquidity by also being listed on the New York and Toronto exchanges. According to the BVC, the government is evaluating the potential sale of an additional 8.5% stake with revenues to be channelled to infrastructure projects. Due to its weight in the index, the equity market is very much influenced by oil and gas market events.

According to Index Mundi, the BVC’s 2000 MCap of $9.6 billion by 2010 had reached $208.5 billion. In 2012 the bourse ranked 30th in the world by MCap, behind Brazil at 10th, Mexico at 19th, and Chile at 26th place. Total equity market issuances in the period of 2010 to June 2014 were at $12.80 billion. As of July 14, 2014 the MCap of the largest-three stocks Ecopetrol, financial holding Grupo Aval Acciones y Valores, and Bancolombia, was Ps137 trillion, Ps27 trillion, and Ps25 trillion, respectively.


According to the BVC, the equity market posted a CAGR of 41% between 2003 and 2013, and as of May 2014 the average daily trading volume (ADTV) was at $108 million, while MCap as of May 2014 was in $219 billion. The key capital market indices ended 1Q2014 in positive territory, where the benchmark COLCAP of 20 liquid stocks closed at 1688.30 up 5.1% from end-2013. Foreign investors accounted for $3 billion of trading volume, 32.1% of total purchases, and 35.1% of sales at the BVC. Year to date, as of July 14, the index had gained 7.36%.


According to the World Federation of Exchanges, Colombia ranked sixth in the world in terms of bond trading value in 2013 at $936 billion. The fixed income market has ratcheted up 19% annual growth since 2003. The average daily trading volume of the fixed income arena up to May 2014 is $2.8 billion. The bulk of that volume, at 90%, comprises government bonds while 10% is corporate debt. Meanwhile, 9.4% of Colombian government paper is foreign held.

According to BVC data in the first five months of the year, the market staged eight auctions of as many issuers, where investors bought up more than double the Ps3.31 trillion placed. The three highest year-to-date issuances are Grupo Sura, Davivienda, and Emgesa, placing Ps650,000 million, Ps600,000 million, and Ps590,000 million, respectively, and receiving, in the same order, demand of Ps2.01 trillion, Ps1.31 trillion and Ps1.18 trillion.


Politics reared its head at the BVC following the indecisive May 25 first round of the 2014 presidential elections, as it seemed possible for now-re-elected President Juan Manuel Santos to lose out in June’s run-off round to rival Oscar Ivan Zuluaga. The latter was vocally opposed to the sale of state-owned hydropower entity ISAGEN, whereby the stock shed 4.6% on May 26, heading the COLCAP index (-0.2%) losers. President Santos indicates that a 57.6% stake in ISAGEN—for which he would accept no less than Ps5 trillion—would help fund Colombia’s $25 billion fourth generation road construction program.

More recently, despite the intentions of the peace process, attacks on pipelines have impacted Ecopetrol. The stock tumbled in mid-July amid concerns that these events would jeopardize its 819,000 barrels per day (bop/d) output target for 2014.


Itself a listed private enterprise, the BVC describes its principal objective as expanding “…its product line though strategic alliances within and outside Colombia, generating sustainable value for its stockholders.” In 2011 to boost liquidity levels—the lifeblood of a vibrant capital market—the BVC hooked up with Peru’s Lima Stock Exchange (LSE) and the Bolsa de Comercio de Santiago (BCS) in Chile. The link up, known as MILA, established the third largest liquidity lake in Central and South America besides the Brazilian and Mexican markets. The structure not only provides regional visibility by diversifying the instrument offering, but benefits from economies of scale, leveraging the experience of three mature markets. In short, more liquidity, more issuers, and more investors.

In 2013, while the BVC’s stand-alone MCap was $205 billion, with an equity trading volume of $10 billion, the respective figures for MILA were $560 billion and $25 billion. According to the bourse, with Mexico—which plans to join the party by year-end 2014—MILA’s respective figures are estimated rising to $1.1 trillion and $89 billion.


The BVC introduced e-trading in 2009, but its uptake has been rather labored. Bourse President Juan Pablo Córdoba Garcés told TBY that, “Currently, only 4% of trading is done via e-trading. We reached a peak of 7%-8% at some point in 2011-2012, but we need to work to further this rate, which we believe will really empower investors in the local market.”


Opened for business in September 2008, Colombia’s local Standardized Derivatives Market became the fourth source of these instruments in Latin America. Trading in standardized derivatives in Colombia hit a record high on March 4, 2014 with a nominal amount of Ps1.26 trillion, rocketing 24.7% above the previous high of Ps1.01 trillion on April 18, 2013. Heading the field was TES futures on a nominal Ps475 billion, and maturing in 2016. Second and third spots went to TES futures maturing in 2024, at Ps213 billion and Bancolombia’s preferred stock futures, at Ps138 billion. The derivatives market grew at a CAGR of 43% between 2003 and 2013, and the average daily traded volume as of May 2014 was $185 million.

Colombia’s capital markets are well regulated and diversified in terms of instruments. Yet its equity market remains susceptible to oil movements, given the principle COLCAP constituent, Ecopetrol. That being said, the potential entry of Mexico to the MILA club late in 2014 would throw the BVC into higher gear.