Two largest Venezuelan stocks delist from exchange
By Benedict Mander
Published: May 8 2007 21:34 | Last updated: May 8 2007 21:34
Venezuela’s stock market lost almost a third of its value yesterday after two of its largest and most liquid stocks were delisted, causing concern that the exchange would fall into insignificance. The removal of the shares of CANTV, Venezuela’s largest telecommunications company and until now its largest traded company, and Electricidad de Caracas, the largest remaining private electricity utility, comes after President Hugo Chávez’s announcement in January that they would be nationalised.
Analysts fear that this represents another nail in the coffin for Venezuela’s stock exchange. “By taking out two of the three most active shares on the exchange, they are condemning it to death – even more so by showing that this is a very dangerous place to be investing,” says Robert Bottome, an economist in Caracas.
The absence of the two stocks, which account for more than a third of trading on the exchange, will drastically reduce liquidity, which is already at less than $1m a day.
“I can’t help seeing Venezuela reversing into a Bolivian bourse kind of situation, where stocks are non-existent and bonds take all the traded money,” said Mark Turner, an equity analyst at Hallgarten, an independent research house based in New York.
“The Venezuelan bourse isn’t very big compared to national gross domestic product anyway, so it wouldn’t take much to turn it into a dead duck.”
Foreign investment in Venezuelan stocks was severely restricted after Mr Chávez introduced exchange controls in 2003, but options are now limited for local investors too.
As Mr Chávez threatens further nationalisations, analysts say there are few stocks with interesting prospects. Last week Mr Chávez threatened to nationalise Sidor, the country’s largest steelmaker, and the entire banking sector.
Last year the Caracas IBC index was one of the best performers in emerging markets, with a 156 per cent rise in local currency terms.
Mr Bottome says shareholders are not being compensated fairly.
“One of the mysteries is why they are getting such a low price,” he says, observing that the government is buying the shares in CANTV at little more than half the price they were issued at 15 years ago.
The government’s offer of $14.84 per package of seven shares was slightly below the market price, and well below the offer of $21 last year by Carlos Slim, who controls the Mexican telecoms giant Telmex. Analysts say the withdrawal of the shares could add to pressure on the black market exchange rate.
Buying CANTV’s American Depositary Receipts are a way for Venezuelans to access dollars, which is complicated by exchange controls and restricted local supply. They have helped to take pressure off the black market rate, which values the dollar at more than 4,000 bolivars, compared with the official rate of 2,150 bolivars.
Copyright The Financial Times Limited 2007http://www.ft.com/cms/s/d5574560-fd98-11...0b5df10621.html