Bermuda Stock Exchange Reflects On A Challenging Year

by Phillip Morton, Investors Offshore.com

13 January 2009

The Bermuda Stock Exchange has announced that the impact of the global financial crisis severely hampered the performance of the RG/BSX index last year.

Torpedoed by the global credit crisis, performance of the world’s stock exchanges was significantly impacted in 2008 with losses in market value ranging from 30% up to 50%. The Bermuda market followed this trend by falling 30% in value as reflected by the BSX/RG Composite Index, which ended the year at 3417.00, a change of 1,553 points in total. Offsetting this decline was a market dividend yield of over 5%, which resulted in a net return of negative 25%. Domestic trading volumes increased from 5.3 million shares to 6.8 million with a corresponding value of over BMD99m.

The total market capitalization of the BSX on December 31, 2008 (excluding fund listings) stood at over USD226bn of which approximately USD1.9bn represented the domestic market.

On December 31 2008, 599 issuers were listed on the BSX. Included in the new listings were the Variable Note Programmes of Valais Re and Blue Coast Limited, underscoring the BSX’s commitment to provide market opportunities and support to the Bermuda insurance market. The Exchange also listed a further 55 international derivative warrants originating from a division of CALYON. There were also 9 new collective investment vehicles listed and 9 subsequent issues processed during the year.

In 2008, the BSX was granted membership to two international industry groups acknowledging the work accomplished in respect of the exchange’s regulatory and operating environment. In February, the BSX was granted membership to America’s Central Securities Depository Association (ACSDA) and in August the BSX joined the European Securitisation Forum.

ACSDA acts as a forum for the exchange of information and guidance among its members to promote best practice in securities depository, clearance, settlement, and risk management services. ACSDA currently has 22 members mostly located in the Western Hemisphere.

The European Securitisation Forum (ESF) is a broadly based professional forum through which participants in the European securitisation markets advocate their common interests on important legal, regulatory, accounting and market practice issues. The ESF is comprised of investors, investment banks, legal firms, securities brokerage firms, stock exchanges and other financial services institutions.

In making the year-end announcement, BSX President and Chief Executive Officer Greg Wojciechowski stated: “There is no doubt that the results of the world’s markets in 2008 were nothing less than stunning. The first half of 2008 saw market’s trading at record price and volume levels which was followed by a complete reversal of the trend in the second half resulting in global markets closing at 30%-50% less than where they began the year. At times market volatility was so intense that some markets chose to halt trading in the hope that a pause would allow investors to regain a sense of composure and return to a less volatile environment.”

In October, the Board of Directors of the World Federation of Exchanges released a joint communiqué stating that:

“Exchanges have continued to function properly during this crisis, fulfilling their role as continuous, open markets for establishing and disseminating prices for exchange-traded instruments. The transparency of the prices in exchange-traded instruments makes this information available to all and is providing important liquidity to investors. The world’s exchange leaders strongly reaffirm the principle that equities and equity related exchanges remain open throughout this period.”

Management of the BSX shared and continues to share the view of the WFE Board and never halted trading during these periods of high market tension. Although domestic stocks came under acute selling pressure, the regulatory and compliance unit of the BSX through constant monitoring was confident that the market was functioning in an orderly fashion thus ensuring that investors continued to have access to Bermuda’s regulated market.

Wojciechowski noted in closing: “While there is considerable uncertainty surrounding the immediate future of global capital markets, times of great uncertainty create periods of unparalleled opportunity. It is with this in mind that the BSX Team looks forward to 2009. We see local and international opportunities for the BSX and the Bermuda market. We are confident that the BSX operating and regulatory environments are capable of responding to the next wave of opportunity and challenges in 2009 and will strive to continue supporting the needs and requirements of the domestic and global financial markets.”

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