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Coronavirus disrupts the stock market

Posted On 23 Mar 2020

According to data from the Superintendency of Companies, Securities and Insurance, the transactional amounts closed on the country’s stock exchanges in 2019 amounted to $ 11,796 million. 58% more than in 2018.

Coronavirus disrupts the stock market

However, experts consider that this growth will not be sustained in 2020 due to the uncertainty caused by the emergence of covid-19.

According to Rodolfo Kronfle, president of the Guayaquil Stock Exchange (BVG), the outlook for the impact on the national economy of this pandemic is still uncertain.

He admits that the stock exchanges worldwide have presented sharp falls due to mistrust and the slowdown of the economies. However, the effects in Ecuador at the stock market level are still not very visible.

Even, the movement in the BVG in the beginning of this year (January-February) was positive in relation to the previous year. $ 1,364 million was closed, representing a growth of 73% compared to the same period in 2019.

“We are not very globalized and the securities traded here are mostly fixed income that do not show strong variations,” says Kronfle.

Luis Naranjo, head of Economic Analysis, Foreign Trade and Projects of the Quito Chamber of Commerce , explains that although in Ecuador it is still not possible to speak of an exact number of the impact on the economy by covid-19, in other countries it is calculated that the negative effect will be from 1% to 1.5% in the economic growth forecast for this year.

Ecuador’s growth for 2020 was estimated to be 0.7%, according to the Central Bank.

“It will be difficult to reach a development like the one of the previous year in the stock markets. The private movement within this market I think is going to stagnate, “says Naranjo.

The analyst ensures that when companies stop growing and there is a global recession, the value of their shares decreases. This is why many world stock exchanges fell by as much as about 30%.

For a cultural matter, he continues, Ecuadorians prefer to keep their money in something safe like the bank, than go to the stock market.

In general, transactions in Ecuador through the stock market are low.

According to Gilberto Pazmiño, president of the Quito Stock Exchange, what was traded on the stock market in 2019 represents 10% of the country’s GDP. In nearby countries such as Chile and Colombia these transactions represent 300% and 190% of GDP, respectively.

Pazmiño explains that the growth that was evident in 2019 was because there was an important participation of roles from the public sector.

For example, treasury certificates issued by the Ministry of Economy and Finance went from $ 2,300 million in 2018 to $ 4,770 million in 2019.

Importance of stock exchanges in the economy
Pazmiño considers that the stock market is a strategic sector and protagonist of the development of a country. It links national savings with those who demand financing.

Companies, according to Kronfle , obtain financing at better rates and terms. While investors can diversify their investment alternatives, reduce risk and obtain better returns than those offered by the financial system.

For the participation in the stock market to grow, Pazmiño considers that an updated regulation is needed for this market, to eliminate capital entry barriers, to have a tax legislation that attracts foreign investment, among other measures.

https://www.eltelegrafo.com.ec/noticias/economia/4/coronavirus-mercado-valores-salud

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