Colombia 3Q Stock Outlook: Market Poised For More Gains
By DIANA DELGADO July 8, 2005 10:37 a.m.
Of DOW JONES NEWSWIRES
BOGOTA -- Colombia's equities market has been reaching all-time highs, and should continue to climb even further in the third quarter amid a flurry of mergers and acquisitions.
Colombian shares have advanced more than 13% in dollar terms so far this year, according to Morgan Stanley Capital International, surpassing gains among most other Latin American markets. During the second quarter alone, Colombian shares rose 15% in pesos terms, and the local equities market reached its highest level ever.
Analysts expect the main IGBC index to continue gaining over the next three months, with a number of mergers and acquisitions underway or expected to be announced. At the same time, strong earnings growth should also be supportive of rising share prices.
"While profit taking could happen - especially if the U.S. Federal Reserve keeps increasing rates - (Colombian) stocks should keep advancing, propelled mostly by financial stocks," said Edgar Jimenez, equity analyst at local brokerage Promotora Bursatil.
Stocks in the financial services sector should benefit from consolidation.
Shareholders of Colombia's largest bank, Bancolombia (CIB), investment bank Corfinsura (CORFINSURA.BO) and mortgage heavyweight Conavi in March approved a proposed merger of the three institutions that should wrap up this month.
Suramericana de Inversiones, the holding company of the three institutions, has the largest weighting on the IGBC index, while Bancolombia's ordinary and preferred shares are ranked No. 3 and No. 4, respectively, in terms of weighting.
Analysts noted that other financial stocks should also keep advancing, as more mergers and acquisitions are queuing to obtain the approval of the securities regulator.
Banco Davivienda is in the process of buying credit card firm Banco Superior (SUPERIOR.BO) in a transaction that will create the fourth largest bank in terms of assets.
Investment bank Corfivalle (CORFIVALLE.BO) is awaiting regulatory approval to merge with another financial firm, Corficolombia.
Brewer Bavaria (BAVARIA.BO) should also perform smartly. International and local analysts expect the sale of South America's second-largest brewer toward the year's end.
International companies interested in the deal include SAB Miller (SAB.JO), Scottish New Castle (SCTN.LN) and Heineken N.V. (00916.AE) of the Netherlands.
Bavaria, which has the second-largest weighting on the IGBC index, advanced 31% over the past three months.
As for other sectors, talk that a foreign steel company is interested in joining forces with Acerias Paz del Rio (PAZDELRIO.BO) has been lifting the company's shares, which jumped 23.4% in the last quarter.
Table Of Recent Trends INDEX: IGBC Stock Index At End At End At End At End At End 2Q/04 1Q/05 4Q/04 3Q/04 2Q/04 Index 5563.57 4652.45 4345.83 3445.47 3004.45 Qtr-to-Qtr Change +20% +7% +26% +15% -9.5% Currency: Peso At End At End At End At End At End 2Q/05 1Q/05 4Q/04 3Q/04 2Q/04 Peso Vs Dlr 2326.10 2377 2350 2617.50 2699 Qtr-To-Qrt Change +2.2% -1.1% +11% +3.1% -0.4% 2Q Index High: 5,563.57 (06/30) 2Q Index Low: 4,683.47 (04/01) Latest Close: 5,614.75 (07/07) Latest close vs 2Q high: +0.9% Latest close vs 2Q low: +20% Latest close vs 2Q close: +29% (This is the sixth in a series of articles on the prospects for Latin America's main stock markets in the third quarter.)
-By Diana Delgado, Dow Jones Newswires; 571-600-1980; firstname.lastname@example.org