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Dynamics of the Ecuador Stock Market

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The Ecuador Stock Market is a relatively young market since only 26 years have passed since the approval of the Stock Market Law. Despite the fact that it is still in the process of consolidation, recent years have shown an increasing trend as can be seen in the attached graph. According to the Guayaquil Stock Exchange (BVG), in 2019 a total of $ 11.797 million was recorded in amounts negotiated nationwide. An impressive figure because it is an increase of 57,8% compared to the previous year. In this way, a greater degree of preference to investment practices in securities can be guaranteed. During the first half of 2020, the economy has been strongly affected by several factors. However, the stock market activity has not been paralyzed completely and it shows a hopeful dynamic.

Public securities

Public securities are debt securities issued by various organizations belonging to the Ecuadorian public sector. Among the main issuers is the Central Bank of Ecuador (BCE), National Finance Corporation (CFN), Ministry of Economy and Finance (MEF), among others. Thus, we can briefly analyze the historical report of the amounts traded in public securities by title and issuer.

Cash value and weighted average TEA (Public securities)

As can be seen, the security with the highest annual effective rate is the state bonds. They are characterized by a weighted average Annual Effective Rate of 7,22%.

Obligations (Corporate debt)

Obligations are securities issued by private companies to obtain resources from the public and thus be able to finance several of their productive activities. As of June 2020, the obligations show a total of 1028 transactions in the stock market nationwide. The accumulated amount negotiated for 2020 covers an amount of approximately $ 218 million. The evolution of the amounts traded shows encouraging data identifying an increase in the preferences of the private sector in obtaining financing through the stock market.

Commercial paper

Commercial paper is a security representing debt, which grants a right to collect interest and recover short-term capital. According to the financial statistics department of the Quito Stock Exchange so far in 2020, 497 transactions related to this type of security have been executed. 55 companies have issued commercial paper to obtain short-term financing this year. As of June 2020, the amount negotiated nationwide is around $ 402 million. Its weighted average annual effective rate in the first half of the year is 5,44%, which has not changed with respect to the previous year. Regarding the amount negotiated, the increase in relation to June 2019 has been slight, since it presents a growth rate of only 2,52%.

Variable income

In the domestic market, stocks and equity securities are the only equity securities. Shares are parts of the capital stock of a company. Its performance consists of a capital gain which consists of the increase in the share price and the payment of dividends that the company executes. Regarding the participation values, the investors acquire an aliquot in an equity, with which it participates in the results, that this equity yields regarding the securitization process.

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