2010年-世界发展银行全球_El_Salvador_Financial_Sector_Assessment_Program_Update___Capital_Market_Development_21页_1mb

El Salvador Capital Market Development Summary

Core Content

This technical note provides an overview of the capital market development in El Salvador as part of the Financial Sector Assessment Program (FSAP) update. It highlights the current market situation, intermediaries, infrastructure, investor base, public debt market, corporate bond market, and equity market, while also suggesting areas for improvement.

Main Points

Current Market Situation

• El Salvador's capital markets are small and underdeveloped, playing a limited role in the national economy.
• At the end of 2009, there were only 40 listed stocks and a limited number of private corporate bond issues.
• The stock market capitalization was about US$5.2 billion, equivalent to 24.6% of GDP.
• Public debt securities totaled about US$6 billion, representing 28.7% of GDP, with 66.7% being Eurobonds.
• Institutional investors allocate less than 10% of their total assets to capital market instruments.
• The market is dominated by banks and pension funds.

Market Intermediaries

• Brokerage firms are the main market intermediaries.
• The number of brokerage houses decreased from 23 in 2000 to 12 in December 2009.
• Most of the brokerage houses are part of financial conglomerates.
• Brokers primarily engage in traditional brokerage and fund management activities.
• Brokerages are the only direct participants in the BCR's securities auctions.
• Proprietary positions are minimal.

Market Infrastructure

• The current clearing and settlement infrastructure is centered around the BVES.
• CEDEVAL serves as the centralized securities depository for all BVES-traded securities.
• CEDEVAL uses a book-entry system for safekeeping, transfers, and clearing.
• The electronic settlement cycle is standardized to T+0 for repurchase agreements, T+2 for treasury bills, and T+3 for government bonds.
• Not all securities are dematerialized, and the RTGS system is not fully linked to the securities settlement system.
• A pricing methodology for securities valuation is still under development.

Investor Base

• Pension funds are the largest domestic institutional investors, with assets totaling US$5 billion in 2009, or 23% of GDP.
• Only two AFPs operate in the country, dominating the institutional investors segment.
• Pension funds mainly invest in public debt securities due to regulatory requirements and lack of investable domestic securities.
• Banks are significant investors in public debt markets due to prudential requirements.
• Insurance companies are small investors, with total assets of US$556 million in 2009, or 2.7% of GDP.
• Collective investment schemes are not well-regulated and have been largely phased out due to inadequate oversight.

Public Debt Market

• The main public debt issuers are the Central Government and the BCR.
• The Central Government issues securities directly through MH and indirectly through BMI.
• MH issues fixed-term bonds, while other government and BCR instruments are floating-rate.
• There is a lack of coordination between MH and BCR, leading to market fragmentation.
• The legal framework for public debt management is restrictive and inefficient, limiting strategic debt management.
• The AFI law does not provide clear objectives or procedures for public debt management.
• The MH and BCR have overlapping responsibilities, leading to organizational fragmentation.

Corporate Bond Market

• The corporate bond market is illiquid, with only 40 outstanding issues at the end of 2009.
• The secondary market turnover ratio was 0.09 in 2009.
• Limited secondary market activity is due to private placements, pension fund regulations, and the anticipated introduction of mutual funds.
• There is a lack of a sovereign yield curve, leading to the use of bank deposit rates as a benchmark, which is not market-sensitive and can be manipulated.
• Private debt instruments like ABS and covered bonds are still underdeveloped.

Equity Market

• The equity market is characterized by cumbersome registration processes and a restrictive ownership structure.
• There have been very few IPOs in recent years, indicating a lack of new equity issuance.
• The market capitalization was about US$5.2 billion in 2009, or 24.6% of GDP.
• Financial institutions account for a significant portion of the market capitalization.

Key Information

• The capital markets in El Salvador are significantly smaller and less developed than those in neighboring countries like Colombia, Peru, and Chile.
• The current regulatory framework grants the BVES a natural monopoly, limiting competition and innovation in the market.
• The market lacks a proper pricing mechanism and efficient secondary market activities.
• Pension funds are heavily regulated and primarily invest in public debt securities.
• The legal framework for public debt management is outdated and does not support strategic debt management.
• The corporate bond market is underdeveloped and lacks liquidity and a clear benchmark.
• The equity market is constrained by regulatory and structural barriers, limiting new entrants and growth.