This principal business activity is typically cyclical in nature characterised by performance activity swings (boom/bust, feast/famine). There are traditionally two relatively large peaks in the activity index. The first would normally occur in April with the largest and most resilient upsurge observable during July/August. Thereafter there would normally be minimal interest from investors unless the macro economic policy managers introduce distortions and inadvertent yield mismatches. By far the largest investors were domestic institutional investors contributing about 85% of all trades by volume and value. This provided the desirable market stability by reducing inherent volatility. However the foreign investors retuned in earnest after dollarisation in 2010. They have now completely overrun the trading activity. Domestic institutions have been slowly building up resources since dollarisation. Bethel Equities has developed strong external relationships with external investors throughout the world.
The trading market itself has shrunk considerably over the last 3 years. Volumes continue to collapse. This is an indication that traditional institutional investors and individuals are not as active as before. The previous historical growth had been driven by the proliferation of wholesale activity such asset management firms and other savings boutiques. Initially these had limited supervision and were largely speculative in nature. Turnover volumes were quite unprecedented during the period 2000 – 2003 as depositors’ funds were being churned with minimal regard to risk management. This irresponsibility contributed to the ultimate partial collapse of the financial services sector and Central Bank intervention starting in December 2003. In the last five years, the primary demanders of equity products, the Insurance and Pension Funds have significantly declined. These traditional “pools” were nearly wiped out on “dollarization” in 2009. Recovery has been very sluggish. Premiums are down and falling and liabilities are up.
Clearly the business has been further devastated by uncertainty and economic mis-governance. Market activity tends be positively correlated with the levels of transparency and the timely release of strategic performance information under stable macro-economic fundamentals. The mechanism of price discovery has been negatively impacted by macroeconomic distortions and is of relatively lower integrity on a global scale.