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BSX says ‘own your share of Bermuda’

Own your share: the BSX is encouraging more people to invest in local companies

Owning your share of Bermuda may be easier than you think.

A new campaign launched by the Bermuda Stock Exchange is encouraging the public to take advantage of investment opportunities at home.

The key message is that by putting a few dollars into publicly listed Bermuda companies, residents can invest in the island and its future while giving themselves the opportunity for dividend income and capital gains.

The campaign launches after a year in which local stock investors enjoyed strong gains, as The Royal Gazette/BSX Index climbed more than 47 per cent in 2016 — around four times the increase in the S&P 500 Index of the major listed companies in the US, for example.

Past performance is no indication of what may happen in the future with stocks, as any responsible financial adviser will stress. However, the success of local companies last year did serve to highlight the on-island opportunities that may be going unnoticed by many.

Greg Wojciechowski, the BSX’s chief executive officer, has focused heavily on growing the exchange’s involvement with international investors in recent years, particularly in the area of insurance-linked securities — a sector in which Bermuda is now the world leader.

But now he feels the time is right to raise interest in domestic securities and ensure that locals understand what’s available to them in their own backyard.

“We want the investing public to be aware of the investing opportunities right here at home, using the national stock exchange,” Mr Wojciechowski said.

“We’re beginning to see green shoots of economic recovery and this is being reflected in the pricing of many of our domestic securities.”

He said the BSX wanted the campaign to reach out to a new demographic — particularly millennials who had never before thought of investing in local securities.

“At the exchange we are not investment advisers, we’re the plumbing that brings it all together, so people can access the securities through a regulated platform,” Mr Wojciechowski said.

The campaign will include the release, within weeks, of a step-by-step BSX guide on how to invest in local securities. The Royal Gazette will support the awareness effort by publishing weekly features on the listed local companies, describing what the companies do and how they aim to benefit shareholders, as well as details of their share price and dividend track records.

This will be supported by our Money columnist Martha Myron, whose Bermuda Investment Primer series in her regular Moneywise column on Saturdays will explain the basics on publicly listed companies, including their structure, governance and legal obligations, as well as the risks and opportunities for investors.

Expert columnists will also periodically offer their take on investing in Bermuda securities in the weeks and months ahead.

And this newspaper’s daily stock markets page will receive an overhaul to present the key data on our local companies in a more attractive and readable way.

There are 13 domestic companies that have shares trading on the BSX, all of which play a role in driving the island’s economy. Butterfield Bank is the largest among them with a market valuation of more than $1.7 billion.

There are also the utilities, Ascendant Group, One Communications and Watlington Waterworks, and local insurers Argus Group and BF&M.

Devonshire Industries, owner of the Bermuda Paint Company, and Polaris Holding Co, the owner of Hamilton docks operator Stevedoring Services, are also listed, along with real estate developer West Hamilton Holdings Ltd and Bermuda Press (Holdings) Ltd, the owner of this newspaper which also has printing, real estate and retail interests.

Financial institutions besides Butterfield on the BSX are Somers Ltd, owner of Bermuda Commercial Bank, and investment firm LOM Financial Ltd.

All bar two of these companies are paying out dividends to shareholders every three months.

“Almost all of us buy goods or services from these companies — we know who they are and what they do,” Mr Wojciechowski said.

To invest in such companies is to have a stake in the Bermudian economy, he added.

The BSX also lists company debt, preferred shares and Bermuda Government bonds that make interest or dividend payments to investors periodically in exchange for borrowing their money for a set period of time.

“Every capital raise we have had in the last 20-plus years has been successful and we have helped organisations to raise more than $1.5 billion,” Mr Wojciechowski said.

These types of securities give private and public-sector organisations an alternative to borrowing from the bank — and if the coupon they had to pay was lower than the interest they would have to fork out to an institutional lender, then it would be attractive to prospective issuers.

For investors, there is the satisfaction of seeing their money put to work to build something in the national interest or to fund Government needs, “to feel part of something” as Mr Wojciechowski describes it, as well as the financial returns from coupon payments.

And for Bermuda, there is the added advantage of the interest payments to local investors staying in the local economy, rather than leaking away overseas.

Mr Wojciechowski felt there was more scope for corporate and public-sector capital raises through the BSX and plenty of public appetite for them, based on the success of past issuances.

Among some of the oversubscribed offerings were the $200 million Butterfield Bank 8 per cent preference shares, a $50 million Government bond issuance and the bonds sold by the Corporation of Hamilton to finance the building of the Bulls Head car park.

Last year, the BSX upgraded its website, www.bsx.com, making it more aesthetically pleasing and data-rich, complete with a rolling ticker tape across the top of the screen allowing browsers to see details of the latest stock prices and trades.

The new look is in keeping with the BSX’s “world-class” digital infrastructure through the Nasdaq OMX platform, Mr Wojciechowski said.

Crucial to inspiring greater investor participation in the BSX are the brokers, the middle men between investors and the BSX.

There are five trading members who cater to retail investors: Barrington Investments, Butterfield Securities, Clarien BSX Services, LOM Financial (Bermuda) and HSBC Bank Bermuda.

Brokers can offer investment advice and set up trading accounts, and can help their clients to invest according to their risk appetite.

Last year, 8.2 million shares with a value of more than $48.6 million changed hands in BSX trading, but there is scope for much more.

Some prospective investors want to see higher trading volumes before they themselves get involved, as “a lack of liquidity” can make it difficult to liquidate investments in a timely fashion.

But with all bar one of the listed companies trading below their book value — an accounting measure that estimates the effective liquidation value of a company — then some will see opportunities to buy a piece of a local company at a discount.

Mr Wojciechowski wants to encourage the brokers to see domestic trading as a growth opportunity and to make the process of investing as smooth and convenient as possible to stimulate broader retail investor participation. The BSX platform is capable of supporting digital trading and Mr Wojciechowski hopes that one day brokers will be able to provide their clients with online trading options, just as the likes of Charles Schwab and E-trade provide digital access to the US markets.