Sada Reddy: Fiji's first Stock Exchange celebrates its 30th anniversary
Opening address by Mr Sada Reddy, Governor of the Reserve Bank of Fiji, at the 30th
Anniversary of the South Pacific Stock Exchange (SPSE), Suva, 28th October 2009.
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Introduction
Representatives of the capital market intermediaries, distinguished guests, ladies and
gentlemen. Good evening to you all.
I am delighted to join you this evening to celebrate the 30th Anniversary of the South Pacific
Stock Exchange (SPSE), and I thank the SPSE for the warm invitation.
Firstly, I would like to commend the Board and Management of the SPSE for continuing the
good work in developing SPSE to where it is today. As we reflect on the developments over
the last 30 years, I would also like to pay respect to the founding members for this vision,
some 30 years ago to establish the first ever Stock Exchange for Fiji.
Importance of the capital markets
The stock market is often seen as a very significant component of the financial system of any
economy. There is indeed a growing body of research which points towards capital market
development making positive contribution to economic growth.
Fiji's stock market fulfils two main functions. Firstly, the market acts as a means for raising
capital for companies, and secondly, a more important secondary role is that it facilitates the
exchange of previously issued shares.
No doubt, a market economy like ours needs a vibrant and developed capital markets as it
offers great opportunities to make a real and positive contribution to the economic
development of our country. It is therefore important that these opportunities are fully
exploited.
History of the stock exchange
Let me share with you some of the brief highlights of Fiji's stock market over the past years.
What started off as a mere trading post in 1979 at the then Suva Stock Exchange, has today
grown to accommodate 16 of Fiji's most successful public companies. I congratulate the few
public companies who had pioneered this establishment, and have decided to remain
onboard despite the bull and bear cycles of the industry within the last 30 years - Fiji Sugar
Corporation Limited (FSC), Toyota Tsusho Company Limited (TTS) and prominent
manufacturer, Flour Mills of Fiji Limited (FMF), to name a few.
Although there have been ups and downs in the industry, and the economy as a whole, the
stock market continued to provide alternative savings and investment opportunities for most
of our citizens. Let me highlight few statistics:
•
In 2008, the total dividends declared and distributed to shareholders amounted to
around $57 million;
•
The market capitalization, which represents the total value of stock listed on the
Exchange, reached a peak of $1.2 billion in 2008;
•
The number of listed companies on the Exchange has increased from 4 companies
in 1996 to 16 in 2009;
•
The average value of trades per annum has increased from about $93,000 for the
first 5 years of the trading post to around $17.1 million1 in the past 5 years;
•
Public companies have managed to raised around F$113 million using the Stock
Exchange.
Considering the general level of Fiji's macro economic developments, these developments in
the Stock Exchange are quite encouraging.
Challenges in the capital markets
Despite these achievements, I believe that we still have a long way to go in terms of
developing a more vibrant capital market. Fiji is generally regarded as having a relatively well
developed financial sector among the Pacific Island countries. Most of the basic
fundamentals are in place, upon which we can built a more vibrant capital market. However,
the range of investments and financing options available are very limited. The potential
benefits of further mobilizing capital markets in Fiji are significant, as you know - but so too,
are the challenges.
A number of challenges confront us in the development of the capital market in Fiji. Let me
mention a few:
1. Listing of more public companies and privatization of state enterprises to
improve liquidity at the stock exchange - I believe that concerted efforts have
been undertaken by both the SPSE and the CMDA over the years to identify and
recruit potential issuers of securities in the market. However, most companies
remain reluctant to tap into the opportunities in the market. We need to find out why
companies choose to remain private, or what's hindering them to go public and list;
2. Development of new financial products - as I mentioned earlier, we need to
make available more investments and financing instruments for both companies and
potential investors, and provide financing options for Government and municipal
authorities;
3. An efficient legal and regulatory framework is also an important element in
promoting market integrity and investor confidence;
4. A supportive macro-economic policy and financial environment is also critical
for the capital market to grow as the economy grows;
5. Investor education is also important to raise the level of financial literacy both in
the capital markets and financial sector generally.
These are enormous challenges, which need to be addressed urgently if our capital market is
to realize its full potential. It calls for coordinated efforts by all stakeholders - the government,
the regulator, and the market players. No single stakeholder has the resources or the
capacity to develop this market alone. We need one another, and we need to understand the
roles each can play, and the contribution each can make, in the development of our market.
New regulatory arrangements
Ladies and gentlemen, let me now talk very briefly on the recent changes in capital markets
regulatory arrangements undertaken by the Government.
As most of you are aware that the Government on 13th August 2009, announced that the
administration of the Capital Markets Development Authority (CMDA) Act, was being
transferred to the Reserve Bank of Fiji as part of the Government's ongoing review of the
Financial Services Sector in Fiji.
This recent decision by the Government has meant that the whole administration of the
CMDA and likewise the regulation and supervision of Fiji's capital market will now be
consolidated under the ambit of the RBF. For a small economy like ours, it makes good
practical and financial sense to consolidate our supervisory functions and to approach
supervision of the financial markets in an integrated and coherent manner.
I am aware that some of you will view this move as a conflict of interest for the RBF
especially where Bonds are concerned. If anything, a central regulatory entity for Fiji's
financial systems will ensure that operations and processes are done in a much coordinated
and orderly fashion. Fiji is not the first country in the world to introduce such a unified
regulatory model. Similar practices have been followed in other economies such as in
Singapore, Denmark, Japan, Korea and the UK, where 3-4 regulatory organizations were
integrated into a single financial regulatory agency.
The merger also bonds in well with Government's overall public sector reform efforts to bring
about greater efficiency and cost savings.
I am pleased to announce that the transition has been successfully undertaken, and a
Capital Markets Unit under the Financial Systems Development and Compliance Group of
the RBF has already been set up in Tower 6 of the RBF.
Let me assure you all that I have no intention of down grading or removing any of the
important functions previously carried out by the CMDA. I am personally aware of all the
capital market developmental work that was undertaken at the Reserve Bank back in the mid
1990s when the Bank decided to move the Capital Market regulation and development role
to a specialized institution - after which the CMDA was established.
The Capital Markets Unit will continue to license and carry out all the supervisory activities
previously done by the CMDA, but with a more strategic and focused approach. A list of
indicators are being developed which will measure developments in the capital markets
within certain time frames. These indicators are currently being drafted by the unit and you
should expect to be contacted to comment or assist in its development.
Let me turn to the purpose for this evening.
Launching of the Stock Market Index
Tonight we will witness the launching of the SPSE Total Return Index (STRI). This STRI will
be very useful in gauging how the equities markets in Fiji are performing on a daily basis.
The concept, I am told, is similar to the various stock market indices that you are all familiar
with - for example, the NZSX, ASX, SING SX, etc.
I am sure that in developing and maintaining its own Index, the SPSE should be able to
provide great assistance to issuers and investors both at home and internationally, to monitor
the level of market activity and make better and informed investment decisions and choices.
Tonight, we will also be unveiling the new corporate logo for the Exchange. I have also been
briefed that the purpose of changing the logo was to give a more professional and corporate
look to better reflect the role of the Exchange and its progress over the thirty years.
I am confident, that if provided the right policy and direction, the Fiji capital markets and the
financial markets as a whole will be well placed to become a reputable international financial
centre for the region in time to come.
I hope that the Exchange will grow from strength to strength in the years ahead.
Thank you.