THE lack of liquidity (how quickly shares can be turned into cash) in Fiji’s stock market has driven a wedge between the value of listed companies and the prices of their shares at the market. As concerns from companies grow over this gap, the South Pacific Stock Exchange (SPX) has indicated it will engage the service of a firm with experience in conducting stock market research reports to help guide investors.
SPX chief executive officer Sheraj Obeyesekere said while the long-term solution lay in creating awareness and educating the public on what the stock market is and how it works, SPX will also be on a hunt for companies that can do valuation on SPX-listed companies.
“In the long term, we are focusing on doing awareness around the country to increase market participation. That is going to be the long-term solution,” Mr Obeyesekere told this newspaper.
“In the interim we are also planning on publishing independent market valuation research reports for the (SPX-listed) securities and we are in the process of getting that done.
“That will be published and conducted independently by a firm or firms that have experience in conducting stock market research reports.
“The availability of that information will greatly support investors in understanding the valuations and the market valuations.
“So that’s the short-term mechanism that we are taking in terms of information availability on market valuation.”
An increasing number of listed companies have been voicing concerns over their share prices on SPX, which they believe do not truly reflect the value of their business.
According to Mr Obeyesekere, it usually fell on stockbrokers in the industry to do their own valuations but because this is lacking in Fiji due to short staffing in brokerage firms, SPX will be intervening by procuring research services, which usually is not the case in more developed markets.
“In stock markets, price discovery is based on demand and supply by investors,” he said.
“It is not an alien case – even in the most developed markets and in some other markets in other countries – to find disparities between market valuations and what independent valuers arrive at.
“Because stock market prices are based on demand and supply and perceptions of investors.
“So in that respect, what we see in Fiji is also seen in other markets but in the long term, the root cause of what has happened in Fiji in terms of valuations is because of the lack of trading.
“So the long term answer is to get more investors to come and participate in the stock market.
“That is why we are doing an immense amount of awareness now.
“In the meantime, we’ll also get the research availability in there.”
Mr Obeyesekere said they want to get “Buy, Sell, Hold” recommendations to be part of the reports so shareholders will know whether they should buy, hold or sell their shares based on research-backed information.
“New investors will know whether it’s a good opportunity to buy it and shareholders will know whether they should hold or sell it.
“So that’s the type of information we’ll try to put out. That will help the market and help address some of these disparities.”
