The Nicaraguan stock market closed last year with transactions of $1,950.58 million, driven mainly by demand for liquidity by the central government and open market operations of the Central Bank of Nicaragua.
According to Nicaragua Stock Exchange data, transactions increased by 17.54 percent, which means an additional $291.2 million in 2022, amounting to 1,659.38 million.
This is the third largest amount in the last seven years and since the socio-political crisis began. It is worth noting that in 2018, when the rebellion began in Nicaragua, the stock market reported its historical maximum of $ 3,226 million, due to the fact that very short-term operations were carried out in the first months of that year, which distorted that Monthly statistics in period.
In 2019, when the stock market unleashed its true devastation, transactions dropped to just $292.81 million, a far cry from $1,564 million in 2017. Due to the crisis, investors in that business left the market and others saw a sharp decline in their financial numbers and were unable to continue operations.
Already in 2020 and despite the impact of the pandemic, transactions increased to $1,038.25 million and in 2021 it increased to $2,082 million, the second highest amount of the period analyzed.
new growth factor
The stock market could be revived this year after Nicaragua’s Central Bank officials announced late last year that they would stop devaluing the cordoba against the dollar and focus on other instruments to maintain exchange stability. .
One of these tools, which may have been the main one till now, is the stock market. Through daily operations, the Central Bank injects or withdraws liquidity from the national market, through the repurchase or sale of securities.
“We will leave that slip rate at zero percent and we will go further into the market, that is, to use securities buying and selling operations, use interest rates and any other mechanisms that allow us to maintain the stability of the national currency. “Ovidio Reyes, president of the Central Bank and economic operator of the dictatorship, explained in an interview with a propaganda outlet for the regime on August 10.
On January 1, the Central Bank’s decision to stabilize the exchange rate at 36.6243 córdoba for every dollar circulating in the economy took effect. The positive behavior of the stock market guarantees the authorities to find investors willing to buy their papers, which ensures exchange stability and also that the central government can meet its financial needs in the general budget of the Republic.
The government also uses the reference rate for its operations with economic agents as a means of regulating the currency. In fact, in January, the board of directors of the institution had decided to maintain the monetary reference rate (TRM) at 7.0 percent. TRM is the interest rate that the BCN uses as a reference to indicate the cost in Cordoba of 1-day liquidity monetary operations.
Similarly, the BCN resolved to maintain the rates of the monetary repo and monetary deposit windows (both within 1 day for monetary operations in Córdoba without price maintenance) at 8.25 percent and 5.75 percent, respectively.
The Central Bank and the Ministry of Finance and Public Credit are the main issuers of papers on the stock exchange, where banks are usually the main holders of these instruments.
Of the total stock market transactions last year, the public sector negotiated 98.33 per cent last year and the private sector negotiated the remaining.
According to data from the Central Bank of Nicaragua, as of September last year, the Finance Ministry had placed 2,766 million cordobas in securities out of the 3,659 million cordobas that were planned for placement.
This year the stock market will be revived not only by the operations of the Central Bank of Nicaragua, but also by the government’s expectations of placing 3,662 million cordobas in the same market. It is noteworthy that banks are the main holders of these stock market papers.
operating time limit
88.24 percent of transactions were made in the primary market, that is, they were new issues, where, for example, the Central Bank paid rates between 6.20 and 11.12 percent.
For its part, 2.38 percent was traded on the secondary market; Repo increased by 9.21 percent.
Regarding terms, most were negotiated between 7 and 90 days, while only 3.12 percent were negotiated for maturities of more than 360 days.