Dominican Republic among the fastest-growing economies in the region
In the Dominican Republic, year-on-year inflation stood at 9.47% as of May 2022, that is, 2.3 times higher than the 4% +/- 1 of the monetary authorities’ target range. This brings repercussions to the financial markets, due to increases in interest rates that impact both fixed income and variable income strategies.
For the executive director of the country’s Association of Brokerage Firms (APB), Mario Franco, this phenomenon, aggravated by geopolitical tension, is a challenge not only for brokerage firms, but for all local and international economic sectors.
“Inflation is an element that requires a rise in the interest rate, also affecting the value of financial assets in a negative way”, stressed Franco when warning that it is a time to be “very cautious” in taking and managing risks.
However, he assures that in these scenarios “the experience of the brokerage firms comes into play”, due to the advice they offer to the investor on the most appropriate instrument for his investment objective.
During an interview with elDinero, Franco emphasized that the Dominican stock market, despite being in its “first steps”, that is to say, being young, has many opportunities ahead of it.
“We have been experiencing constant growth in recent years and this process has allowed us to accumulate important experience that will help us to move forward with greater agility in the coming years,” he said.
He added that, although the world economic outlook is not yet the most favorable, there will always be opportunities and “this is the time to take advantage of them”.
So, can the common citizen invest in the Dominican stock market?
The executive director of the APB affirms that the local stock market sector is for any citizen who has two elements: money and interest.
“People think that you have to be rich to invest, but you can open your account with up to 10,000 pesos,” Franco indicated when recommending the population to approach the stock exchange posts to help them manage the process and explain how it works.
He cited that in developed countries any person participates directly in the stock market, either through their own account or through their pension fund account.
“Here too, pension funds have been diversifying, placing their contributors’ money in real estate, tourism and commercial development funds, in trusts and other instruments that not only develop the country, but also offer the best possible yield to the investor,” said Franco.
According to data from the country’s Securities Market Superintendence (SIMV), there are investment instruments in which one can start with up to RD$1,000, although there are some brokerage firms that, depending on the instrument chosen, condition the entry to the sector in minimum amounts ranging from RD$150,000 to RD$300,000 and even higher, depending on the condition.
Addressing the issue of the shares to be issued soon by the company César Iglesias, the APB executive assured that it is one of the most important steps taken by the Dominican sector, due to the fact that it offers extraordinary conditions to the companies to finance themselves, besides allowing all Dominicans to become owners of a part of that company as investors and with this, to be beneficiaries of its profits. “It is a virtuous circle where everyone wins”.
Franco indicates that this first stock issuance program will whet the appetite of other actors as results are seen. “More (companies) will keep coming and behind all that comes money from investors looking for the best possible return. More companies, more work, more transparency and more development. That is the impact.
He assures that the issuance of stocks and bonds allows the actors to be part of a business, without having to take care of it. “You become an entrepreneur without all the headache that implies.”
Among other benefits, it helps people diversify their investments. “You can invest one part in bonds of an electric company, another in stocks and another in a tourism development fund in exchange for receiving a very attractive return. It’s putting money to work for you, while you go about your day-to-day business,” he emphasized.
For the APB executive the first step was to issue shares, the next step must be education. “The trick is to learn how to get through the change, without losing momentum. We have already overcome some important impasses that did not allow the issuance of shares, but now we have an important barrier of lack of knowledge.”
“We have to awaken people’s interest in our market and we will only achieve this by helping them to understand it better,” said Mario Franco.