Bermuda is an island nation in the Atlantic Ocean that is known for its resorts and also as an offshore financial hub. With a population of just 65,000 people, its economy is small and so most investors would not even consider Bermuda as an investment destination.
However, in its transformation into an offshore financial center, Bermuda has enacted many investor friendly policies. Chief among them is the absence of any corporate income tax (it has a very high consumption tax instead), making Bermudan subsidiaries very popular among large corporates looking to shift income.
The Bermudan Stock Exchange (BSX) has also managed to find some niches in the broader financial market. With over 700 listings on the exchange, the BSX offers both domestic and international equities, along with fixed income securities. But where the BSX really shines is in two relatively specialized markets: Insurance-Linked Securities (ILS) and Mezzanine Listings.
By offering fast and easy listing processes and a technology platform licensed from NASDAQ, the BSX is a market to watch for frontier market investors looking at alternative asset classes.
How the Bermuda Stock Exchange is Structured:
The market can be split into 6 main sections:
- Domestic Companies (Equities)
- International Companies (Equities)
- Fixed Income (mostly Government Debt)
- Insurance Linked Securities
- International Mezzanine Market Companies
- Collective Investment Vehicles (Funds)
There are currently 14 companies spread across 7 different industries listed on the BSX that are domestic companies. Combined they have a market cap of around $2.8 billion and the market is up over 36% over the past year.
There are about 40 international companies listed on the exchange, most of them financial companies in Asia including HSBC, Hongkong Land, and Jardine Matheson Holdings among others. They are not actively traded.
There are 160 listed fixed income securities on the exchange, but only the government debt has much liquidity and for that there are 7 main securities.
Insurance Linked Securities
This is one of the fastest growing areas of the exchange, and is an asset class we talked about in a previous post. The BSX currently has 211 listed Insurance Linked Securities.
International Mezzanine Market Companies
Mezzanine listings focus on smaller companies that may not be ready for a full-fledged IPO. This part of the BSX is similar to junior boards found in other stock exchanges. There are currently 12 companies listed on the BSX in this category.
Collective Investment Vehicles (Funds)
Given its status as an offshore financial center, a lot of funds and other investment vehicles choose to be incorporated in Bermuda.
Notable Companies in Bermuda:
- Butterfield Bank (Bank of N. T. Butterfield): a bank founded in Bermuda, is by far the largest domestic company listed on the BSX
- One Communications Ltd: the main telecom company in Bermuda, and the third largest company on the exchange.
Is It Safe To Invest In Bermuda?
As a globally recognized exchange by many different Western countries, the BSX is reputable enough that investors should have few concerns when investing in it.
Can Foreigners Invest In Bermuda?
Yes, and it is encouraged through favourable policies such as no taxes of any kind on investments.
Bermuda Stock Exchange Snapshot:
In operation since: 1971
Location: Hamilton, Bermuda
Market hours: 9:00 to 16:30
Currency: Bermudian Dollar (BMD), on par with the USD
Market Capitalization (as of Oct 2017): $2.8 billion BMD
Local Listed companies (as of Oct 2017): 14 listed stocks
Taxes: none on dividends, capital gains, or even on corporates
Foreign currency controls: none
Main Index: Bermuda Stock Exchange Index:
How to Invest on the Bermuda Stock Exchange:
All trading is conducted through registered Trading Members on the BSX. There are currently 9 trading members although only 5 are registered brokers offering retail brokerage services:
- Barrington Investments Ltd
- Butterfield Securities
- Clarien BSX Services
- LOM Financial
- HSBC Bank Bermuda
This article was written by Michael Shum for Frontera.
Source: Investment Frontier