Measures by Colombia stock exchange may allow it to stay in JPMorgan index -president

By Nelson Bocanegra

BOGOTA, April 29 (Reuters) - Measures adopted by the Colombian stock exchange and securities issuers to improve liquidity could be enough for the country to hold onto its "emerging market" classification and stay in a key JPMorgan index, but more progress is needed, the stock exchange's president said.

Last year JPMorgan warned Colombia could be excluded from its MSCI emerging markets index and be downgraded to a frontier market due to declining liquidity.

The warning sparked a sharp drop in share prices across the stock exchange as a downgrade would drive away foreign investors guided by the bank's indexes.

Just three Colombian stocks are included in JPMorgan's MSCI index; Bancolombia, Bancolombia Preferential and energy conglomerate ISA.

The stock exchange has cut costs for issuing new shares, while companies have hired liquidity providers to promote them, among other measures, in a combined effort to boost liquidity, Colombian stock exchange chief executive Andres Restrepo said.

"From our figures, we don't think the downgrade risk will materialize," Restrepo told Reuters late on Friday. "The performance of the three stocks that form part of the MSCI Emerging index has recovered."

In March, Davivienda, Colombia's third-largest bank, carried out a share issue for $183.4 million, while Spanish bank BBVA's Colombian unit said in mid-April that it was preparing a share issue worth 220 million euros.

The next step will be to promote including other companies into JPMorgan's MSCI emerging markets index, which will require more share issues, said Restrepo, who has held the job since February.

Cementos Argos could be a candidate following a decision to convert its preferential shares into common shares, Restrepo said, adding that Colombia's majority state-owned oil company Ecopetrol could return to the index after it was pushed out at the end of 2022.

"Ecopetrol could very quickly enter the index with a decision I understand is no small thing, but which is to increase its float by selling no more than 3% (of its shares)," Restrepo said. Currently, 11.5% of Ecopetrol's shares are traded on the stock market, while 88.5% is owned by the Colombian state.

(Reporting by Nelson Bocanegra; Writing by Oliver Griffin; Editing by Andrea Ricci)