Caribbean Management Talk
The Virtues of Listing
Author: 123jump.com Staff
Last Update: Oct 20, 5:06 PM ET
Marlene J. Street-Forrest
As the first demutualized stock exchange in the Caribbean, the Jamaica Stock Exchange is focused on improving liquidity and boosting regional cooperation on the back of solid growth in the country’s financial services sector.
Jamaica Stock Exchange
We have quite a few international companies listed. The Bank of Nova Scotia has been there since inception, and so have Berger Paints and the telecom company Cable & W Wireless Jamaica. We also have Jamaica Gleaner Company, the local newspaper and a media company that has been a publisher in Jamaica dating back to 1834. Goodyear Jamaica is the local distributor of Goodyear products from the U.S. G GraceKennedy, a nearly eight-decade old company that is active in food processing, imports and financial services. We also have Trinidad Cement that is cross-listed in Trinidad and Jamaica and is now the parent company of Caribbean Cement Company. Another listed offering is The Palace Amusement Company, a cinema hall and theater management company which has been around for 80 years.
Q: How can one invest in Jamaica if they are an individual or corporate foreign investor?
If you would like to invest in companies listed on the stock exchange, the investor should seek the brokers or member dealer who has the authority to trade on the exchange. At present, we have 11 such member dealers. A buy or a sell order is placed with the member dealers. Member dealers, through their terminal at their office will put in trades on behalf of clients. The member dealer’s workstation is directly connected to the exchange’s trading platform. We have a seamless connectivity and the trade is queued, time-stamped and matched on priority of orders. There is a tightly coupled process between our trading platform and our clearing and settlement platform; the latter which is operated by our subsidiary, the Jamaica Central Securities Depository.
Q: Are there any restrictions as to how much a foreign investor can buy in companies listed on the JSE?
There is no restriction on a foreign company or an investor to buy local stocks except in the case of Jamaica Producers. There is still a restriction there, but for the other 44 companies, there is no restriction to the level of stake that they invest in. The foreign investor is treated no different than any local investor.
Every investor who purchases more than 15% of the company’s shares must disclose to the company and the exchange the reason for purchasing this amount of the company’s share. Moreover, for every 5% thereafter, they must disclose again. Nevertheless, there is no distinction between a local and a foreign investor purchasing local stocks. No distinction and no restriction except in the case of, as I said, Jamaica Producers where foreign investors are not allowed to purchase.
Q: What is the exchange doing to attract overseas Jamaicans to invest in the companies listed on the exchange and, subsequently, helps the country to create jobs and facilitate capital access to local companies?
A: I think there is potential for us to do marketing with communities in North America, Europe and Caribbean. We have had such an event probably two times in the last three years when we invited Jamaicans from overseas to forums. Broker members too are trying to concentrate on this area. Yet, I believe that there is more consistent attention that needs to be paid.
We have about three million people living abroad, which is just about the size of the population on the island, and I am sure that a good number of them would want to invest. While there are about 85,000 active investor accounts, we have potential to add at least that many new accounts from the overseas community.
One of the areas where we want to see a more significant growth, and I think we should see some of that shortly, is in greater liquidity. We are suffering from the low levels of liquidity in our market, which is why we want to a solution to this problem through an enhanced integration in the Caribbean Exchange Network. Our investors frequently purchase shares that are held long-term. Sometimes there is a problem with the liquidity for people, whether internal or external, to have more of those shares available to purchase. As we work to solve this problem we feel that with the Junior Market, there is a possibility that it will create a bigger pool of companies in which people within Jamaica can participate.
Q: What are the growth possibilities for the exchange and what further areas can the exchange diversify in?
A: The exchange is looking for growth in various avenues. We are seeing how the fixed income market has overshadowed the equities market. A couple of years ago we embarked on a process of creating a fixed income depository. The other side of it was to create the market for listing of those bonds. We do have some bonds listed on the exchange, but they are not traded. They have been listed rather for contract purposes. The domestic bonds issued by the government are listed, but they are not traded due to some hurdles in the development.
The Bank of Jamaica will complete the development of the fixed income depository in September 2008. After that, we will be talking either with the Bank of Jamaica or the government as this move relates to the listing of some of these instruments on the exchange and we are looking to invite corporations to issue and list bonds through the exchange. We have not pursued that yet because we are focusing on three major initiatives. One, we are working on the interface networking between Jamaica, Barbados and Trinidad in an attempt to grow the market. Two, we are concentrating on the Junior Markets, which will be a reality before the year-end, and finally, we are preparing for the launch of exchange traded funds. In our recent communication, Senator Donald Wehby, Minister without Portfolio in the Ministry of Finance and the Public Services, endorsed the Junior Market.
We expect that the incentives developed between the stock exchange and the government will cause excitement, so to speak, in people listing on the Junior Market. W We also understand that our chances of attracting bigger companies to list will improve if we focus on their extra needs.
Q: Since Jamaica issues, as a country, quite a bit of debt, both corporate and government, would it be attractive to the exchange to get these debts issued and traded in an attempt to create an active market for domestic and overseas investors?
A: That gives emphasis to our intention of first introducing the fixed income depository and then listing these debts. The Bank of Jamaica is in the final stages of implementing the fixed income depository. The timeline is the last quarter of 2008. As soon as it has been implemented, we will discuss with the government the possibility of listing the government debt instruments on the market. It is something that we have started discussing already, but we will do so with even more vigor once the fixed income depository is implemented.
We are the first exchange in the Caribbean to be demutualized. We completed the process of the demutualization on April 1 of this year with the separation of the commercial division of the exchange was from the regulator. We have seen some immediate positives because, in the past, there were concerns that member dealers who owned the company also regulated the company and there could be possibilities of conflict. Having removed that perception it will still take time for the message to reach and sink in the broader public, but we are moving with confidence towards the development of a dynamic market.