It’s a question that’s often asked: does size matter? And the answer is usually in the negative: it isn’t the size that counts but how it is managed.
If that’s true, then, Jamaica’s stock exchange, one of the largest in the Caribbean, but that’s among the Lilliputians that don’t register a blip on the global financial radar screen, is teaching the giant bourses a thing or two.
Yes, the Dow Jones in the United States, the planet’s best known index, has a market capitalisation of more than US$5.23 trillion and Jamaica’s a mere US$5.3 billion but in 2015 the Jamaica Stock Exchange galloped ahead with 80 per cent growth rate at a time when the Dow, according to Bloomberg News, dropped by one per cent and the Euro Stoxx 50 tumbled by six per cent in dollar terms.
“I’m really impressed with what they have done to attract capital to the market,” said Carl Bennett, a vice-president of investor relations at the Bank of New York Mellon.
That’s why the banker wants investors to pay far more attention to what’s happening in the Caribbean country. What helped to propel the growing performance were stronger investor safeguards, plus a rebounding Jamaican economy, said Ezra Fleser of Bloomberg News.
“With economic growth forecast to accelerate for a third straight year, reaching 1.4 per cent in 2015, according to estimates compiled by Bloomberg, the Caribbean island of 2.8 million people is slowly emerging from a recession while struggling with one of the world’s highest debt burdens,” he wrote in a recent analysis published in Canada. The government has restructured local bonds twice since 2010, accepting the International Monetary Fund-led financing package in 2013.”
As Jovano Johnson, an equity trader at Mayberry Investments in Jamaica’s capital Kingston saw it, the country’s negative factors did discourage institutional investors from pouring money into Jamaica stock in 2015 looked something like this:
Almost 30 of the stocks traded on the markets in Jamaica recorded a ten per cent jump in profits year over year. Eight of the profitable stocks skyrocketed by more than 100 per cent, led by the Jamaica Stock Exchange Group’s 1 658 per cent growth for a $1.2 million profit for the 12-month period that ended in September last year. Securities were traded daily at a fast clip during January to November.
Estimates put the daily trading volume at $700 000, a 40 per cent increase over the previous year. That’s about $6 billion less than what traded on the Dow in New York every day and $832 million lower than the volume on Mexico’s stock exchange.
“It’s an emerging market and the fact is you want to be on the ground when we are growing,” asserted Marlene Street-Forrest, the Jamaica Exchange’s general manager. Jamaica’s relatively large diaspora in the US, Canada and Britain is seen as a prime source of investment capital that can accelerate further growth in the stock exchange. After all, Jamaican based abroad remit about US$2 billion every year to relatives back home, pumping more money into the economy than the country earns from tourism.
As a matter of fact, the diaspora is the single largest source of foreign currency in Jamaica, way ahead of what the Barbadians, Haitians, Guyanese and Trinidadians living abroad send to their respective birthplaces. In all, Caribbean immigrants, Haitians among them, remit about $5 billion to CARICOM member states.
What may prove to be a magnet for investors is that proposed divestment of government ownership in Jamaica’s petroleum corporation and its electricity company, both of which Dr Peter Phillips, the Minister of Finance, said were prime candidates for sale. Forrest-Bennett was quoted by Bloomberg News as saying that outside investment would be crucial to further expansion of the stock market’s volume.
And the online trading platform, the Caribbean’s first, should give Jamaicans in the diaspora an opportunity to invest in their homeland. Bank of New York Mellon’s vice-president Bennett thinks 2016 should turn out to be a good year for Jamaica, with continued growth, as the government of Prime Minister Portia Simpson-Miller moves ahead with plans to divest state enterprises through initial public offerings.
However, it seems somewhat overblown to compare Jamaica with the bourse in France or the Dow. True, Jamaica can take credit for putting its economy on a growth path, while Trinidad and Tobago’s has slipped considerably.
Also true, Jamaica’s exchange did well in 2015, much better than the tiny facilities that allow for the buying and selling of securities in Barbados, Trinidad and Tobago, and St. Kitts & Nevis. But those hard facts don’t justify putting Kingston in the same league as New York, Paris, London or Toronto.
