Is it time for a regional stock exchange in the Caribbean?
By Marcia Forbes, PhD
Jamaica’s Junior Stock Market Punching above its Weight
As its General Manager, Marlene Street-Forrest can take kudos for the Jamaica Stock Exchange (JSE) being named by Bloomberg as the Best Performing Stock Exchange in 2015. But as we all know you’re as good as your last job and based on Bloomberg’s tracking for 2016, the JSE is now, year to date, trailing in 7th position. Still Street-Forrest has much to be proud of and a solid foundation on which to build.
Speaking at a recent Mona School of Business and Management (MSBM) forum titled ‘Stock Market as Driver for Economic Growth’, she highlighted the performance of the JSE over the past 7 years. While the Main market recorded a positive return of 77% as measured by the index, the newly created Junior Market recorded positive returns of a whopping 2,100%.
At that same forum, State Minister in the Finance and Public Service Ministry, Fayval Williams, encouraged the expansion of the Junior Stock Market and reeled off some of the benefits already derived. She informed us about the 3,107 jobs that have been come into being in those companies so listed and how this ramped up their payments of statutory deductions to the Government of Jamaica as well as their increased hand over of General Consumption Tax (GCT).
Academics Support the Stock Market
Early research findings coming out of the MSBM’s Dr. William Lawrence and Dr. Twila-Mae Logan show that small and medium sized enterprises (SMEs) can transform their financial performance by listing on the stock exchange. Bemoaning the manner in which theories of capital structure seem almost dismissive of SMEs going the route of public equity, the researchers also pointed to the dearth of academic research into this area.
Lawrence and Logan seem to be on to something important as they track the performance of SMEs two years before and two years after their Initial Public Offering (IPO), using their return on assets and debt equity ratio as two important variables. In going forward one anticipates that these researchers will drill down into SMEs that succeed compared to those that do not and eventually tease out key performance indicators for success.
Caribbean Fragmentation versus Capital Consolidation
Making his contribution to the forum, Professor Sir Hilary Beckles highlighted the consequences of fragmentation of Capital within the region and insisted that Jamaica was in a prime position to lead the charge to create a Caribbean Capital market. Former Finance Minister Peter Phillips spoke to broadening the scope of such a market to embrace the Spanish-speaking and other countries of this region.
The importance of moving beyond the Anglophone Caribbean was also emphasized by JMMB’s Julian Mair who pointed to the performance of that company’s entrance into the Dominican Republic and Trinidad and Tobago and the extent to which those early decisions helped to consolidate the leadership role of the JMMB.
In terms of regional development, those in attendance supported Marlene Street-Forrester’s call for a common trading platform throughout the Caribbean, a Caribbean Stock Exchange. Speaking of the Anglophone Caribbean, Mair noted that “when the world shakes, we are very, very irrelevant.”
Many see an expanded Capital Market and one inclusive of Latin America as one way of becoming more relevant. After all, international agencies already have us tightly knit as ‘Latin America and the Caribbean’, an amalgamation that often renders the Anglophone region invisible based on the comparative large sizes of Latin American countries as well as their populations.
One strategy toward foregrounding wealth creation is by way of companies listing on the stock exchange. Hearing more about findings from UWI’s research project on SMEs as it progresses will likely convince more to move to IPOs.
Dr Marcia Forbes, a Caribbean Journal contributor, is a media specialist, the co-owner of multimedia production company Phase 3 Productions Ltd and former Permanent Secretary in Jamaica’s Ministry of Mining and Telecommunications and later the Ministry of Energy and Mining. She is the author of Music, Media & Adolescent Sexuality in Jamaica and the recently-released Streaming: Social Media, Mobile Lifestyles.
Follow Dr Marcia Forbes on Twitter: @marciaforbes