Wed | Aug 16, 2017

Marcia Forbes | A Caribbean Stock Exchange?

Published:Sunday | June 26, 2016 | 6:00 AM
Marcia Forbes

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 seventh 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 seven years. While the main market recorded a positive return of 77 per cent as measured by the index, the newly created Junior Market recorded positive returns of a whopping 2,100 per cent.

At that same forum, state minister in the finance and public service ministry, Fayval Williams, encouraged the expansion of the Junior Market and reeled off some of the benefits already derived. She informed us about the 3,107 jobs that have 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 handover of general consumption tax (GCT).

 

INCREASE PERFORMANCE

Early research findings coming out of the MSBM's Dr William Lawrence and Dr Twila-Mae Logan show that small and medium-size 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.

 

Fragmentation vs 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 emphasised by JMMB's Julian Mair, who pointed to the performance of that company's entry 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.

 

REGIONAL DEVELOPMENT

 

In terms of regional development, those in attendance supported Street-Forrester's call for a common trading platform throughout the Caribbean. 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 a 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 towards foregrounding wealth creation is by way of companies listing on the stock exchange. Hearing more about findings from the University of the West Indies' research project on SMEs as it progresses will likely convince more to move to IPOs.

- Marcia Forbes, PhD, is executive chairperson of Phase 3 Productions and a former general manager of TVJ. Email feedback to columns@gleanerjm.com and marcia.forbes@phase3prod.com.