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Joyful exchange - public, private sector interests excited by JSE's world standing

Published:Monday | December 28, 2015 | 12:00 AMGary Spaulding
Phillips ... I think it reflects a very good development and certainly should provide impetus for capital raising by companies and, hopefully, will prompt other companies to list on the stock market over time.
Dennis Chung ... When the stock market does well, especially at this first phase where sophisticated investors get in, it is really an indicator of an improvement in economic activity and business confidence.
Dennis Morrison ... The performance of the stock market should, I think, be part of what converts the mood of the country to a more positive outlook.
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'Tis the season to be jolly, but the Government and local business community have found other reasons to celebrate Christmas and the New Year.

A Bloomberg News report that Jamaica's Stock Exchange surged in 2015 to the top spot ahead of those of developed economies across the globe has resulted in local merriment.

Finance Minister Dr Peter Phillips is joyful.

"I think it reflects a very good development and certainly should provide impetus for capital raising by companies, and, hopefully, will prompt other companies to list on the stock market over time," asserted Phillips.

Chief Executive Officer of the Private Sector Organisation of Jamaica Dennis Chung was just as upbeat.

"It is positive as it means that investors are seeing confidence in the prospects of Jamaican companies, which have been undervalued for a while when you look at the book value," he asserted.

The Bloomberg report, published last Thursday and headlined: "It's Jammin': Jamaica's tiny stock market conquers world in 2015", is like music to the ears.

Finance minister since January 2012, Phillips has also marshaled Jamaica's economy to the passing of 10 consecutive International Monetary Fund (IMF) tests, with an 11th looming.

He told The Gleaner that this should provide an alternative source for capital injections into companies and the productive base of the country even more.

Bloomberg noted that "amid the middling returns of the world's best-known indexes' foreign acquisitions, stronger investor safeguards and a rebounding economy helped the Jamaica Stock Exchange surge more than 80 per cent in 2015".

Said Phillips: "I think that generally, it is accepted in the economic literature that a good stock/equity market represents an important element in any country's economic make-up."

Asked about prospects for 2016, Phillips said: "I think it is a good development and I expect the trends to continue in a positive direction."

Phillips' sentiments were endorsed by Chung, an accountant by profession.

"When the stock market does well, especially at this first phase where sophisticated investors get in, it is really an indicator of an improvement in economic activity and business confidence."

Added Chung: "When you also consider the increased demand for money during Christmas per the Bank of Jamaica, and from my own perspective, we have seen increased garbage generation, which is the result of increased activity, then it is positive."

He said that among the other positives is that over the past year, there has been only a four per cent depreciation of the dollar.

Chung noted that interest rates are low, so investors see the stock market as the most viable option now, which is good for the exchange rate.

"I expect that the economy will do better, barring any policy errors, and also the risk of the low skill levels in the labour force," he said.

Economist Dennis Morrison agrees. He said that the Bloomberg story is yet another indication of the positive turn in Jamaica's economic prospects as it shows that local companies across a lot of industries did well in terms of their profitability this year.

"The performance of the stock market should, I think, be part of what converts the mood of the country to a more positive outlook, one in which our people begin to believe that we can move the economy forward to the benefit of the broad cross section of the population."

The Bloomberg report noted that with a market capitalisation of about US$5.3 billion (the Dow has US$5.23 trillion), Jamaica lives on the fringe of frontier status.

With economic growth forecast to accelerate for a third straight year, reaching 1.4 per cent in 2015, according to estimates compiled by Bloomberg, Jamaica, it stated, is slowly emerging from recession while struggling with one of the world's highest debt burdens.

It noted that the Government had restructured local bonds twice since 2010, accepting an IMF-led financing package in 2013.

Twenty-nine of the 57 stocks traded on the main and junior markets in Jamaica saw year-over-year post-tax profits rise 10 per cent or more.

Eight of those saw profits spike more than 100 per cent, led by the JSE Group's 1,658 per cent growth for a $1.2-million profit for the 12 months that ended in September.

gary.spaulding@gleanerjm.com