STOCKS ROCK! - Winner of RG Platinum Award, Jamaica Stock Exchange triples over five years
The Jamaica Stock Exchange (JSE) copped the prestigious RG Platinum Award for its distinguished contribution to the field of business at the RJRGLEANER Honour Awards Gala yesterday evening.
Record-setting profits have opened wealth streams to a new class of investors, firing debate and fostering social-media fan clubs on a subject that was once viewed with freakish suspicion or as the playground of the intelligentsia. Now, it’s cool to talk stocks.
The number of accounts hosted at the Jamaica Central Securities Depository for stock market investors skyrocketed by 30 per cent to 206,004 at December 2019. The listing of the state-owned Wigton Windfarm alone reeled in more than 11,000 new accounts.
“It’s a great honour for the exchange,” said Chairman Julian Mair, who received the award on behalf of the JSE.
“There were many times over the many years when the performance of the stock exchange didn’t excite the imagination of either investors or issuers. This award, for us, really recognised the real work that we are putting in and the work that has been put in by issuers to bring products to the market that excite the investment public,” Mair told The Gleaner last night.
He explained that the stock exchange has made a deliberate effort to engage with local and international investors as a valuable capital-raising mechanism.
Mair credited the previous and current political administrations for imposing fiscal discipline that provided a stable and profitable platform on which businesses could expand and get bang for their buck.
“The public has made all the contribution. Our performance is not something that we determine. It’s determined by the investors’ confidence in the economy and the investors’ confidence in the stocks they choose,” Mair said.
The chairman said the prospects for the exchange were “massive”.
The JSE might have lost nearly $120 billion in value since January with its 6.0 per cent slide to 475,000 points on Friday, but the market grew threefold since 2015.
The value of the combined index moved from $700 million to roughly $2.1 trillion between December 2015 to December 2019, according to JSE data. That’s equivalent to the country’s total gross domestic product.
The JSE still expects increased transactions and listings for 2020, which should push the market even higher. It already witnessed four initial public offerings since January – either listed or in the process of so doing.
In 2015, the number of listed companies was 61. Now it is closer to 120 companies.
The type of stocks on the market not only widened but deepened to include family businesses on both the Junior and Main markets such as Honey Bun, Wisynco, Medical Disposables & Supplies, and many more.
It now contains a number of real-estate investment trusts, including Kingston Properties, Stanley Motta Limited, Eppley Caribbean Property Fund and Sagicor X-Fund. Also on board are ETF-type funds that track the market, including Sagicor Select Funds, Mayberry Jamaica Equities, QWI, and others.
Also, there is the listing of public-sector entities including Wigton Windfarm Limited and the ongoing IPO for TransJamaican Highway Limited, which expects to rival the additional share offer of JMMB Group for the largest ever offering on the market.
In 2015, the island’s stock market outperformed at least 92 other exchanges tracked by Bloomberg and did the same in 2018. It ranked fourth in 2019, with 11 stocks making gains above 100 per cent, and the market surpassing 500,000 points for the first time.
The near tripling in value of the Jamaica stock market represented a confluence of factors, with an important element relating to the macroeconomy. Over the period, the Bank of Jamaica reduced its policy interest rate from 5.25 per cent in December 2015 to 0.50 per cent in 2020. It resulted, over time, in making stocks and real estate more attractive to put money for small and institutional investors than yields for government paper and bonds. The stock market also increased its trading multiples over the period from shares selling at under 10 times their annual profit to above 20 times and more.
In 2016, the Government all but disallowed the 10-year tax break to new Junior Market listings. The measure was, however, reintroduced in October 2016 when an amendment was debated and passed in the Lower House. It resulted in the reigniting of the dynamism of the Junior Market and the frequent pace of listings returned.
In 2019, market capitalisation closed above $2.1 trillion as at December 31, with $1.9 billion in Main Market stocks, and $151 billion in junior stocks. Statistical Institute of Jamaica latest figures size the economy at J$2.0 trillion.
Comparatively, as at December 31, 2015, the market capitalisation of the Combined Market stood at just over J$695 billion.
At December 2015, there were 61 stocks comprising 36 companies listed on the Main Market, 23 on the Junior Market, and two on the USD Equities Market in 2015.
Today, the number of equities has virtually doubled – specifically, with more than 90 listed ordinary stocks, and about two dozen preference stock listings. The stocks are evenly split between Main Market and the Junior Market.