Mon | Feb 20, 2017

The stock market: What is the future for 2017?

Published:Wednesday | January 11, 2017 | 12:00 AMRochelle Johnson

The following is a contribution ahead of the Jamaica Stock Exchange (JSE) conference set for The Jamaica Pegasus hotel, New Kingston, between January 24 and 26.

Investment is a crucial component in enhancing standard of living, especially in developing countries. Theoretical studies indicate that stock markets promote long-run growth. The Jamaica Stock Exchange has provided a lucrative alternative for channelling savings since its inception. Shareholders are able to benefit from diversification of income, inclusion in business decisions due to voting rights, and stock appreciation. Likewise, companies are able to increase their market share as well as raise capital to aid research and development or to pay off expenses by going public.

Following their success in 2015 as being recognised by Bloomberg as the number one performing stock market, the JSE continues to be innovative. In 2016, they launched their mobile app, which enables shareholders to retrieve current information about the market, and their loyalty rewards programme, where cardholders can earn a percentage of sale transaction back in loyalty points. In addition, Prime Minister Andrew Holness has restored the incentives given to companies listed on the junior stock market which created the potential influx of new company listings.

The JSE experienced an increase in all its indices.

The market volume (excluding blocks) amounted to 167,676,566.00 units, with National Commercial Bank, Lasco Manufacturing Limited and JMMB Group Limited capturing 10.78 per cent, 9.27 per cent and 8.25 per cent of the market volume, respectively, for the month of December 2016. The combined market had a total value of stocks traded at the end of December 2016 of $29.24 billion in comparison to the previous year with a value of $27.79 billion, a 5.2 per cent increase.

The market capitalisation for the main market amounted to $697.45 billion, compared to $615.56 billion in the previous year, thereby reflecting a 13.3 per cent increase. For the year ending 2016, Cargo Handlers Limited and Honey Bun Limited were the top-performing stocks on the junior market, with share prices increasing by 395.20 per cent and 375.61 per cent, respectively; and Trinidad Cement Limited and Palace Amusement topping the main market with share prices increasing by 320 per cent and 124.68 per cent, respectively.

The outlook for JSE in 2017 seems promising based on hitherto trends. There should be an increase in the number of companies listed, increased market capitalisation, and a continuation of companies expanding. The gains outweigh the losses from investing in the stock market because not only are shareholders and companies benefitting, but the country has a greater potential to grow due to increased investment.