Mon | Nov 18, 2019

Briefing | Jamaica the most lucrative stock market in the world

Published:Wednesday | October 17, 2018 | 12:00 AMDr Andre Haughton
The Jamaica Stock Exchange in Kingston

The Jamaican stock market has been on a four-year increasing trend where some stocks have doubled, some tripled and others increasing fourfold in value to provide excellent rates of return for investors. According to Bloomberg, over the last 5 years, the Jamaican stock market has advanced by 233 per cent, the most in the world, with the Vietnam Ho Chi Minh Stock index coming second at 86 per cent, both turning out even better than the S&P 500 that only advanced by 73 per cent over the same time period.

Since the beginning of 2018, the Jamaica Stock Exchange has registered the highest gain among more than 90 primary equity markets tracked and monitored by Bloomberg. Eight stocks have advanced by more than 100 per cent in value, a total of 20 stocks have advanced by more than 50 per cent, and the benchmark index has increased by 19 per cent, according to Bloomberg.

This coupled with improving macroeconomic parameters, low inflation, low interest rates, a falling debt to GDP ratio, lower than usual unemployment, expanding logistics and road work infrastructure provides a decent platform for business and industry expansion.

The country also has in place fiscal rule to mitigate unnecessary government spending while loans to the productive sector appears to be expanding , which might improve output and increase GDP growth. Many commentators are describing the Jamaica Stock Exchange as possibly the best stock market in the world, and quite rightly so because the economy is expanding.

 

Many companies are far from frontier

 

In the more advanced economies, many companies that are listed are well established and have grown so big that they are close to their frontier, and this reduce their scope for growth and hence the rate of stock appreciation. While in Jamaica many companies are newly emerging and far from frontier, hence more scope for growth and expansion and increases the amount by which your equity can appreciate in value. Investing in companies that are very far from frontier, might allow your equity more room to grow, hence more room for the value of the equity to increase.

 

More room for profit

 

Since these companies have more room to grow there is more scope to increase long-run profits and rate of returns through dividends, as an example. You can get information on the profitability of firms from their quarterly or annual revenue statements. If you gather an understanding of how to buy stocks then you can invest and benefit as well. Here are a few tips:

 

Great history and potential

 

Many of these Jamaican firms have been performing excellently as medium and micro enterprises for years and are gradually receiving the capital they need to expand. They already have the industry know-how and expertise. If the company displays steady, gradually increasing earnings they can be earmarked as an investment prospect. On the flip side, if the company's earnings appear to be volatile then you can gamble with them short term, buy and sell, quick flip. These stocks will require more research before making any investment decisions.

 

Great value

 

Many of these companies' earnings are increasing to match the value that the market has associated with their stock, which is a good sign. If this was not the case, for example, if a company's stock value was increasing but its earning was not matching up, then there might be other concerns to investigate.

 

Found their niche, overcoming competition

 

Many of these companies have a comprehensive understanding of the industry in which they operate and their competitors. They know they are never independent of the market in which they operate as a result have done their homework and are designing their strategy to capitalise on their niche in a globally competitive business environment.

 

Excellent management and direction

 

Jamaicans have run and operated Fortune 500 companies around the world. They are excellent leaders and visionaries and who are leading their local companies to regional and global success.