Ashford W. Meikle, Business Reporter

Sanjaya Panth, division chief in the Western Hemisphere Department at the International Monetary Fund. - file

A senior official from the International Monetary Fund, says the Caribbean lags behind the rest of the world in financial integration but noted that cross-border transactions have increased over the last decade and a half and can present opportunities for the CSME.

The region's "domestic financial markets are large, yet under-developed," said Sanjaya Panth, from the international lending agency's Western Hemisphere Department, addressing the Jamaica Stock Exchange's second annual regional conference on investments and capital markets in Montego Bay.

The main intra-regional linkages are through conglomerates, he said, noting that "bond markets are mostly fragmented across the borders."

Pointing specifically to fixed income trading, Panth noted that while the markets were large and dominated by government bonds, the secondary markets were limited and thin.

He noted that cross-border bond markets in Trinidad and Tobago have been growing rapidly "but still much smaller than extra-regional eurobonds."

Importantly, said Panth, the intra-region interest rate differen-tials remain large while correla-tions are lower than in other regions.

Cross-border banking

Commenting on cross-border banking - dominated by cross-border ownership - he said that while such transactions have been rising gradually over the past 15 years, they "are overall not as extensive as cross-border ownership."

Examining the equity markets, the IMF official noted that the markets are large but characterised by low turnover, a fact repeatedly argued by local analysts.

"There has been an increase in cross-listings but prices differ substantially across the region," he said, drawing reference to the high trading costs and the absence of market connectivity, vis-a-vis differences in settlement periods, the different trading days as well as no effective cross-border connections among central depositories.

In fact, the deputy chairman of the Jamaica Stock Exchange and executive director of JMMB Securities, Leo Williams, made a similar observation yesterday on the second day of the JSE conference.

He pointed, for example, to the circuit breaker rule variations in the region: in Jamaica the daily minimum price is 0.85 times, or lower, the bid or last sale while in Barbados and Trinidad the daily minimum price is 0.9 times the last sale.

In the latter two exchanges, while the daily maximum price is 1.1 times the last sale, in Jamaica it is 1.15 times higher of ask or last sale.

"The need exists for more harmonisation of timelines and policies for reporting across exchanges and trading rules," noted Williams as he addressed the issue of transparency in his presentation.

Still, as Panth argued, the current situation presents challenges as well as opportunities for the Caricom Single Market and Economy, since, in addition to providing benefits of a clear road map for further financial integration, it could, he said, open up "potentially sizeable efficiency gains from enhanced financial intermediation within the region."

ashford.meikle@gleanerjm.com