Belgium-based African wants to invest in Jamaican market
Personal Financial Advisor OranHall
QUESTION: I came across financial advice you gave to someone online and saw your email address with it. I am an African based in Belgium and I've been to Jamaica twice this year on vacation and sincerely love the country.
I would like your advice on what I can invest about €5,000 in without taking the risk of losing my capital, and, since I'm not a Jamaican, what are the possibilities of me investing in Jamaica?
Thank you in anticipation.
FINANCIAL ADVISER: There is no hindrance to you as a citizen of another country participating in Jamaica's securities markets. The requirements are primarily the same as for a Jamaican.
Just as some Jamaicans are diversifying by investing in foreign markets, you want to diversify by investing in a foreign market.
The Internet will make the process quite easy. You can use it to identify the broker-members of the Jamaica Stock Exchange and other licensed securities dealers and to learn about them. Similarly, you can learn much about the Jamaica Stock Exchange and the financial system, generally. The forms required to open an account are available online.
The client agreement form seeks to get valuable and necessary information about you relating to your identity, but it also sets out the terms that guide the relationship between the dealer and the client.
You will observe that your social security number will be required, as well as a notarised copy of the card itself. Two references are also required.
losing your capital
You have stated that you want to invest without the risk of losing your capital, so that seems to rule out ordinary stock, but I mentioned stock brokers, dealer members of the Jamaica Stock Exchange because they play an important role in the market for fixed income securities issued by the Government and the private sector.
If stock will not guarantee your principal, what will? You have the option of money market unit trusts or, to a lesser extent, those that invest in longer-term fixed-income securities.
In addition, our unit trusts offerings have grown quite well recently and are poised to increase even more before long. Most of these offer Jamaican dollar-denominated instruments, but there are some that invest in currencies other than the Jamaican dollar. The mutual funds are not Jamaican dollar instruments.
You will not lose any of your capital if you buy interest-bearing securities at a discount or buy them at face value (or par) and hold them to maturity. If you are attracted to interest-bearing securities issued by the Government of Jamaica and which trade on the Bank of Jamaica system, you will need a taxpayer registration number (TRN). Upon completion of the form, which is available online, you would submit it with a notarised copy of your identification to the TRN office. You may apply from the following website: jamaicatax.gov.jm.
There are some foreign investors, I understand, who opt to use the TRN rather than a social security number for other types of investments.
You realise, no doubt, that investing in a currency other than that of your country of residence exposes you to exchange-rate risk. You could make a loss in terms of your own currency if the Jamaican dollar loses its value. You should give serious thought to this before making a final decision.
Investing in Jamaica can still be profitable to you if the difference between the returns on Jamaican investments and investments in your country is more than any decline in the value of the Jamaican dollar between the time of your investment and when you choose to liquidate it, or it matures.
Although you are not a Jamaican, you can invest in the Jamaican market, but you are exposed to exchange-rate risk. The instruments that give the best protection against loss of capital are money market instruments or pooled investments such as unit trusts that invest in money market instruments.
Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. Email firstname.lastname@example.org