Thirst for stock-market tips
Oran A. Hall, Contributor
QUESTION: Please send me information on the stock market in Jamaica. I can see that the market in Jamaica is about to move up. It caught my interest.
PFA: Yours is a very general request. Is it that you want to take the plunge? I will not say if you should or what attitude you should take to the stock market but will say how it operates generally and what protection is available to investors. I will also comment on its general performance recently.
How has the market been doing? In 2010, the market index increased by 2.23 per cent to 85,220.82 points. Forty-six stocks traded, of which 29 advanced, 16 declined, and one traded firm.
The value of the 2.6 billion units which traded was J$17.3 billion. In 2011, the market index increased by 10.57 per cent to 95,297.20 points. Forty-seven stocks traded, of which 34 advanced, 10 declined, and three traded firm. The value of the 1.527 billion units traded was J$18.1 billion.
On May 3, 2012, the market index was at 91,425.28 points, 4.06 per cent below where it closed at the end of 2011. The market has not done much since the beginning of 2012.
It closed at 92,206.86 at the end of January, 90,869.40 in February, 91,369.00 in March, and 91,460.74 in April.
The foregoing gives a global view of the market but you will understand that some stocks would have done quite well and others would not have done so well.
In any event, investing in stocks should be seen as a long-term endeavour and you should note that good opportunities come along even in times when the market does not appear ready to move up.
The focus should be on identifying good quality stocks and taking positions as you are able to and not to rely too much on timing your entry into the market. It has an amazing ability to make fun of investors. It can be very unkind.
The website of the Jamaica Stock Exchange — www.jamstockex.com — has a wealth of information on the market. You can also source information on the market from the websites of the 11 broker-members of the exchange and from the reports in the Gleaner publications and the rest of the media.
Here is some general information. Trading takes place on the JSE Mondays to Fridays between 9:30 a.m. and 1 p.m. on a computerised platform.
Transactions are settled three days after the execution of the order by your broker who will supply you with a contract note giving details of the trade. It is advisable to put all instructions to your broker in writing and to monitor your account regularly.
Although you may request a physical certificate, today's norm is for holding securities in electronic form, which is facilitated by the Jamaica Central Securities Depository. This enables transactions to be processed by book entry. It is a convenient way of changing the ownership of securities between seller and buyer.
The depository is able and willing to confirm what it is holding for each client and issues regular statements of the holdings of its clients.
There are several arrangements in place for the protection of investors. The Council of the JSE regulates the activities of the stock market and sets guidelines and rules of operations for the exchange to ensure that it and its broker-members operate at the highest possible standards.
The Compensation Fund of the JSE exists to compensate clients of dealer-members who have lost money as a result of misappropriation of money and fraudulent misuse of securities by a dealer-member or any of its directors or employees.
It does not protect against losses due to fluctuation in the price of securities but provides protection against certain losses which may arise if a dealer-member is unable to meet obligations to clients, in the case of bankruptcy, for example.
The JSE Regulatory and Market Oversight Division regulates member organisations by enforcing marketplace rules and securities regulations. It also ensures that companies listed on the JSE meet their financial and corporate-governance listing standards and serves as a forum for resolving disputes between investors and dealer-members.
The Financial Services Commission monitors the securities industry. It enforces penalties against violators of industry regulators, oversees all securities firms, has oversight responsibility for the JSE and, through the licensing and registration process, is responsible for ensuring that securities companies are financially sound, that they employ qualified representatives, and that they and their representatives operate with the highest level of integrity.
Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers free counsel and advice on personal financial firstname.lastname@example.org