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Jamaica Stock Exchange Basics: What is the stock market and how does it work?

Alaina Hull

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Jamaica Stock Market

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Introduction to the Stock Market

Stock Market is a very popular term among people around the world because of the commodity it deals in- money! In simple terms, the stock exchange is a place where investors can go to purchase stocks of a public firm. The value of the stocks will keep varying – it can go sky-high or it can hit rock-bottom, depending on the integrity of the brand or the company.

Jamaica Stock Exchange Basics: What is the stock market and how does it work?

Investors and those looking to buy stocks of a particular company or organisation will normally analyse the company’s existence through the years and its successful business history. Any firm such as Amazon, Google or even local banks have stocks that people can buy. The pricing will, however, change regularly and one may witness considerable growth or a steep fall through the years.

The Jamaica Stock Exchange (JSE) is one of the hundreds of stock exchanges in the world. The JSE deals with brands and companies that operate across the island. It may also include firms that have direct or indirect ties to the country even though business operations are carried out elsewhere.

What is the Stock Market?

The official definition for the stock market is that it is a place where people can sell, buy or exchange stocks. While it is commonly known as ‘stocks’, investors call it ‘equities’. Equities or shares allow the investors to quickly raise funds from the public for considerable growth.

Each nation of the world relies heavily on the stock market and the value of shares of different companies to improve the overall growth of the nation. The public, which includes investors and other interested parties buy shares from the share market. Several such purchases of shares grow into big numbers allowing the companies to expand or diversify in different areas.

The investors and brokers also make an income every time there is an increase in the price of stocks. When a broker sells stocks, he/she makes a small broker fee, while the seller gains the increased amount as profit for the investment they made.

How Does it Work?

A typical stock market or stock exchange relies on multiple parties for efficient operation. Financial Advisors who are involved in it as full-time employees get 1% as their fee. A similar percentage is taken by online traders who allow investors and the public to make investments from the comfort of their home through a website or app.

Jamaica Stock Exchange Basics: What is the stock market and how does it work?

The overall stock exchange market in the world is governed by Wall Street in the United States. Such power exists because the majority of the world trade is done using American Dollars. Major banks like Goldman Sachs and Wells Fargo have a say in the financial planning to ensure that the market is handled smoothly. The largest stock exchange in the world is the New York Stock Exchange located in The Wall Street which handles about $21 trillion in stock value, while there are many others spread around the world including Jamaica.

The History of Jamaica Stock Exchange

The Jamaica Stock Exchange was officially incorporated in the year 1968. It is located in the capital city of Kingston. The stock exchange follows its own terms allowing the country to take control of the economy, to ensure the inflation rate is kept low and also as a way for the public to make small investments with benefits in the long run.

Jamaica Stock Exchange Basics: What is the stock market and how does it work?

While it did not have a significant impact in the past, the exchange has grown immensely in the last few years and is now one of the potent markets. Investors from around the world have started noticing how stable the stock market is in Jamaica when compared to the dips and dives in the international market that makes it difficult even for expert investors to take decisions and make a profit.

Understanding and Investing in Companies Through the Jamaican Stock Exchange

For starters, one could consider playing the Jamstockex game, a game designed to help people understand how to buy stocks, sell them and choose the right company to invest their money in.

There are two types of stocks – the first one is ordinary stocks where you get paid when the company makes profits and stock prices rise. The other one is preferential stocks which provide a fixed interest rate for the investors irrespective of whether the business is making a profit or not.

Buying and Selling Shares

  • Get in touch with a stockbroker who can help you buy shares.
  • The broker should hold an authorized license and work in one of the recognized brokerage firms that are allowed to take part in the Jamaican stock trading.
  • The broker can help purchase shares in a company of one’s choice and all instructions can be provided either in person or over the telephone.
  • They can also help to sell the shares when the market is volatile.

Do’s and Don’ts of Being a Shareholder/Stock Investor

While there is a common assumption that only big companies invest and reap benefits from a stock market, the Jamaica Stock Exchange is a far easier place to work in. The resources and business hours are limited; you can invest small amounts initially to understand the real challenges before investing heavily into the company’s shares.

Read through the financial news and magazines released by the organisation. Jamstockex is stable and growing at a rapid pace. You can also check out the game which is similar to the game of Monopoly. It teaches you the basics of investing, about the stock exchange, how it works, buying and selling, besides making timely decisions. Always keep a close watch on the latest news to know when companies are making announcements, expansions or on the verge of shutting down so that you could sell your stock on time.

Jamaica Stock Exchange Basics: What is the stock market and how does it work?

Get valuable advice from seasoned investors and you can also understand more about how it works by reading world news related to investing in stocks/shares. Create and maintain a daily stock worksheet. The number one rule to successfully make a profit in the stock market is to be patient and make timely decisions on buying and selling, which is possible only when one is not hasty to make more money. Perseverance pays in the Jamaica Stock Exchange.

The commitment to deliver knowledge and information to the world is a duty that one should not take lightly; it is one that I do not take lightly. Equipped with 10 years of professional writing experience, and even more so of "scribbling in a journal", I aim to provide in-depth, accurate and expeditious news and information. "Journalism can never be silent: that is its greatest virtue and its greatest fault. It must speak, and speak immediately, while the echoes of wonder, the claims of triumph and the signs of horror are still in the air."- Henry Anatole Grunwald [email protected]

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Modernising Jamaican Workplaces

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A lot of changes are being seen in Jamaica, which are steadily improving the economy and the standard of living of our people. A cultural explosion is happening; where our art, music, food and dances are being tapped into and used for various events and initiatives. As we are modernising in most aspects, the state of our workplaces and the archaic structures need to experience a fresh and invigorating renovation as well.

The world as we know it is actively changing. The development of technologies and the ease of accessing information are continuously being revised, improved and refined. Societies have come a long way due to the benefits of globalization and international trade.

Competing in the Global Arena

Recently, JAMPRO had a Future of Work Conference and it shed light on many things, in particular, our great need to change our structures. One of the speakers, Ms. Gloria Henry, the President of the Business Process Industry Association of Jamaica (BPIAJ), instilled that:

“We need to look at communities that support the wellbeing, the cognitive development, the lifestyles and the new mind-set that we are seeking to cultivate.”

This is a stark realization that Jamaica has a need to make changes within. This changing global environment has our current structures and processes seeming completely obsolete. We are no longer in a bubble, we are in a global arena, where our people have to compete with many others. Competition is fierce, and only the best of the best are drafted onto teams for many world-leading organizations.

Unlocking Our Potential

As the world is revolutionising itself, Jamaica needs to be adequately equipped to be on the track and not on the side-lines. Our potential for greatness is unmatched and we are truly a force. Jamaica is a blessed country with talented individuals who continue to make a mark on this Earth. A quick scroll through social media will see many Jamaicans flying the flag high in various countries, golden representations.

It is puzzling though how the Jamaican work environment remains stagnant with all these changes. The practices that we have are no longer serving us but drastically limiting us. The management of our organizations need to start building and not restricting individuals.

Structures such as flexi-work and work from home need to be implemented in order to contribute to our productivity, innovation and creativity. Employees need to start experiencing more autonomy and not be stuck at a role for years that doesn’t challenge them. Why are we moving at a snail’s pace with this needed change to our structures?

Building Anew

It is clear as day that employees have no need to remain in this strict nine to five atmosphere that is stifling creativity and creating misery. This traditional style of management is surely becoming a hindrance to our nation, and many young persons are voicing their displeasure. A work environment that is constantly being likened to slavery is a cause for concern. A look at the state of the actual environment is also a matter to discuss for another day, or at least another article, “Better Work Spaces, Increased Productivity“. Work is only one aspect of our lives, where we have to be juggling many other issues and situations, but the nature of work in Jamaica seems like a vise grip to many nowadays.

In shaping and changing our infrastructures and practices, the creation of a modern work environment will boast many benefits to our standard of living and the way in which we do business. In defining a modern workplace, the website NH Learning Solutions remarked that “An organization must evolve into a flexible environment that allows for continued communication and collaboration.” The innovation and creativity of our organizations are guaranteed to also impact the society. A modern workplace will increase productivity and improve our work-life balance, where factors of health and wellness can be better adapted. Jamaica needs to enter this path of growth, our future leaders need it.

 

 

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Govt. Extends EPOC: It Will Continue After IMF Ends November

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The Economic Programme Oversight Committee, EPOC will continue to operate after Jamaica’s programme with the International Monetary Fund (IMF) ends in November 2019. That is the word from the Minister of Finance and the Public Service, Dr. Nigel Clarke recently. The work of EPOC was supposed to end at the same time the three-year Precautionary Stand-By Arrangement (PSBA) with the IMF terminates in November.

MOU Signed

The Finance Minister and the Chairman of EPOC, Keith Duncan, on August 22, 2019, signed a Memorandum of Understanding (MOU) at the Finance Ministry that will see EPOC operating beyond 2019. The President of the Private Sector Organisation of Jamaica, Howard Mitchell was among other signatories to this MOU.

Under this MOU, EPOC will continue to monitor Jamaica’s economic reforms after the current arrangement with the IMF expires. EPOC’s work will continue until the Government of Jamaica establishes the Fiscal Council and puts in place the institutional framework that enables the Bank of Jamaica to become an independent monetary entity. The Cabinet already approved the creation of the independent Fiscal Council.

The independent Fiscal Council will be a permanent institution established by law to promote fiscal policies that are economically sustainable. Such policies would transcend partisan considerations. Government’s extension of EPOC is also part of its agreement with the IMF to keep its office operating for another two years once the Precautionary Stand-By Arrangement ends in November.

Legal Arrangements to be made for Fiscal Council and BOJ

In his address to the audience at the signing ceremony, Minister Clarke stated that  “the government is far advanced in enacting legislation to modernise the Bank of Jamaica, inclusive of the institutionalising independence in the implementation of monetary policy. We are working to table legislation by April 2020 to implement the Fiscal Council that will strengthen Jamaica’s fiscal responsible framework and be an independent arbiter of Jamaica’s fiscal rules.”

He further emphasised that the government is “committed to empowering EPOC to continue in a monitoring role until our central bank and Fiscal Council policy commitments are operationalised.” Jamaica is far advanced in its steps to complete the Precautionary Stand-By Arrangement with the IMF. This achievement marks another success as the country had brought the previous IMF Extended Fund Facility arrangement to a successful early end in November 2016.

Legislation to be tabled, April 2020

Jamaica’s approximately six-and-a-half-years of collaborating with the IMF has been described as successful. The Finance Minister indicated that Jamaica’s macroeconomic achievements have been recognised around the world as a success story. He attributed the success to the effort and sacrifice that the people of Jamaica made throughout the six and a half years. “..we owe it to the Jamaican people to preserve and build on these gains even as we work to address the other important challenges.” He said.

While the Finance Minister was not able to indicate the expected duration of EPOC’s extension, he explained that the duration depends on Parliament approval of the legislative arrangements for the fiscal council and enabling the independence of the central bank. He indicated, however, that the tabling of the legislative arrangements will occur by April 2020.

 

EPOC Monitoring Continues

Meanwhile, Keith Duncan expressed his pleasure in serving in this interim period. He promised to keep the public abreast on the government’s economic reform programme. He declared that EPOC will communicate any concerns with the economic reform programme to the Jamaican public, as it has been doing since it was established in 2013.

Among the items on EPOC’s agenda is its focus on Jamaica achieving its fiscal rules including a 60 percent debt to Gross Domestic Product (GDP) ratio by 2025/2026. Jamaica is already seeing the benefits of the GoJ’s fiscal responsibility programme and EPOC’s chairman expressed confidence that the country will continue along this fiscal discipline path.

About EPOC

EPOC is made up of 11 representatives from the private and public sectors and civil society. This group receives and assesses information from the Government of Jamaica (GOJ) to track Jamaica’s progress against the agreed targets outlined in the 2016 PSBA with the IMF.

It monitors the monetary, fiscal, and financial sector indicators agreed under the standby agreement. Through these targets, the GOJ expects to maintain the macroeconomic stability that was achieved under the previous agreement with the IMF. Jamaica’s renewed focus is on growth and job creation as well as the maintenance of fiscal responsibility.

The EPOC committee meets quarterly for monitoring based on the quarterly targets and the semi-annual IMF reviews. A technical sub-committee also meets monthly to carry out ongoing analysis of the Precautionary Stand-By Arrangement.

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Jamaica is Ready to Exit IMF

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“Jamaica is ready to exit IMF financial support”. That is the word from Dr. Constant Longeng Ngouana, the International Monetary Fund’s (IMF) Resident Representative in Jamaica. He was speaking at a recent media interview where he shared his views on Jamaica’s economic performance. The IMF resident representative expressed his belief that Jamaica’s success in its economic performance over the past few years has placed the country in a position to exit the IMF programme and take care of its economic affairs.

Jamaica is currently benefitting from a US$1.6-billion Precautionary Stand-By Arrangement (PSBA) with the IMF. Previously, the island was in an Extended Fund Facility (EFF) between 2013 to 2016. Jamaica first entered into a standby agreement with the international lending institution in 2010.

Borrowing Relationship with IMF to end in September

Jamaica’s existing arrangement with the IMF is to end in September 2019. According to the IMF resident representative, the Fund will continue the partnership with the island. The nature of the future relationship with Jamaica will be consultative and not involve new financial support. The expected change in the relationship between the country and the IMF is in recognition of Jamaica’s maturity in policymaking and the economy. Jamaica expects to graduate from the borrowing arrangement with the IMF as projected barring unforeseen circumstances.

Ngouana praised Jamaica’ achievement which he acknowledged has taken place over a relatively short time. Since 2013, Jamaica has exceeded the various targets that were agreed between itself and the IMF. The results were the tremendous economic turn around that the country experienced. Initial doubts that Jamaica would have successfully transitioned economically from its dire position to its much-improved position disappeared.

… everybody is in agreement that this has been a tremendous turnaround and we get calls all the time asking how did the Jamaican people do it. It’s really an economic transformation for such a short period,” Ngouana said.

An ingredient that enabled Jamaica’s success is the sound policymaking that is based on a broad consensus from stakeholders. Consequently, Jamaica was able to achieve positive economic growth within a short period.

Jamaica’s Achievements

Among Jamaica’s impressive achievements were:

  • The reduction of the public debt from 147 percent of GDP in March 2013 to 95 percent by March 2019
  • An increase in the Net International Reserves (NIR) from US $1 billion in 2013 to more than US$ 3 billion
  • The reduction in inflation from double-digits to single digits within six years
  • A reduction in the unemployment rate from 16.3 percent in April 2013 to 7.8 percent in April 2019
  • A 1.9 percent growth in the Jamaica economy in 2018-19.

Although the rate of Jamaica’s economic growth was not at the targeted levels, the actual performance of a 1.9 percent growth in 2018-19 represents the best performance compared to the past 20 years.

Crime, however, remains a serious concern. Although Jamaica continues to grapple the crime problem, the island needs to do more to increase the gains achieved to date. Ngouana also indicated that the modernisation of Jamaica’s agriculture is also a reform that is necessary to further stimulate economic growth. Another structural impediment to growth is the limited access to financing that the country currently experiences.

IMF Team’s Latest Assessment

Previously, a staff team from the IMF led by Uma Ramakrishnan was in Jamaica from June 10 to 14, 2019. That visit came ahead of the sixth and final review under the IMF’s Stand-By Agreement to be held in September 2019. After the visit, the IMF team leader released a statement. Included in that statement were the following observations by the IMF team.

Jamaica’s improved economic growth in FY2018/19 was buoyed by construction and mining. Unemployment is now at an all-time low of 8 percent. The inflation outturn was 3.9 percent (y/y) in April, closer to the Bank of Jamaica’s (BOJ) target range of 4–6 percent. The primary surplus was almost 7½ percent of GDP in FY2018/19, with public debt falling to about 95 percent of GDP at end-March 2019—the lowest since FY2000/01. Non-borrowed reserves were US$430 million above target at end-March 2019, providing (a) critical buffer against unforeseen global economic shocks.”

The statement lauded the BOJ’s recent accommodative policies to restore inflation to the target range.  It further commended Jamaica’s reduction in the Cash Reserve Requirement by 5 percentage points during the current fiscal year and the successive policy rate cuts to 0.75 percent. The IMF noted that these actions should support private credit expansion as the government continues to deleverage.  Furthermore, strengthened central bank supervision and risk management practices at lending institutions will be vital to ensure careful assessment of risks for financial stability.

Also, the IMF statement noted that the execution of the budget for the fiscal year 2019/20 is underpinned by continued buoyant tax collections in April and above budget capital expenditure which is regarded as an encouraging new normal for Jamaica.

IMF’s Recommendations for Jamaica

Among the other recommendations from the IMF is that the central bank should limit its interventions in the foreign exchange market to “episodes of significant market dislocations.”  At the same time, the IMF noted,  the continued shifts in the value of the currency indicate an urgent need for the central bank to adopt a foreign exchange trading platform. This platform should enhance market transparency and price discovery. Hedging instruments for FX trading may also be developed.

In order to entrench the hard-fought gains Jamaica has achieved, the IMF recommended that the Jamaican government keep its commitment to:

(i) enact amendments to the BOJ Act to adopt a full-fledged inflation targeting framework,

(ii) create a policy framework for natural disasters risk financing, and

(iii) table legislation for the establishment of an independent Fiscal Council

The Fund also recommended that the country strengthen efforts to enhance the special resolution regime and consolidated supervision of financial conglomerates. This action was recommended by the recent IMF Financial Sector Assessment Program (FSAP).  The IMF, however, noted that these actions “require strong coordination among the BOJ and the Financial Services Commission (FSC).”

The IMF statement also reiterated the need for the Jamaican government to implement new streamlined and performance-based compensation framework for its employees. This recommended action should take place before the next round of wage negotiations. The Fund noted that this reform action will ultimately result in a more cost-effective and efficient public sector.

Meanwhile, Ngouana encouraged Jamaicans to remain on the present growth and reform path. He insisted that

“Jamaica has come too far to allow for any reversal. Sacrifice has been far-reaching by all Jamaicans and we (IMF) encourage the Jamaican people to stay the course.”

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