Why Invest in the Jamaican Stock Market?

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The overwhelming success of the recently concluded Initial Public Offer (IPO) of 11,000,000,000 shares in the Wigton Windfarm has convincingly demonstrated the public’s appetite for investing in the Jamaican stock market.  At the listing ceremony for the Wigton Shares, on May 22, 2019, at the offices of the Jamaica Stock Exchange, Mrs. Street Forrest, Managing Director shared statistics showing the breakdown of the applicants.

Overwhelming Support by Investors

According to her data, 31,200 persons applied for shares in Wigton. Of that number, 11,772 or 38% are investors who are new to the stock market. This information is encouraging news for the Jamaica Stock Exchange, which  Bloomberg News, in 2018, recognised as the best performing stock exchange in the world.  Continuing her presentation, Mrs. Street-Forrest highlighted that more than 64 percent of the applicants were under 50 years old.  A significant proportion of this group is less than 40 years old. This observation indicates a strong interest among younger persons in the Jamaican stock market.

Interestingly, more females applied for the Wigton shares, represented by 56 percent of the total applicants. The rest of the Wigton IPO applicants, 44 percent, were males. Furthermore, the average amount spent by these investors was approximately $124,000. Consequently, the Wigton IPO was oversubscribed by 158.8%.  All this is great news for the future of investment in Jamaica. More ordinary Jamaicans are wising up to the benefits of investing in the Jamaican stock market.

Why invest in the Jamaican Stock Market?

Undoubtedly, the government of Jamaica supports the investment drive and has committed to the divestment of other state assets. In his congratulatory message at the listing ceremony for Wigton, Prime Minister, the Most Hon. Andrew Holness announced that in the short to medium terms government will divest more public assets. The first would be shares in the Jamaica Public Service (JPS) and the Jamaica Mortgage Bank (JMB). Jamaicans can, therefore, look forward to participating in these investment opportunities when their IPOs open.

Investing contributes to Jamaica’s Economic Growth

Another reason to invest in the Jamaican stock market is that investment contributes to the island’s economic growth. As Energy Minister Hon. Fayval Williams, in her remarks, puts it,

 “Our economy is winning as this IPO was able to generate some $14 billion, when only $5.5 billion was on offer. Other countries are also encouraging their citizens to invest in wind energy.”

She cited the example of the Middelgrunden offshore wind farm in Denmark, which has 20 turbines and is regarded as the world’s largest offshore farm at the time it was built in 2000.  Approximately 10,000 investors of the Middelgrunden Wind Turbine Cooperative owned 50 percent of that wind farm.

Opening a New Investment Account Is Now Easier

It is also much easier for new investors to open an account with the Jamaica Central Securities Depository (JCSD), a wholly owned subsidiary of the JSE. The JSE Board of Directors approved this move to allow the immediate activation of new accounts to facilitate trading activities. New investors no longer need to wait days for their accounts to become active to enable trading. This new arrangement became effective on February 11, 2019.

In its release, the Jamaica Stock Exchange acknowledged that the need for the timely opening of new accounts. Both new investors and their brokers will benefit from a more efficient depository account opening process.

According to Mrs. Street Forrest, more investors will participate in the equities market as a result of these improvements. She anticipates that over the next five to ten years the number of investors will increase to approximately 30%.

You Avoid Risks Associated with UFOs

Investing in the local stock market is much safer than risking money in unregulated financial organisations (UFOs). During the past decades, more than 40,000 Jamaicans were badly hurt financially by the fraudulent operations of UFOs. Who could forget the financial damage Cash Plus and Olint caused to their “investors”?

By all indications, investors in both the Main and Junior Markets also experienced encouraging growth in their investment portfolios. Bloomberg, in its article, observes that in 2018 the JSE Main Index rose 29 percent (in US dollar terms) which is the highest among the 94 national benchmarks that Bloomberg tracks. Indeed, over the past five years, according to Bloomberg, that index outperformed the other indices. Furthermore, Jamaican stocks surged almost 300 percent, which was more than four times the performance of the second-best national benchmark index and seven times the S&P 500’s advancement.

Speculative Trading Does Not Affect the Jamaican Stock Market

That said, it is to be noted that the Jamaica Stock Exchange is a comparatively smaller market. The stocks listed in the JSE Main Index value less than J$11 billion (in 2018), so it does not take much effort to drive this market into positive territory.  Also, the level of speculative actions that hit larger stock exchanges daily does not impact the JSE. Such activities as short selling to drive stock prices down, and high-frequency trading (day trading) to eke out advantages derived by the differences in the spread between the buy and the sale prices, are not features of the Jamaican stock market. Furthermore, the Jamaican stock market is active for only three and a half hours, much unlike other stock exchanges that facilitate pre-trading before the opening bell.

JSE Celebrates 50 years

One of the main reasons to invest in the Jamaican stock market at this time is the higher investor confidence in the stability of the market, which, incidentally is celebrating this year its 50th anniversary. Since 1969, when the Jamaica Stock Exchange opened its doors on the Bank of Jamaica Building, it has provided robust trading support to its investors.  The stock exchange eventually moved, in 1998, to its current location on 40 Harbour Street from which it continues to operate. Over the years, the Jamaica Stock Exchange has evolved into a strong and reputable organisation. Its main mandate is to mobilize capital to enable the growth and development of companies and by extension the Jamaican economy.

As one Kinston investor, 36-year-old Paul Simpson. remarks

“Clearly, capital goes where it’s comfortable. To see capital coming here means people must be comfortable.”

So, if you are interested in investing your money into assets that will grow over time, start with the Jamaica Stock Exchange.

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