Editorial | JSE should head to Guyana

It is not surprising that the recent relisting on the Jamaica Stock Exchange (JSE) by the Port of Spain-based Guardian Holdings did not create the same excitement as last week’s admission to the exchange of Massy, another Trinidadian conglomerate.

Both developments were significant, but there was a sense of familiarity about Guardian and its return. The insurance group had previously been on the Jamaican board and left, ostensibly because of lack of liquidity in its stocks. Now that the group is majority owned by Jamaican Michael Lee-Chin’s NCB Financial Group, its return was sort of taken for granted.

Further, Guardian did not itself create too much excitement around its relisting. Massy has. The company has been advertising heavily in the Jamaican media, and its bosses have been touting the significance of the development in press interviews.

“As we embark on our international growth plan … we are hunting for significant opportunities,” Massy CEO Gervase Warner told the Financial Gleaner. “And at some point we will need to raise capital, and we feel that the JSE would be a good place for that.”

Further, Mr Warner said, Massy liked the “energy and enthusiasm” with which the stock exchange is run, and was impressed by the “broader retail participation” of Jamaicans in the equities market, including the fact that regular folk were “more interested in stock investments in Jamaica, compared to other jurisdictions”.

HIGH COMMENDATION

This is certainly high commendation of the JSE and the Jamaican equity environment. Indeed, there is little doubt that the JSE is the most sophisticated of the English-speaking Caribbean bourses. The question now is how the JSE will leverage this latest vote of confidence in its operations.

This newspaper agrees with Terise Kettle, vice-president of investment banking at the brokerage house Barita Investments, that Massy’s listing enhances the potential for accelerating the build out of “a more regional capital market … one that is far more intertwined and, consequently, more robust and beneficial to companies throughout the region”. But people in the region have been expecting that for more than three decades, ever since the Grand Anse Declaration of 1989, when the Caribbean Community (CARICOM) leaders pledged to transform the regional group into a CARICOM single market and economy.

That process, though, has been inordinately slow, often constrained by domestic politics. Additionally, an early idea of creating a single regional stock exchange proved impractical. And creating a seamless regional regulatory environment for securities remains a work in progress.

The good thing is that CARICOM’s firms enjoy a right of establishment within the community and with it the ability to cross-list, once they adhere to regulations of the markets on which their securities trade. Additionally, some regional bourses have reciprocal agreements, under which they recognise each other’s rules.

These are among the factors that give the JSE a good launch pad from which to aggressively promote itself across CARICOM as the preferred market for primary and secondary listings. But achieving this will require more than the JSE distributing application forms to companies or advising them of the requirements to be on its boards. A fair bit of hand-holding might also have to take place. Indeed, the managers and overseers of the exchange will perhaps have to be more creative in fashioning offerings that excite regional companies to list in Jamaica.

SHOW ON THE ROAD

In this regard, the JSE should consider taking its show on the road, being clear that while the bourses of the region may have cooperation agreements, they are potential competitors operating in a space that is obligated by treaty to fuse itself into a single pan-CARICOM market. Regional bourses, therefore, in seeking business in the context of competition, may have to distinguish themselves on the basis of price and the quality of service they offer.

Should this newspaper be asked for advice on where the JSE might begin a regional roadshow, the immediate response would be Guyana. As The Gleaner has been highlighting in recent years, that country, with its discovery of oil, is in a period of high and, at least into the medium term, very robust growth.

Most projections are that this year, Guyana’s real GDP will expand by over 45 per cent, after expanding 21 per cent last year and 43 per cent in 2020. But even before the extraordinary oil-driven expansion, the Guyanese economy was moving along at a fair clip – around four per cent per annum. Per capita GDP, at US$3,851 in 2000, reached U$9,250 in 2020, which is nearly twice Jamaica’s. At current growth rates, Guyana’s economy will double in three to four years. Its GDP will be around the size of Jamaica, a country with over three and half times its population.

Guyanese will be richer, having more money to spend on goods and services. That should benefit the country’s firms. Some will need help with financial intermediation, including cheaper ways, other than through debt, to raise capital and/or expand equity. With a financial services market that is significantly more developed than Guyana, Jamaica can provide some of those services. Moreover, Guyana’s young stock exchange has only 12 listings and trades only once weekly. The JSE, in the circumstances, is in a position, either on its own or working with the Guyanese, to have a pioneering presence in that market. Indeed, the JSE might even think, for its own account, of mergers and acquisitions in the region. In any event, Marlene Street Forrest, the JSE’s managing director, should be heading for Georgetown – and elsewhere.