Best Practices in Business & Economic Development February 2024 Jamaica Latest Issue

Jamaica Stock Exchange (JSE) – Kingston, Jamaica

written by BVC March 5, 2024

Jamaica Stock Exchange

Investing in a Sustainable and Innovative Future

Innovation in the financial market; setting a new standard for growth and resilience in the Caribbean

The Jamaica Stock Exchange (JSE), a pivotal institution in the Caribbean, marked its 55th anniversary in 2024, underscoring its long-standing role in fueling economic growth through capital mobilization. Located in the heart of Kingston, the JSE has evolved into a robust platform that facilitates the seamless exchange between companies seeking investment for growth and investors looking for profitable and secure avenues to deploy their savings.

Dr. Marlene Street Forrest, the Managing Director of the JSE, elucidates the exchange’s core mission and operational dynamics with clarity and passion. “We celebrate 55 years of operation this February,” Dr. Street Forrest begins, highlighting the exchange’s journey since its inception. The primary goal, she explains, remains unwavering: to serve as a conduit for capital mobilization, enabling businesses to access necessary funds for expansion while offering investors a reliable and efficient means to invest their savings.

The JSE encompasses several subsidiaries, which include the Jamaica Central Securities Depository (JCSD), the JCSD Trustee Services Limited, and the innovative Jamaica Social Stock Exchange (JSSE). This diversified group of companies underscores the JSE’s multifaceted role in the financial ecosystem, extending beyond traditional stock trading to include securities depository and social impact initiatives.

Innovations and Resilience in Challenging Times

In the ever-evolving landscape of global finance, the ability of a stock exchange to navigate and thrive during economic fluctuations speaks volumes about its resilience and forward-thinking approach. The JSE is a prime example of such agility, especially in the challenging economic climate of 2023. Dr. Street Forrest shares insights into how the JSE has not only weathered the storm but has also taken significant strides to enhance its internal competencies and expand its services, ensuring sustainability and relevance in the modern financial ecosystem.

“While the markets did not perform as well as in the previous year, the stock exchange continued to be sustainable,” she explains. This sustainability was not a product of stagnation but a result of deliberate efforts to bolster the exchange’s internal competencies and resilience. Dr. Street Forrest emphasizes critical areas such as cybersecurity, enterprise risk management (ERM), and data privacy. “We spent a lot more time on cybersecurity, ERM, and data privacy issues, essentially shoring up and strengthening our internal environment,” she notes, underlining the proactive measures to secure the exchange’s operations and stakeholder interests.

In the face of a downturn in market performance, the JSE remained focused on growth, mainly through expanding its listings. “Within 2023, we listed more than we did in 2022, with 14 securities as against 12 of the previous year,” Dr. Street Forrest proudly states. This significant achievement reflects the exchange’s ability to attract new listings and capital, even in less favorable economic conditions. Furthermore, she points out that in terms of capital raised, the JSE outperformed the previous year, which indicates the Jamaican market’s robustness and appeal to both local and international investors.

Turning her attention to the subsidiary operations, Dr. Street Forrest underscored the innovations at the Jamaica Central Securities Depository (JCSD). Launching the JCSD Client Portal was a major milestone. This technological advancement allows investors to access their portfolio information online, facilitating independent verification of their investments across brokers. “Once you log in, you can see the state of your investment across brokers, allowing for independent verification at your fingertips,” she elaborates. This initiative, she believes, is crucial for enhancing confidence in the market. “Ensuring that confidence in the market is not only maintained but improved was very important for us,” Dr. Street Forrest asserts.

Cybersecurity and International Connectivity

Digital transformation dictates the pace of business and investment in today’s financial environment, and cybersecurity is a pivotal concern for financial institutions globally. The Jamaica Stock Exchange, under the guidance of Dr. Marlene Street Forrest, has placed a significant emphasis on fortifying its digital defenses, ensuring the safety and confidence of its stakeholders.

Dr. Street Forrest provides a detailed account of the JSE’s approach to cybersecurity. “We ensure that our framework is in line with the NIST framework,” she states, referring to the globally recognized standards for cybersecurity. This adherence benchmarks the JSE against the best in the world and ensures a dynamic and responsive cybersecurity posture. “Our cybersecurity environment is mature and robust, encompassing both internal management and external relations with our brokers, investors, and listed companies,” Dr. Street Forrest adds, highlighting the proactive measures like penetration testing to identify and mitigate vulnerabilities.

Dr. Street Forrest also sheds light on the Direct Market Access (DMA) system, a landmark advancement facilitating cross-border investment flows. “In 2023, we continued to roll out Direct Market Access, with our connection extending to Canada,” she reveals. This initiative allows investors to diversify their portfolios with Canadian securities directly through their brokers, enhancing the depth and breadth of investment options available. Dr. Street Forrest emphasizes the system’s transparency and real-time access to information, which is crucial for investors in an increasingly interconnected world.

In addition, the JSE has launched corporate secretarial services to support smaller companies. Dr. Street Forrest highlights these entities’ challenges, particularly in maintaining compliance with regulatory requirements. “We’ve started offering corporate secretarial services under the umbrella of the JCSD, focusing on smaller companies that struggle with incorporating and keeping good records,” she states. This service is critical for ensuring compliance with the Companies Office of Jamaica and ensuring companies can accurately report and manage shareholder information.

Strategic Advice for Investors on Navigating Market Volatility

In investment, understanding market dynamics and investor psychology plays a crucial role in navigating periods of volatility. Dr. Street Forrest shares her perspective on the current market conditions and offers sage advice to investors looking to weather the storm and capitalize on emerging opportunities.

“As interest rates rise, we often see stock market performance decline,” she explains, attributing this trend to investors’ preference for the relative safety and higher returns of interest-bearing instruments during uncertain times. This flight to safety, especially in the post-Covid era, has contributed to the downturn in the market. However, Dr. Street Forrest emphasizes a silver lining in this scenario, noting that “over the long haul, you are still better off in the stock market.”

Highlighting the discrepancy between company performance and stock prices, Dr. Street Forrest points out that many well-performing companies on the exchange are undervalued, presenting a unique opportunity for investors. “The access to these companies has become easier because the prices of these shares are down,” she observes, encouraging investors to view the current market conditions as a sale. This perspective is about capitalizing on low prices and recognizing the potential for significant returns as the market corrects itself.

Dr. Street Forrest advocates for a strategic investment approach, urging investors to diversify their portfolios across and within sectors to mitigate risk and maximize potential gains. “Take advantage of the market. Look to diversify within or outside of a sector,” she advises, underscoring the importance of not succumbing to herd mentality but finding value where others may not. This approach is particularly relevant in market downturns, where fear often leads to missed opportunities.

The JSE’s Central Role in Jamaica’s Economic Resilience

After the global pandemic, economies worldwide faced unprecedented challenges, striving for recovery and growth amidst continuing uncertainties. Jamaica, renowned for its vibrant culture and tourism industry, has demonstrated remarkable resilience, buoyed by strategic economic policies and initiatives. Within this context, the JSE remained a linchpin institution critical in the nation’s economic revitalization and growth.

Dr. Street Forrest paints an optimistic picture of Jamaica’s economic landscape, citing significant achievements such as an improved credit rating, a reduced debt-to-GDP ratio, and a notable decrease in unemployment rates to around four percent. “These are signals of a resilient country, but not by luck, but by effort,” she emphasizes, acknowledging the concerted efforts behind these positive developments. Despite the challenges posed by high-interest rates aimed at curbing inflation, the JSE has remained a pivotal player in Jamaica’s economic strategy.

She positions the JSE as a barometer of the economy’s health, reflecting broader economic trends and investor sentiment. “The stock exchange acts as a barometer in terms of how the economy is doing,” she notes, illustrating how the exchange’s performance can signal broader economic conditions to market participants. Despite a downturn in the market index, she points out the increase in listings on the exchange, with a significant portion of capital mobilization occurring in the bond market. This diversification in financial instruments, including equities, bonds, preference shares, and private market offerings, emphasizes the JSE’s adaptability and critical role in facilitating access to capital for business growth and expansion.

Strategic Priorities for 2024

As the JSE strides into 2024, it does so with a clear vision for its future, marked by innovative financial instruments, a commitment to sustainability, and enhancing market efficiencies. Under Dr. Street Forrest’s leadership, the JSE is poised to introduce several key initiatives that promise to elevate its position further within local and international financial landscapes.

Dr. Street Forrest outlines the JSE’s top priorities for the year, emphasizing the introduction of short selling, developing a green bond market, and commercializing data as pivotal focus areas. “This year, we will be offering short selling to the market,” she asserts, highlighting the importance of this development in providing investors with more sophisticated trading strategies and enhancing market liquidity. “With an expected launch in the middle of the year, we are looking at the framework for sustainable bonds,” Dr. Street Forrest elaborates.

Data commercialization is another crucial initiative, responding to the growing demand for accessible, comprehensive market data. Dr. Street Forrest notes, “Data commercialization is an area that we have started to develop, and that should be completed by the second half of the year.”

Partnerships play a vital role in these developments, with the JSE collaborating with local and international entities to realize its objectives. The Inter-American Development Bank (IDB) and the Government of Jamaica are vital partners in developing the green bond framework, reflecting a collaborative approach toward sustainable investment practices.

Expanding on this theme of connectivity, Dr. Street Forrest reveals plans to streamline settlement cycles, moving from T+2 to T+1 and aligning the JSE with global market practices. “We will be settling our transactions through the JCSD at T+1… because obviously, we see ourselves as interconnected in terms of global market activities,” she states. This transition will align the JSE with markets in the US and Canada and reinforce its status as a globally integrated and responsive market player.

Through these strategic priorities and partnerships, the JSE is set to further its mission of providing a robust, innovative, and sustainable platform for capital mobilization and investment. Dr. Street Forrest’s vision for 2024 reflects a holistic approach to market development, emphasizing efficiency, sustainability, and global integration, ensuring that the JSE remains at the forefront of the financial sector’s evolution.