Dennise Williams, Staff Reporter
JOHNSON
DESPITE THE challenges for the stock market in 2005, the Jamaica Stock Exchange (JSE) made a profit and began several initiatives aimed at widening the scope of its operations.
In an exclusive interview with the Financial Gleaner, executive chairman of the JSE, Roy Johnson looked back at the 2005 achievements of the Exchange and spoke about the plans going forward.
"Our main focus last year was to expand revenue streams beyond the trading cess charged on transactions. I am happy to say that we are coming on well with this endeavour. Even though the market declined by seven per cent in 2005, we made a profit."
Mr. Johnson then discussed other achievements.
FIXED INCOME SECURITIES DEPOSITORY
Work began last year on a building to house the JSE's Jamaica fixed income security depository (JFISC). Similar in concept to JSE subsidiary, the Jamaica Central Securities Depository Limited (JCSD) located in New Kingston, the JFISC will be a bank to house the fixed income instruments that are the backbone of the repurchase (repo) industry.
Essentially, the depository will seek to regularise the repo industry. According to Mr. Johnson, "What will happen, for example, is when a company buys a $100 million Government of Jamaica bond, they cannot sell repos worth more than that. The depository will record how much money each company has on its books as assets to resell. And it will also indicate to investors how much the underlying instrument is worth that forms the repo. This will help investors understand the spreads and offer the possibility to be in a better negotiating position."
While originally intended to benefit the members of JSE, Mr. Johnson explained that the scope of the project has widened considerably.
"What we are trying to do is establish a bank for securities which a company can trade. We would keep the records there electronically and the Financial Services Commission (FSC) has recognised the importance of this. And so the scope has been expanded to include banks. Therefore, our computer systems have to be reconfigured to accommodate them."
DYOLL
The collapse of Dyoll Insurance Company took the market by surprise and threatened to destabilise the investor confidence hard won after the 1990s financial sector meltdown. The JSE and the FSC raced to control the damage that the events surrounding Dyoll created.
"Dyoll was a major event," he said. "We took action appropriately, decisively and as soon as we had adequate basis."
On Valentines Day in 2005, the JSE halted trading of Dyoll Group the parent company of Dyoll Insurance company at $14.50 price. However, after intervention by the FSC and the release of updated financial statements by the Dyoll Group, the JSE allowed trading to resume on October 11, 2005 after which the price fell to under $2.
Mr. Johnson continues, "I believe our actions were in the best interest of the market."
In fact, when asked if there were any actions taken with the Dyoll case that they would do differently, he replied, "No, I think we took a very cautious approach to the entire matter."
EDUCATION SERVICES
In 2005, the JSE sought to widen its services by offering education to the investing community.
"We ventured into training and that went very well. One of our successes was a mutual fund seminar. In fact, we will be doing such seminars on an ongoing basis. When we look down the road, we will take the decision to create educational programmes on products such as derivatives. Our intent is to bring down the expertise to Jamaica and get the local people fully apprised."
REGISTRAR SERVICES
Mr. Johnson revealed that the JCSD would be expanding its registrar services this year. "Last year, we were the registrar for the Mayberry initial public offer and they were our first client.
This year we will looking to contracts from unit trusts."
NEW INVESTORS
Another initiative taken on by the stock exchange is the attempt to widen the investor base. Mr. Johnson explains, "We have tried to attract investors outside Jamaica. An important event last year was when the Prime Minister, P.J. Patterson rang the bell on the New York Stock Exchange and when a consortium of local brokers along with the JSE met with U.S fund managers to provide information on Jamaica.
We recognised the need to increase listed companies and interest more people as investors. We are taking advantage of the fact that emerging markets are being looked at. The key to attracting outside interest is proper regulation, liquidity (the ability for investors to be able to get out their money) and a strong revenue base from the listed companies."
Mr. Johnson says confidently, "The JSE can meet international inspection."
AWARDS CEREMONY
In order to raise the performance bar among the financial community, the JSE launched the Best Practice Awards in 2005.
"The objective is to encourage listed companies to improve in areas such as presentation of their annual report, usefulness of information provided to investors and the like, "Mr. Johnson said.
DEMUTALISATION OF THE JSE
The much anticipated listing of the JSE as a public company is on track, Mr. Johnson says.
"The process is done in three phases. First, we turned the JSE into a for-profit company. The next phase includes issuing shares to our members for their seats along with adopting new business rules; creating a new trading floor access agreement. We are in the middle of this second phase. The final phase is the process of readying the organisation for listing."
And in terms of the current bearish mode the market is experiencing, Mr. Johnson says, "We want to remind investors that equities over the long term do better than real estate and foreign exchange once inflation is factored in. Markets go up and down and are a reflection of the real economy."
According to the JSE, one per cent of Jamaicans in the 18-65 age group participate on the exchange.
