Thomas
Dennise Williams, Staff Reporter
"OVER THE life of the stock exchange, its mission has not been accomplished," head of the Development Bank of Jamaica (DBJ) Kingsley Thomas, asserts.
Speaking at the Investor's Choice Investment Seminar held at the Pegasus Hotel on January 19, Mr. Thomas stated, "The Jamaica Stock Exchange has as its stated mission, 'to provide a fair, efficient, ethical and transparent medium for the conduct for a viable securities market that facilitates the mobilisation of capital to finance the growth and development of the nation.'
"A passionate and objective review of the stock market would undoubtedly lead to the conclusion that this has not occurred."
NEGATIVE GROWTH
In fact, Mr. Thomas believes that "compared to Malaysia, we have actually realised negative growth between 1973 and 2004 for the number of companies listed."
The Jamaica Stock Exchange (JSE) archives reveal that from 1969 there were 34 listed companies. By 1995, there were 51 listed companies and by 2005 the number settled at 38.
Naturally, the JSE sees things differently. In fact, Roy Johnson, executive chairman of the JSE, takes umbrage at Mr. Thomas'comments.
"I totally disagree that the JSE has not lived up to its mandate. We have to look at the environment that we operate in. Rome was not built in a day. It takes time to educate people to see that vision and understand how the market works, and participate and make the right investment decisions."
Mr. Johnson is of the view that our culture prohibits the rapid growth of the exchange.
DEBT CULTURE
"We have done some research which has helped us to understand the reasons why companies do not come to the market. It seems like our culture is significantly a debt culture. When people want money to expand, their first resort is to go to the commercial bank. But market forces will force people to look at financing through equity. To expand they will need cheaper capital and equity is more cost effective than debt."
On this point the two gentlemen agree. Mr. Thomas did state, "Jamaica has a high cost of debt."
Another factor Mr. Johnson points out is the need for control. "Being a small scale country the desire of our business people is to retain the control of their company. People view listing on the JSE as diluting their control.
Business people are not open to others participating in ownership of their companies as in other countries. That is a significant misunderstanding that we must overcome. What really happens is that you have to be more accountable to your investors. And that is a good thing."
Mr. Johnson believes that the government could set the example by listing public entities on the exchange.
"If you look at the history of divestments that took place, the government has not continued the tradition of divesting public enterprises through the market. This has not helped to encourage our business people."
Yet, Mr. Johnson points to what could be considered a positive sign.
VENTURE CAPITAL VEHICLE
"During the April 2004 Budget Debate it was stated that the government would list the National Investment Bank of Jamaica. My take is that it could work out as a venture capital vehicle. The National Investment Bank of Jamaica would access the stock market to raise capital. With those funds they could provide funding for smaller businesses in return for an equity stake. Later, those companies would then be listed on the exchange. However, this has not materialised. When it does, it would fuel the development in the country."
Mr. Johnson asserts, "I am not going to agree with Mr. Thomas. Look at the amount of capital that has been raised, look at the trading and the number of Jamaicans who participate and have increased their wealth through ownership of shares. We are not just clients of these companies - we are owners and I believe that is where value comes from."
Interestingly, the DBJ is currently working Harmony Cove, a major high-end tourist development in Trelawny. The over 2,000-acre property was reported to have been purchased with funds earned from their investment in the Jamaica Money Market Brokers initial public offering.
