Urgent need for Regional exchanges to access global markets

| February 2, 2016
Director, Priority International Denis St Bernard

Director, CENUK Denis St Bernard

URGENT NEED FOR REGIONAL EXCHANGES TO ACCESS GLOBAL MARKETS AND GROW ECONOMY, AS JA SETS THE TONE…

On the heals of the amazing news of the Jamaica Stock Exchange (JSE) being voted the best performing exchange in the world in 2015, there is now a tremendous opportunity for the rest of the regional exchanges to raise their game and also set their sites on the global market. As the eyes of global investors are beginning to view the Caribbean through different lens, we now need to show greater capitalization and scale, sighted St.Bernard Director of the Caribbean Enterprise Network (CEN) in an interview with CaribDirect Multi-Media.

St.Bernard, the Diaspora Liaison Officer for the JSE explains that a key component for making this happen is the strengthening of the CXN (The Caribbean Exchange), thus providing greater capacity and scale to better attract global investors in a sustained manner. The Caribbean region has the capacity to be one of the largest emerging market growth areas of the future but our ability or lack thereof to work together toward this common goal will determine where we go and how far.

Currently we have 4 Exchanges in the Caribbean namely Jamaica (JSE), Trinidad and Tobago (TTSE), Barbados Stock Exchange (BSE) and the Eastern Caribbean Stock Exchange (ECSE), the lowest performer of the lot, as the government bond market witnessed an overall decline in trading activity as total trades fell by 47.73% to 23 trades, resulting in a reduced trading volume and value of 108.30 million and 140.16 million or a decrease of 81.12% and 80.11% respectively. Corporate Bond Market, there were no market activities during the review period 2015/16.

As we are aware Stock markets can positively affect economic activity through the creation of liquidity. Many profitable investments require a long-term commitment of capital, but investors are often reluctant to relinquish control of their savings for long periods. Liquid equity markets make investment less risky. The easier it is for savers to acquire an asset (equities) and to sell them quickly and cheaply, the sooner economic growth can take place.

Photo courtesy nationwideradiojm.com

Photo courtesy nationwideradiojm.com

By facilitating longer-term, more profitable investments, liquid markets improve the allocation of capital and enhance prospects for long-term economic growth. Further, by making investment less risky and more profitable, stock market liquidity can also lead to more investment. Put succinctly, investors will come if they can leave better off.

STOCK EXCHANGES & BANKS

However, although great capacity by regional exchanges working closer together thus creating greater diversity, more liquid equity markets which imply more investment, new equity sales are not the only source of finance for this increased investment. Most corporate capital creation is financed by retained earnings and bank loans.

Greater stock market liquidity in developing countries is linked to a rise in the amount of capital raised through bonds and bank loans, so that corporate debt-equity ratios rise with market liquidity. Stock markets tend to complement—not replace—bank lending and bond issues.

Tips for policymakers; given the important role well-functioning stock markets seem to play in economic growth. Legal, regulatory, accounting, tax, and supervisory systems influence stock market liquidity. The efficiency of trading systems determines the ease and confidence with which investors can buy and sell their shares. And the macroeconomic and political environments affect market liquidity.

Denis St.Bernard
Director – Caribbean Enterprise Network – CEN

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