It's Jammin': Jamaica's Tiny Stock Market Conquers World in 2015by
Two dozen companies doubled value; dolphin shows and cement up
Market gains aided by sale of Red Stripe brewer to Heineken
Jamaica may bring to mind rum daiquiris and Bob Marley but its stock market had a better year than any other across the globe.
Amid the middling returns of the world’s best known indexes -- the Dow Jones Industrial Average dipped about 1 percent, the Euro Stoxx 50 lost 6 percent in dollar terms-- foreign acquisitions, stronger investor safeguards and a rebounding economy helped the Jamaica Stock Exchange surge more than 80 percent in 2015.
With a market capitalization of about $5.3 billion (the Dow has $5.23 trillion), Jamaica lives on the fringe of frontier status. And although the exchange’s benchmark index lost 5 percent last year and 13 percent in 2013, investors should pay attention, according to Carl Bennett, a vice president of investor relations at Bank of New York Mellon.
“I’m really impressed with what they’ve done to attract capital to the market,” he said, pointing to new measures to combat insider trading and market manipulation.
With economic growth forecast to accelerate for a third straight year, reaching 1.4 percent in 2015 according to estimates compiled by Bloomberg, the Caribbean island of 2.8 million people is slowly emerging from recession while struggling with one of the world’s highest debt burdens. The government has restructured local bonds twice since 2010, accepting an International Monetary Fund-led financing package in 2013. That didn’t deter individual Jamaicans and institutional investors from pouring money into local stocks this year, said Jovano Johnson, an equity trader at Kingston-based Mayberry Investments Ltd.
Twenty-nine of the 57 stocks traded on the main and junior markets in Jamaica saw year-over-year post-tax profits rise 10 percent or more. Eight of those saw profits spike more than 100 percent, led by the Jamaica Stock Exchange Group’s 1,658 percent growth for a $1.2 million profit for the 12 months that ended in September.
Strong earnings reports helped push up shares of companies like Caribbean Cement Co., which manufactures Portland cement and reported a 969 percent increase in profits, while shares of modeling agency and marketing company Pulse Investments Ltd., which said it would pay a dividend for the first time since 1994, surged 557 percent. As of November, 23 stocks had more than doubled in value this year.
Roughly $700,000 a day in securities were traded in the first 11 months of the year, according to exchange figures. While that’s up nearly 40 percent from last year, it’s still a fraction of the $7 billion average daily volume for members of the Dow Jones Industrial Average or $833 million for Mexico’s stock market.
“It’s an emerging market and the fact is that you want to be in on the ground when we are growing,” said Marlene Street-Forrest, general manager of the Jamaica Stock Exchange.
Street-Forrest pointed to the interest in Jamaican firms from large multinational corporations, such as Heineken NV’s acquisition of Red Stripe beermaker Desnoes & Geddes Ltd., which sent the shares up more than 500 percent this year. The stock will be delisted in January.
The exchange also saw a flurry of trades in November when Mexico-based Dolphin Discovery Group, a dolphin show theme park operator, announced it would acquire 58.5 percent of ordinary shares in Dolphin Cove Ltd., which is based in Jamaica.
Bennett, who doesn’t hold any stocks listed on the exchange on behalf of clients, said the growth could keep going in 2016 as the government divests state-owned enterprises through initial public offerings. Finance Minister Peter Phillips has said that government positions in the Petroleum Corp. of Jamaica and power generation and electricity distribution companies are candidates for divestiture.
Investments from outside of Jamaica will also be key, Street-Forrest said. The more than 3 million Jamaicans living abroad sent home $1.9 billion in remittances in 2014, according to the Bank of Jamaica.
This year, the exchange launched the Caribbean’s first online trading platform, seeking to tap Jamaicans living in North America and the United Kingdom. Still, trading online, which requires an account in one of a handful of Jamaican brokerage houses, represents less than 10 percent of inflows, Street-Forrest said.
Denis St. Bernard, a business consultant who lives in London, is starting a diaspora-focused investment company that would pool contributions. He said Jamaicans living abroad know Jamaican brands, such as food and construction material exporter GraceKennedy Group. He said that while convincing them to buy shares of those companies remains a challenge, “That’s where the opportunities are.”