Transcript The Financial Sector & The Role of Stock Exchange in Nation Building.

The Financial Sector
&
The Role of Stock Exchange in Nation Building
Defining Wealth
 Positive net worth
 Assets are greater than liabilities
 Positive cash flow
How is Wealth Created?
1. Maximization of earnings from
investments through various financial
markets that are available.
2. What is the Financial Sector?
Overall part of economy
How is Wealth Created?
 Free Market – Producing product desired by
people
 Individuals, Companies, Government create
wealth by the combination of material, land
and technology in such a way as to capture
a profit in a Sustainable Manner
Players Necessary to Create
Wealth –(Economy)
Business
Government
Consumers
NonGovernmental
Organizations
(NGOs)
Regulators
Creating Wealth-Country
Perspective –(Financial Measure)
 Central to the elimination of Poverty is the
Creation of Wealth
 Measurement is the Country’s ability to
encourage ‘value added’
 Measurement also by GDP
 Jamaica’s Annual Real GDP growth 1%
since 1991. Labour productivity declines by
1.3% annually over the last 35years
Our Challenges
 Per Capita Income is below that of our
Caribbean Partners
 Public Debt – Debt to GDP Ratio averaged
130%
 High Interest Rate ?????
 Fiscal and Monetary Stimulus required
 Significant drop in private capital inflows
Our Current Challenges –Macro
Level
 Diversify into value added products
 Define Marketing and Branding Strategies
that will help crate new profitable
businesses that produce sustainable jobs
 Create the network of players joining forces
e.g. Jampro, Scientific Research Councils,
Universities, BOJ, JSE, FSC, Multilateral
Agencies such as IDB
Our Current Challenge - Macro
 Funds to Finance the productive process –
IMF loan facility (cushion the devastating
effect of decline in productive sectors).
Wealth Creation at the Micro
Level
 Finance Company through Equity and Low
interest funding
 Improve Governance and fiscal
responsibility
 Emphasis on export production of value
added products
 Investments, Investments & More
Investments
What are the Financial
Products sought after for Wealth
Creation?
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Mutual Funds
Certificate of Deposit
Government of Jamaica Securities (LRS,
Debentures)
Treasury Bill
Real Estate, (REIT)
Stocks, Options and Exchange Traded
Fund
Unit Trusts etc.
New Initiatives - Jamaica
 Expansion of the different investment
products
 The advantages for Investors & Companies
Listed on the Junior Stock Market
 The possibilities of trading of government
of Jamaica Securities
Wealth Creation Summary
1. Proper Climate to Create Wealth –
Government, or personal
2. Proper financial regulation
3. Importance of Innovation
4. Determination of Risk and Reward
5. Vibrant Financial Sector
THE STOCK MARKET – ‘IT’S ROLE IN THE
ECONOMY’
The MARKET acts as the conduit to:
 Rein in primary capital by rechanneling cash
resources into ‘productive’ economic activities
thus build up the economy.
 Enhance job opportunities and wealth creation.
 Provide the option of equity financing rather than
debt financing.
 Provide new product offerings to investors
THE STOCK MARKET
‘It’s Role in the Economy’
 Provides investors with a market where shares
traded (capital raising and as investment) and
other financial securities are bought and sold
 Gather the savings of the nation by bringing
potential buyers & sellers together
 Pass the capital on efficiently and securely to the
user
THE JAMAICA STOCK EXCHANGE
‘Functions of the Exchange’
 The mandate of the JSE is to provide a fair and
efficient and transparent stock market.
 Provide the facilities to enable companies to list
and raise capital for financing of new & existing
business.
 Provide an efficient electronic platform which
facilitate Secondary Market Activities- Trading of
the securities.
THE JAMAICA STOCK EXCHANGE
‘Systems -Technology’
The Electronic system is structured and
provides :
 Continuous order-driven process with central
market principles.
 Trading platform which is tightly coupled to a
settlement platform.
THE JAMAICA STOCK EXCHANGE
‘Protecting & Regulating’
The Exchange’s Regulatory Requirements enables a
high level of transparency for investors which
promotes:
 Increased confidence in the equities market
resulting in greater interest in the market.
 Member dealers and listed companies are
regulated.
THE JAMAICA STOCK EXCHANGE
‘Relationship with Investors’
 The stock market provides for investors in the
medium and long-term a means to invest in
corporate companies in Jamaica.
 Capital appreciation of holdings over a period of
time often exceeds the rate of inflation.
 Consistently the Exchange conducts public
outreach such as this to advise person on new
developments in the market and to get feed back
from investors on their concerns.
THE JAMAICA STOCK EXCHANGE
‘Relationship with Investors’
 Host workshops on different aspect of
investor education.
 Provide a Website which is updated daily.
 Provide Quarterly and Annual Stock
Market Performance Reviews.
THE JAMAICA STOCK EXCHANGE
‘JCSD- Promoting efficient clearance & Settlement’
 Securities must be lodged in the JCSD prior to the
transactions in shares (buy/sell)
 Through the tightly coupled system
(horizon/equity) platforms shares are transferred
from one participant to another by a double entry
system of accounting
 Brokers must settle transactions on a T+3 basis.
There has never been a failed settlement.
THE JAMAICA STOCK EXCHANGE
‘The Relationship with Investors’
JSE provides:
 A mechanism for the disclosure of information to
the public.
 A channel for aggrieved clients to lodge
complaints against broker members
 Protection for minority share holders
 Compensation Fund which allows for
compensation of aggrieved investors in respect of
brokers conduct.
THE JAMAICA STOCK EXCHANGE
‘Links listed companies and investors’
 Provides a safe and easy process for the transfer of
securities
 Monitors and liaise with listed companies and
registrar to ensure ‘5-days’ turn around of
securities.
 Provides statements to clients in order that
customer can monitor their transactions and the
value of their investment.
JAMAICA STOCK EXCHANGE
‘The Role of Member/Dealers’
 Promote growth of the market
 Promote and Understanding of the Market and Provide
Market Information
 Provide Access to the Market for clients wanting to invest
and Companies wishing to list
 Listed Companies shares are traded through Authorized
brokers
 Investors buy/sell shares listed on the Exchange through
Member dealers who open segregated accounts on behalf
of their clients.
THE JAMAICA STOCK EXCHANGE
‘Role of Member Dealer’
 Member Dealers opens with client a discussion on
proposed investment
 Member Dealers examines the fundamental of
shares such as P.E. Ratio, quality of Companies
and provide advice
THE JAMAICA STOCK EXCHANGE
‘Advocacy Role’
Discussions with Government and Other Regulatory
Authorities is a key function of the JSE which has
resulted in:
 Removal of Taxation on Dividends
 The Establishment of the Junior Market
 The approval of Caribbean Stock Exchange
network
The Junior Market Experience
 100+ companies canvassed since inception in 2009
 MOU and joint promotions with JamPro, PSOJ, brokers
 14 listings to date
 All compliant with JSE rules
 All show financial and other improvements
 Paying additional taxes
 10+ companies ready for listing
 Many getting ready to be listed
Junior Market Performance 2011 vs. YTD 2012
*YTD 2012: January to
October 2012
Junior Market Performance 2011 vs YTD 2012
*YTD 2012: January to
October 2012
Junior Market Performance
Year
Number of
Transactions
Volume
Value
Year End
Year End Market
Year End
Number of
Market
Capitalization
Junior Market Companies at
Capitalization (US$ Millions)
Index
Year End
(JA$ Millions)
2009
14
62,248
$1,531,915
755.17
8.40
150.01
1
2010
1,192
50,331,871
$206,559,980
8,466.81
94.16
379.92
8
2011
7,883
306,220,533
$1,247,948,069
23,595.00
262.40
748.86
12
YTD 2012
4,336
108,103,695
$563,496,892
21,975.43
241.35
668.51
14
*YTD 2012: January to October 2012
JM Companies: Financial Performance
Average increase in Pre-Tax Profit of 332% over the previous year.
600,000,000
Pre-Tax Profit
500,000,000
Post Listing Pre-Tax Profit
400,000,000
Pre Listing Pre-tax Profit
300,000,000
200,000,000
100,000,000
0
JM Companies: Financial Performance
Average revenue increase of 238% over the previous financial year
Additional Taxes Paid
GCT
Company
AFS
Post listing
PAYE
%
change Post listing
Pre-listing
Pre-listing
%
change
6,787,207
5,442,376
25%
16,282,369
15,865,726
3%
16,518,868
9,587,552
72%
13,973,822
9,245,039
51%
0
0
0
15,338,179
13,558,387
13%
DCOVE
62,368,682
34,106,917
83%
58,845,536
47,915,148
23%
JAMT
84,256,260
52,122,877
62%
15,763,748
9,128,072
73%
LASD
8,469,385
2,456,205
245% 166,818,202 141,636,903
18%
LASF
22,100,000
9,900,000
123%
2,700,000
1,800,000
50%
LASM
8,232,783
5,629,320
46%
34,053,634
18,147,641
88%
75% 323,775,490 257,296,916
26%
BPOW
CHL
208,733,185 119,245,247
JMC Contribution to Economic Growth
Junior Market companies have employed over 230 full time workers and 100
temporary workers since listing.
Junior Market
Companies
Access Financial
Services
New
Employees
Since Listing
New Employees Since Listing
100
90
80
52
AMG Packaging & Paper
Blue Power
Dolphin Cove
General Accident Ins
Honey Bun (1982)
Limited*
7
10
100
6
New Employees
70
60
50
40
30
20
10
5
Jamaican Teas
20
Lasco Distributors
21
Lasco Financial
7
Lasco Manufacturing
3
0
JMC Contribution to Economic Growth
Financial Services
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Oct 2009: Listed on the JSE Junior Stock Market
December 2009: Opened 3 new branches - Santa Cruz, Linstead & Portmore
August 2010: Opened 2 new branches - Old Harbour & Brown's Town
Feb 2012: Opened new branch in Downtown, Kingston. Total branches to 14.
Has employed over 50 persons since listing on the Junior Market
AMG Packaging and Paper Company
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July 2011: Listed on the JSE Junior Stock Market
Purchased new property costing J$43M that will add 10,000 square feet of warehouse and
manufacturing space to expand output
Has hired 7 employees since listing
JMC Contribution to Economic Growth
Blue Power Group
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April 2010: Listed on the JSE Junior Stock Market
Expanded building complex to 8,500 square feet, new machines and mills.
Increased manufacturing capacity by 50 per cent, launched new soaps
Has employed 10 persons since listing
Caribbean Producers
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July 2011: Listed on the JSE Junior Stock Market
2011: Acquired additional 10,000 sq. ft. for food processing plant in Montego Bay
Constructing a store in Kingston costing J$80M
Has hired 25 workers since listing
C2W Music
May 2012: Listed on the JSE Junior Stock Market
 The first startup company to list on the Junior Stock Exchange.
 The company has acquired 550 copyrights since listing. This is above its projections.
 The company has six songwriters and is expected to increase the number o songwriters to ten
by the end of 2012.
 The company is expected to generate revenue during its 4th quarter ending December 2012.
 In November 2012, C2W Music announced that it has signed a multi‐year partnership with
music publishing giant BMG Chrysalis and ‘We Want Drinkz’ is the first C2W track to be
featured on the iTunes iOS game called Tap Tap Revenge.
JMC Contribution to Economic Growth
Dolphin Cove Limited
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Dec 2010: Listed on the JSE Junior Market
2011: Opened a second marine park in Lucea, Hanover.
2011: Purchased additional 3 acres to the 7-acre Ocho Rios marine park facility to widen its
attraction offerings. Over J$155M on capital expenditure.
Has employed more than 100 persons since listing on the Junior Market
Honey Bun (1982) Limited
 June 2011: Listed on the JSE Junior Market
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Purchased new equipment & vehicles – improved manuf. and distrib. efficiencies
Expanded product line and marketing
Has employed 5 permanent persons and 100 temporary workers since listing
JMC Contribution to Economic Growth
Jamaican Teas Limited
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July 2010: Listed on the JSE Junior Market
Nov 2010: Acquired 50% interest in Bay City Foods Limited.
June 2011: Entered water bottling business
2011: Doubled warehouse, factory and admin office space
Dec 2011: Purchased a supermarket in Kingston
Feb 2012: Purchased assets of former Hilo supermarket in Savanna-La-Mar
Now building 2,000 sq ft warehouse on Port Royal street in Kingston to expand productive
capacity
Has employed more than 20 persons since listing on the Junior Market
Lasco Distributors Limited
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Oct 2010: Listed on the Junior Merket
Expanded its logistics business and technology platform
In the process of expanding product lines as well as plant and machinery
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21 employees hired since listing
JMC Contribution to Economic Growth
Lasco Manufacturing Limited
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Oct 2010: Listed on JSE Junior Market
Building modern facility costing J$2.1B in White Marl, adding 100,000 sq ft. to:
• Significantly reduce imports and make use of more local resources
• Enable launch of new products, increases exports and double sales by 2014
Has employed 3 persons permanently since listing
Factory expansion projected to provide 250 new jobs in the first phase alone
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Lasco Financial Services Limited
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Oct 2010: Listed on JSE Junior Market
Expanded product range, e.g. education loans
Acquired Supreme Ventures Money Gram business for J$38M
Quadrupled payday loans since listing
Has hired 7 persons since listing
Quotes from Warren Buffett
 ‘Today people who hold cash equivalents
feel comfortable – they shouldn’t. They have
opted for a terrible long term asset, one that
pays virtually nothing and is certain to
depreciate in value’
 ‘ The investor of today does not profit from
yesterday’s growth’
Summary
The Jamaica Stock Exchange provides:
 Regulation of members & listed companies
through Rules & Directives
 Electronic Trading- ensuring transparency
& Efficiency
 Electronic Settlement System
 Dissemination of price sensitive information
 Surveillance system – monitoring of the
market
 The platform for reviving the economy
Sources of Stock Market
Information
The general public can receive information on the market through
the following channels:
 Radio & Television
 Financial Magazines
 Stock Brokers
 JSE Website
 Stock Market Brochures
 Companies Publications
 Annual Reports
 Daily Trade Sheets
Questions & Comments