Junior Stock Exchange growing fast

Today we start a new feature which looks at the close to 30 companies listed under the Junior Stock Exchange (JSE). Who are they? How has the listing helped them? Is this a viable option for the small enterprise sector in Jamaica? Read on and send your feedback to barbara.ellington@gleanerjm.com.

THE JAMAICA Stock Exchange was incorporated in 1968 and started operation in 1969.

Its principal mandate is the mobilisation of capital to facilitate the growth and development of companies and, by extension, the economy. Among its functions, the JSE is to promote the orderly and transparent development of the stock market and the stock exchange in Jamaica; develop, apply and enforce the rules designed to ensure public confidence in the stock market and its broker members; and to conduct research, disseminate relevant information, and maintain local and international relationships which can enhance the development of the Jamaica stock market.

The Junior Market of the JSE was launched in 2009, and, for a few months last year, its fate hung in the balance following a decision by the previous government to cease some of the tax relief privileges it enjoys. But with the return to power of the Jamaica Labour Party, under which it came into being, the Junior Market is breathing a sigh of relief.

ECONOMIC CONFIDENCE

Access Financial Services was the first company to enlist with the Junior Market, which will allow investors to put capital into legitimate small- and medium-sized companies (SMEs) whose shares trade on a special JSE platform.

This gives SMEs the opportunity to raise capital. Capital raised on the exchange provides for equity infusions, as opposed to debt capital. By raising capital through an initial public offering (IPO), SMEs assist greatly in growing the local economy by creating established and transparent businesses, jobs, growth, and, ultimately, economic confidence.

For the enlisting company, the raised funds offset the IPO cost, plus being on the exchange give a higher marketing profile. But, perhaps, the greatest incentive is a 10-year tax concession, fiveyear tax holiday, and an allowance to pay half the applicable taxes in the remaining five years. This allows for a continued and faster pace of growth in the listing company as more net income can get reinvested into the company.

LISTING CRITERIA

The Junior Market was established through collaboration with the Government, the JSE board, the Financial Services Commission, and, Steering Committee comprising key stakeholders. Listed on the JSE Junior Market are ordinary and preference shares, which represent various business sectors, including banking and finance, manufacturing, insurance, and real estate.

Among the criteria for listing on the JSE Junior Market, companies are restricted to capital raising between J$50 and J$500 million in subscribed share; must be incorporated with limited liability in a CARICOM country; must have a minimum of 25 share or stockholders holding not less than 20 per cent of the issued ordinary capital; and must appoint a mentor to assist the board.

The last six months have been good for the Junior Exchange. The JSE was the top-performing index in 2015, according to Bloomberg, topping 92 markets tracked by the global financial research company.

At April 1, total capital raised on the Junior Market since it was launched in April 2009 stood at $4.94 billion. There were also significant increases for contributions to Pay As You Earn by 97 per cent, the National Housing Trust by 86 per cent, the National Insurance Scheme by 120 per cent, and general consumption tax up 337 per cent.

Also, up to April 1, six companies had enlisted for the calendar year. Key Insurance was the latest, making it the 29th company overall.