Sep 2009 Financial News

SFC to delist on low trading activity

Sep 11, 2009

Low trading activity in Sagicor Financial Corporation (SFC) shares, which prompted the company to de-list from the Jamaica Stock Exchange (JSE), is not dissimilar to trading activity among other cross-listed shares.

But the JSE, which yesterday expressed its displeasure with the decision, said the Caribbean Exchange Network (CXN), which will give Jamaican investors access to SFC shares and others listed on regional stock exchanges, should be on stream in December.

On Monday, SFC notified the JSE that it would delist its shares effective September 16, 2009, as "insignificant trading activity in the company's shares did not justify the operational cost of maintaining this listing".

Listed companies have to conform to regulations of all exchanges they are listed on, which comes with the cost of interim reports, and in the case of the JSE, have to pay listing cost based on market capitalisation. With capitalisation of over $72 billion, SFC forks out just over $1 million per annum.

At the end of August this year, the Jamaica Central Securities Depository (JCSD) listed 19 individual shareholders holding 4.6 million shares in SFC, or 1.7 per cent of the total shares in issue.

Those shareholders will have to arrange to have their shares transferred to either the Barbados Central Securities Depository, the Trinidad and Tobago Central Depository, or the Depository Interest Register maintained to facilitate trading in CREST on the London Stock Exchange.

Indeed, the only time SFC shares were traded locally in 2009 was the first trading day of the year, when 500 shares crossed the floor of the exchange, and since listing on June 24, 2008, SFC shares traded on 15 days only.

Stocks and Securities Limited's (SSL's) manager, equity trading, Ryan Reid said that low availability of shares locally squeezed investor interest in the stock.

"Because it was listed in Trinidad and Barbados before it was listed here, most of the stocks were registered on those depositories and a lot of holders of the stock did not take up the opportunity to cross the shares," Reid told Caribbean Business Report. "With the weak supply you found that the bids weren't coming in."

According to Wade Mars, research manager at Mayberry Investments Limited, "There is a general lack of interest as well as a lack of market float in the cross-listed stocks that are not domiciled locally."

"This is manifested by the lack of activity on the JSE cross-listed index" said Mars. "That index in particular has changed value on only eleven occasions since it was conceptualised at the end of January."

The Cross Listed Index closed at 968.16 yesterday, down from 1000 on February 2, when it was introduced.

The three other cross-listed stocks that are domiciled outside of Jamaica - Trinidad Cement Limited (TCL), Guardian Holdings Limited (GHL) and First Caribbean Investment Bank - all have low levels of trading activity and relatively small amounts of shares registered at the JCSD.

TCL has only 2.5 per cent of its total shares in issue registered with the JCSD, GHL has 1.7 per cent and FCIB, 0.7 per cent.

In terms of trading activity, TCL shares cross the floor of the JSE on two trading days this year and 20 times since SFC listed, while GHL shares was traded only once in 2009 and 20 times since SFC listed.

FCIB, which has the least amount of shares registered locally, actually had the highest amount of trades over the periods - 19 trading days in 2009 and 65 since SFC listed.

JSE General Manager, Marlene Street Forrest said she doubted that the delisting will impact the psyche of local investors in a significant way but insisted that "every listing is important to the JSE and our market, we are not pleased that Sagicor has asked to be delisted but what we want to see is our exchange grow and our listing."

But she added that "all regulators must agree to the constituted document and we had pretty much full agreement, except one regulator asked a few questions which we have already responded to."

"The CXN should come on stream in December 2009".

Article by: Camilo Thame
Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20090910T200000-0500_159455_OBS_SFC_TO_DELIST_ON_LOW_TRADING_ACTIVITY_.asp
Date Published:Friday, September 11, 2009