Jan 2007 Financial News

Perceived insider trading remains disincentive to equity investors - Davies... JSE conference highlights transparency...

Jan 17, 2007

Regional stock ex-changes have been challenged to fast-track their harmonisation into a single platform, to create a more dynamic market for investors and a more rich pool from which businesses can raise capital.

The theme running through the Jamaica Stock Exchange capital markets conference in Montego Bay on the weekend was emphatic on the Caribbean positioning itself as a real player in the global financial market.

But transparency was also a big issue, which Jamaica's Finance Minister Dr. Omar Davies attacked frontally.

Davies, who continues to tap both the local and international capital markets to finance his multi-billion annual budgets ($358 billion in 2006), told the conference in his direct style that potential investors were uncomfortable with the smallness of the regional equities market and feared that the market was not deep enough.

Prone to manipulation

"There is also the perception that the market could be prone to manipulation due to insider information," remarked the minister. He argued that if Caribbean stock exchanges are to attract foreign investments, then the listed companies must adopt first-world reporting standards.

"There are foreign investors in search of a diversified portfolio [but] the lack of timely information about the financial position of companies and their corporate strategy acts as a deterrent to potential investors," said Davies.

Managing director of JMMB Securities, Leo Williams, also noted that media and private sector scrutiny were generally inadequate, with investors having limited visibility into corporate affairs.

"Frequently, local access to information deemed 'public' in developed markets is not available due to weak or thin capital markets. Listed companies have little incentive to disclose key information," he said.

Harmonising their activities

The exchanges have made some headway in harmonising their activities - as shown at the live demonstration of regional connectivity of the stock exchanges - especially as it relates to a common trading platform.

The exchanges are also ironing out a memorandum of understanding on common rules for the different markets, work on which is said to be far advanced.

There is also common ground, with depositories in place to allow custody arrangements, as well as an electronic order matching system.

But the conference also agreed that the different regulatory environments remained a hurdle.

Additionally, the exchanges are yet to synchronise their settlement cycles - currently three days in Jamaica, compared to five days in Barbados and Trinidad. And there are also disparities in the number of days the exchanges trade - three for Barbados and Trinidad, five for Jamaica.

There was also the call for greater harmonisation of macroeconomic programmes, specifically as they relate to fiscal and monetary policies: extreme variation in exchange rates and high inflation can have significant impact on stock prices indices.

Three-day conference

The three-day conference, dubbed 'The Global Response: Strategy and Innovation for Regional Capital Markets Growth', featured almost four dozen presenters and discussants representing the Jamaica, Barbados, Trinidad and Tobago, Bermuda, and New York Stock Exchanges as well as several investment houses, international and regional agencies, private sector companies and regional regulatory bodies.

Opposition Leader Bruce Golding noted that regional capital market growth demanded the following requirements:


A single regulatory body applying a standard set of rules;

A single platform providing access to the market's shares and products;

Real-time technology to link dealers, traders and retail investors;

Harmonised company laws, securities legislation and accounting standards;

Automated cross-border clearance and settlement systems.


Source:
Ashford W. Meikle, Business Reporter
ashford.meikle@gleanerjm.com
The Jamaica Gleaner
Wednesday 17th January, 2007

http://www.jamaica-gleaner.com/gleaner/20070117/business/business3.html