Deepening Regional Capital Markets

Regional Stock Exchanges

• Jamaica Stock Exchange (JSE), 1968

• Trinidad and Tobago Stock Exchange (TTSE), 1981

• Barbados Stock Exchange (BSE), 1987

• Bahamas Stock Exchange (BISX) 1999

• Eastern Caribbean Securities Exchange (ECSE), 2001.

Current Market Scope

• Stock market-primary issue and secondary trading of corporate equity.

• Bonds market-primary issue and secondary trading of corporate debt securities

• Government securities market-primary issue and secondary trading of regional government debt instruments.

• Market for short-term borrowing and lending to facilitate liquidity management and settlements.

Impediments to Capital Market Deepening

• Financial Structure, Caribbean financial systems are predominantly bank based.

• Large predominance of small family own businesses, with little or no effective division of ownership.

• Lack of institutional Investors to drive the market.

• Better market regulation to that guarantees fairness and transparency to include the prevention of market manipulation, including insider trading and other collusive practices’

Impediments to Capital Market Deepening Cont’d

• Lack of local or regional credit rating agency to assess the credit risk of governments and corporations.

• Maintenance of macroeconomic stability including fiscal deficits, balance of payments equilibrium and inflation

Recommendations

• Measures to boost investor preference for stocks, bonds, venture capital and other capital market instruments.

• Measures aimed at encouraging regional institutional investors to invest their funds regionally. (insurance companies, pension funds, mutual funds).

• Education and awareness building to encourage, (1) the public to invest, (2) firms to list on the exchanges.

Recommendations Cont’d

• Regional securities exchange need to streamline their operations to reduce operational cost and thereby reducing the cost of listing and trading.

• Some reassessment needs to be done as it relates to the requirements for listing to encourage small family owned businesses to go public.

Recommendations Cont’d

• Creation of a fully integrated regional capital market including harmonization of listing requirements and regulatory standards. (ECSE represents a good model to follow in this regard.

• Increase in product offerings to the variations available in the advanced countries ie derivative instruments capable of hedging

• Pursue linkages with the international market to increase the supply of company listings and instruments for investment.

Recommendations Cont’d

• Caribbean countries should strive to maintain macroeconomic stability.

• Particularly rising inflation and unsustainable fiscal imbalances, (1) hinder the development,(2) maintenance of stability on securities exchanges.

• Particularly in the OECS policy makers need to reconsider the role of the GSM to (1) increase the debt stock of regional governments (2) removal of liquidity from the domestic market, (3) fund recurrent expenditures as opposed to development projects.

Recommendations Cont’d

• Development of a regional credit rating agency is crucial for assessing the credit risk of governments and the corporations and the viability of companies issuing capital market instruments. (CariCRIS represents a step forward in this regard.)

• Strengthening of the technical staff within the CCJ to deal with dispute settlement and arbitration in matters of dispute between parties dealing on the regional capital market.