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Roadblocks to regional capital market development

JSE Group Chairman Julian Mair is pitching the stock market as a way to sustain legacy and share in the benefits of a growing economy.

It’s a message he took to Guyana, where the capital market is lagging the oil economy’s growth spurt.

“The businesses which were traditional may not be the businesses that generations to come decide to follow. If [a company] lists, this will allow future generations to pursue the business of the future and of today,” said Mair, at the JSE Guyana Capital Markets Conference, held October 3-4 in the Georgetown capital.

The Guyana Stock Exchange has 15 companies listed, compared to 100 on the JSE, and its market capitalisation is at a quarter of the levels of the JSE’s.

“Listing can unlock value for generations. Beyond that, there is the broad public mass who know you and want to participate in listed entities, allowing common citizens to buy into growth. This is the way that those most skilled in operating business, and those least able to, can all participate in this very exciting time in Guyana,” Mair said.

Guyana grew 62 per cent last year and is projected to grow by 40 per cent this year. Additionally, its gross national income has more than doubled in four years to around US$15,000 per capita, which reclassifies it as a high-income country.

Angus Young, the newly appointed CEO of NCB Capital Markets Limited, one of Jamaica’s largest investment banks, said that as the fastest-growing economy in the world, Guyana was in need of a well-developed capital market.

“There is no shortage of ideas to solve problems, but other challenges exist. The answer for Guyana lies in the development of the domestic capital markets,” said Young.

“Traditional banking plays an important role, but it is not enough. The energy industry needs specialised equipment, which is difficult for asset-backed lending. This is where the capital markets can play a role,” he added, citing bond issues and mezzanine debt among the options.

As to the prospect of linkages between the capital markets of Jamaica and Guyana, Mair was bullish on that front.

Otherwise, citing Barbados as example, he said the advent of a true regional capital market was being stymied by the lack of will to resolve thorny issues related to cross-border transactions.

“Foreign currency is very much at the heart of what has restricted our region from being financially integrated. To trade, we will have to pass through a third-party currency. The decision to create parity with regard to currency or consensus around foreign exchange policy is one of the major hindrances,” Mair said.

That problem, however, does not exist in regard to Guyana.

“The JSE chose its first conference in Guyana where we do have currency parity, with regard to how we can go from one currency to the next. This facilitates access to pricing, which opens the door to the more logical ways in which markets interact with each other,” said the JSE chairman.

“I am very encouraged that we did choose Guyana, because these are discussions we can have without having the wall of discussing how to deal with currency,” he said.

The JSE capital markets conference has been staged annually each January in Kingston. The Guyana confab is additional to the 18th conference held in January of this year.

Its goal, said JSE Group Managing Director Dr Marlene Street Forrest, was to gain more insight about market development in the new oil economy and build alliances.

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