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Short-selling on the JSE promised again by year end

Other deadlines have come and gone, but the Jamaica Stock Exchange, JSE, is again promising that this year will be the year that short-selling becomes a feature of local stock market investing.

The exchange says it is now finalising the rules, which will allow investors to earn profit when share prices fall.

It’s one of a series of initiatives the JSE has been pursuing, but which are still in various stages of roll-out.

Short-selling is again being promised by the fourth quarter, that is between October and December.

Its other projects and schedule for roll-out include: direct market access with Canada in the third quarter, that is, by or before the end of September; and a green bond market for environmental and sustainable projects backed by donors, as well as the trading of government bonds, both by the first quarter of 2024.

Short-selling, or shorting, is seen as one way for leveraging gains from a market that is still down seven per cent year to date.

Chairman Julian Mair downplayed a query on whether shorting would further erode the market capitalisation.

“With a market, you want investors to express their investment outlook both in the buying and selling of stock. We want both expressions to be able to be shared,” he said at the JSE Group’s annual general meeting last week.

At peak, prior to the coronavirus pandemic, the JSE Combined Index strode to a high of 528,300 points on August 8, 2019. On Wednesday, the index closed at 343,451 points.

“We are struggling a little there in terms of the performance of the index,” JSE Group Managing Director Marlene Street Forrest affirmed, as she announced the plans for additional services.

The has market rebounded somewhat in the two years following the onset of the pandemic, but it took a hit in late 2021 when the central bank started raising interest rates to stem inflation.

Market capitalisation outlines the total size of the market when all listed company shares are multiplied by the closing stock prices. It serves as a measure of the value of companies listed on the exchange and as a proxy for stock market wealth, which at the end of May was estimated at being just shy of $2 trillion.

JSE market cap grew despite the fall in individual stock prices because the number of listings increased from 92 in 2020 to 101 companies at present. Overall, there are 151 securities listed, inclusive of preference shares and bonds.

The JSE anticipates that as interest rates trend down and other market turbulence subsides, investors and companies will be more active in the stock market, which will result in improved performance. The JSE, however, did not give an estimate on when it thinks the central bank will start lowering rates.

JSE Group’s financial performance is travelling in the direction of market activity. Revenue fell to $540 million in the March quarter. from $562 million a year earlier. The decline at the top line was accompanied by an erosion of its bottom line, with profit falling to $87 million from $136 million.

More services will mean additional revenue for the exchange. The JSE is also investing in the facilitation of trading to bring more investors into the market.

“We continue to enhance our mobile app and we are moving towards trading using the mobile app. We also updated the JSE website. So there’s constant and continuous improvement,” said Street Forrest. “We are at the point of reviewing the rules,” she added.

She also reported progress on another initiative, the digital asset market, saying it has been developed but awaiting regulatory approval. It will allow for the trading of securitised tokens.

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