Why Investing in the JSE is Good for Jamaica
28 Jul 2017 | Back to Blog
The Bloomberg Business headline in late December, 2015 — It’s Jammin’: Jamaica’s Tiny Stock Market Conquers World in 2015 — reverberated around the globe. Jamaicans had more to celebrate beyond Bob Marley, beaches and Bolt. Pundits and politicians and ‘Uncle Joe’, planning his return home from London after 50 years, all laid claim to this remarkable feat. Wealth Advisors at VM Wealth were immediately inundated with calls. Jamaica’s economy was surfacing slowly but surely from the recession and some wanted to get in on the open secret. Others wanted to know why this coup that had made the world take stock was being said to be a clear indicator that the Jamaican economy was on the rebound. Understanding how the stock market works and who can benefit, makes the role of the Jamaica Stock Exchange (JSE) in bolstering Jamaica clearer to the investment novice.
The JSE is a financial institution that has the purpose of bringing together small entrepreneurs and large corporations alike, to trade, sell and buy shares with the aim of capitalising businesses that need injections of capital. According to Manager of Research & Stockbroking at VM Wealth, Nicole Adamson, “the stock exchange is a means by which capital is deployed. Companies that need capital will go to the stock exchange to raise those funds and persons that have capital that would like to earn a return will supply those funds”.
An “initial public offering” or IPO is used to introduce new business’ stock on the stock exchange. Once a corporation or entrepreneur makes an IPO on the stock exchange, there is immediate access to a range of investors and new capital for their business. The enterprise, upon listing on the stock exchange, may in future seek to raise more capital by issuing more stock for sale if needed.
How Does My Buying Stocks Help Jamaica?
If you aren’t a corporation seeking capital but are hoping to take the plunge as an investor, do contact your trusted Wealth Advisor at VM Wealth Management and we will demystify the stock market and provide stellar support every step of the way. The JSE provides you with the opportunity to invest in a number of entities across various industries through a stock brokerage authorised by the JSE and licensed by the Financial Services Commission. VM Wealth is one of the few that offer the 21st century necessity of access to online trading among 12 such brokerage firms. You never have to put your eggs in one basket. While there are risks involved, by diversifying your investment portfolio, that is, by choosing to place your money in different places to work for you, you are better positioned to get the best bang for your buck. According to financial website UpDown.com, there is little or no benefit to the economy when individuals keep their savings in cash or even in a bank account. On the other hand, investing on the stock market is a direct investment in individual businesses and helps promote stronger economic growth.
Credibility and Accountability – JSE for my money!
It is this economic growth that the stock market stimulates that is simply good for Jamaica. As Adamson puts it, “The increased activity that the stock market affords these companies generates further economic activity that feeds into the wider economy. So the more activity that these companies can generate is the more activity the economy itself generates and the economy as a whole grows thereafter.”
The stock market also affords the Government of Jamaica the opportunity to raise money for major projects and infrastructure by either issuing bonds through the JSE or listing public sector entities on the exchange. In the simplest terms, the stock exchange facilitates individuals and companies having a stake in the development of our nation.
It is incumbent on the government to ensure that the JSE is governed by stringent laws, rules and regulations that hold companies accountable while protecting investors. In a time when many Jamaicans have fallen prey to unregulated financial products, this governance is crucial. The credibility and accountability factors continue to have a direct impact on the choice of individuals to invest their hard-earned money on the stock market.
The Stock Market as Economic Health Indicator
The mood of a tiny nation such as Jamaica is known to rise with the acquisition of each medal by an athlete at the Olympic Games. So too can the national temperament hinge on the performance of share prices on the stock exchange. While the stock market cannot be said to be a total reflection of the economy, it is undeniable that it is a fair indicator of a nation’s fiscal health and financial infrastructure. Like the athlete that stumbles and misses out on the podium causes nationwide melancholy, when stocks fall, consumers lose confidence and spending dries up, causing the nation’s financial state to falter. Conversely, the confidence of individuals within the economy swells when stocks rise; this confidence spreads and spending and investments grow. The stock market is thus a reasonable barometer of a nation’s economic health. Next time you feel a twinge of patriotism or even self-interest, consider investing in the JSE. Be a direct contributor to strengthening the social and fiscal fabric of Jamaica, land we love.