Liquid capital markets will bring transparency — RBTT executive director

Keith King, RBTT’s Executive Director,  Corporate and Investment, has told his Jamaican counterparts that concentrating the economy on a single industry is dangerous. Any downturn in that sector would lead to social and economic dislocation, he said.

He spoke at a  recent seminar organised by the Council of the Jamaica Stock Exchange, in Kingston. The topic was, “The Need for Liquid Capital Markets in the Caribbean”. He said he would continue to champion the issue, because of his belief in its singular importance to the Caribbean and the Caribbean people. Having a liquid capital market is of critical importance, especially for the growth and development of the Caribbean region. According to King, another benefit  is having a de-regulated financial sector. “New avenues for access, or improved access to capital, generally reduce financing costs,” he said. It has been shown, he added, that entry of foreign banks, increases efficiencies, as banks, faced with new competition, must either learn new skills, adopt new technologies, or falter.

Another benefit that liquid capital markets will bring was transparency. “A liquid capital market facilitates price discovery to property price, price and value securities, due to the free flow of information inherent in an efficient market,” he said. “A developed financial sector has always been the fulcrum of development and increased transparency has been proven to lead to decreases in corruption and political manipulation,”King said. Referring to the need for a regional Stock Exchange, King explained that it would serve to encourage regional capital to flow. “It will also facilitate the minimization of country risks to the investor, through the diversification away from the home market to the regional Caribbean equities. “A Common Stock Exchange would also encourage the development of a more active secondary market — a key component of a truly liquid market”, said King.

King recalled that since 1992, this region had started the processs for a Caribbean Stock Exchange, but this is not yet complete. “The four-stock exchanges currently in operation in the Caribbean (Jamaica, EC, Trinidad and barbados are beset by issues such as small market capitalisation, limited number of stocks, small volumes, limited trading hours, and concentrated stock ownership. “I however ask the question about the viability of these four stock exchanges and wonder whether liquidity and market efficiency would not be better served by a merger into a single exchange with an electronic network, connecting broker desks throughout the Caribbean”, said King. He said that Exchange should reside in a jurisdiction where there is the geatest liquidity, buoyancy, market capitalisation, foreign direct investment, foreign reserves, free movement of capital and freer movement of Caribbean labour. He added: “Today, market capitalisation for the Caribbean totals a mere US$2. 7. “The markets are so small that much of the public viewed them as being subject to manipulation by a few powerful individuals and corporations’.  “Another key component for the realisation of a liquid market is a common currency”, he added.