Business

'Equities market virtually frozen'

BY BALFORD HENRY Senior Staff Reporter

Wednesday, May 07, 2014    

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OPPOSITION Senator Nigel Clarke says that the decline in the equities market is an indication that the country's economy is not at the point where it is supposed to be.

"The market for government equities is virtually frozen," said Clarke as he contributed to the Senate debate on the Appropriations (budget) Bill. "You cannot sell government securities freely in Jamaica, and if you are forced to you would be required to take discounts that are in the high double digits.

"That is not good.That is not healthy and we cannot remain in a situation characterised by these experiences for a long time; and I certainly hope we won't."

Clarke said that much has been made about the primary indicators of the economy, such as trade and the current account deficits, and the fact that they have been moving in positive directions.

While welcome and encourageable, he pointed out that many secondary indicators are still not where they should be.

"One secondary indicator that is often overlooked is the performance of the equities market, which is an indicator of the type of economy and certainly in classical economic theory is a predictor of the medium-term future," said Clarke. "The equities market has been stagnant for a very long time. In fact, in real terms, as the dollar has declined in value, the equities market has not only stagnated, it has declined significantly."

The savings of Jamaicans are invested in the equities market, and a major form of social protection in Jamaica comes from the National Insurance Fund, according to the opposition senator, who is also deputy chairman and chief financial officer of Musson Group.

The NIF provides social safety to a large number of Jamaicans, who in their mature years can fall back on payments from the fund.

"The NIF is a huge investor in the equities market," said Clarke. "The people of Jamaica are huge investors in the equities market, and an indicator that we are not where we need to be, is the fact that the value of the investments of the people of Jamaica in the business of Jamaica has been declining in aggregate terms, and that is not good."

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