LOCAL dealers and market specialists are expecting an improved number of listings on the Junior Market of the Jamaica Stock Exchange (JSE) in 2016 – this mainly connected to increased investor interest.

The JSE reached an all-time high of 144,257.93 points on December 16.

Marlene Street-Forrest, general manager of the Jamaica Stock Exchange, indicated Tuesday that the new year is expected to be a better one following the comparative doldrums occasioned by changes in tax benefits under the Junior Market regime in December 2013.

“We have not seen the level of listings we anticipated in the Junior Market as could be expected. However, there is still value in companies raising equity capital and utilising this avenue to grow their businesses. We expect that there will be some six Junior Market and main market listings in 2016: the traditional banking and insurance (financial companies), IT, manufacturing and business product outsourcing.”

The phasing out of the 10-year holiday from income tax for junior listings kicked in at the end of December 2013. New ordinary listings now get a five-year waiver up to year end 2016. Under amendments to the Income Tax Act, the special tax benefits will be fully phased out by December 2021.

Under these conditions, in 2014, the JSE Junior Exchange added two listings of ordinary stock: Knutsford Express in January and Sweet River Abbattoir in September; and one preference stock — Eppley STP in December. A total of $718 million was raised on the Junior Market.

In May 2015, start-up renewable energy company Caribbean Energy Finance Company Limited (CEFCL) failed to raise even half the $452 million it targeted. Now, however, on the back of a bull market, better results are expected.

Technology firm tTech Ltd, which aimed to raise $50.2 million on the Junior Market through its IPO which opened on Wednesday, December 16 and closed in one minute, was oversubscribed thrice.

Greig Lindo, senior trader with JMMB Limited, noting accelerated trading activity said, “In the context of a six-month time frame, the Junior Market has seen improved interest as evidenced by the appreciation of the index by almost 75 per cent from the end of June 2015.

“Perception of equities on a whole has improved in the local market which has driven both the main and Junior markets higher. The macroeconomic profile has been stable with the Government meeting all its IMF targets. The restructuring of the repo market, coupled with reduction in interest rates, has also played its part in prompting investors to take a look at Junior Market equities which have good growth potential. The environment has been beneficial to stocks and we see where a host of companies have come to the capital markets through rights issues and the most recent Junior Market IPOs, such as tTech and CAC 2000.”

Street-Forrest said better economic conditions and reduced investment options have been redirecting money to the exchange.

She commented, “If you recall, both the Junior and the main markets up until recently were both in a bearish mood. I do not believe the performance of the Junior Market, as it relates to secondary market activities, is directly correlated to the reduction in incentives, but was more in keeping with the general confidence in the economy. The number of companies that pursued listing was and is still affected by the Government’s unwise decision to reduce and ultimately to discontinue the corporate tax benefits for new companies seeking to list.

“It takes time for investors to appreciate the fact that there are several reasons to invest in the market. The market is long-term and will react to positive economic indicators. With the Government not crowding out the market as in previous years and with low interest rate, investors are forced to look for higher returns on their investments. To do so they have to look carefully at the drivers of the economy, and a major player is listed companies that have been very undervalued, hence the stock market,” Street-Forrest said.

Davie Martin, assistant trading manager, NCB Capital Markets, told the

Caribbean Business Report that there has been a revival in trading interest in Junior Market stocks over the last several months “largely due to a few factors, one being the significant upward movement in the main market and, the relative bargain provided by Junior Market stocks. Another contributing factor is recent M&A (mergers and acquisitions) activity has highlighted the fact that stocks have been undervalued and this has spurred investors to look at companies that could be the next takeover target”.

Scotiabank Analyst and Trading Manager Chris McKenzie said Junior Market returns year to date to the end of November 2015 provided improved returns of 138.49 per cent, this when compared to 2014.

The reasons, he said, were improved “stock market sentiments (coupled with market conditions, takeovers, increased dividend payout … all good news all over) and solid performance from most listed companies; this added to increase interest from investors”.